P&G in Red Queen Mode Over Adspend

03 September 2007

CINCINATTI: As the Red Queen said in Lewis Carroll's immortal Alice in Wonderland: "Words mean exactly what I want them to mean, neither more nor less."

And when it comes to defining adspend as a percentage of sales, Procter & Gamble concurs.

For reasons apparently cosmetic, the planet's largest FMCG manufacturer has restated eleven years of ad-spending data. The move was revealed in the company's annual report filed August 28.

Conveniently, this performs a 'Soviet history' on the decline of P&G's adspend as a percentage of sales ratio - a metric that has in recent years irked some investors, particularly in the light of declining growth in organic sales.

The prestidigitation adds $349 million (€255.85m; £173.07m) to 2006 ad expenditure, with substantially less adjustment in earlier years.

Advertising Age summarizes P&G's juggling act as follows ...

  • What's in:
    In-store advertising via displays or third-party vendors, such as NewsCorp's SmartSource and Thomson's Wal-Mart TV (but not trade deals with retailers).

  • What's out:
    Salaries and benefits of P&G marketers

  • What's always been there:
    Traditional media
    Agency fees
Trilled a P&G spokeswoman: "Over the past few years we've been looking at ways of improving the effectiveness of our marketing spending.

"As a result, we've been shifting more of our dollars away from traditional TV and toward other media, including instore. So we thought it was important to include in-store in our disclosed advertising spending."

But cynics, such as Sanford C Bernstein analyst Ali Dibadj, suspect that the differences between the old and new definitions could boost P&G's reported 2007 outlays by $350 million.

"Pish and tush," indignantly replied the Cincinatti colossus, insisting that it hasn't even calculated - let alone disclosed - the impact of the readjustments on its 2007 numbers.

Data sourced from AdAge.com; additional content by WARC staff