P&G's Prodigality Props US Media Spend

17 April 2008

NEW YORK: In a media market that is currently bucking a worsening economic trend, the hero of the hour is Procter & Gamble which is spending heroically both in the interests of America and its own shareholders.

According to a report published Wednesday by investment management firm Sanford C Bernstein, overall measured-media outlays by six major FMCG marketers rose 26% year-on-year.

Three of six marketers examined by Bernstein (using TNS Media Intelligence data) lifted their January adspend; the others went into reverse.

The Cincinnati colossus, which has both the funds and the savvy to protect market share in tough times, hiked its January outlay by 37.5% to just short of $300 million.

The move continues P&G's trend of double-digit increases that began in the fourth quarter or 2007, when spending rose 17.1% year-on-year.

Without P&G's massive dollar injection, overall January adspend in the US household and personal care sectors would have declined.

Other contributors to the adspend cause were Kimberly-Clark, which increased spending by a modest 2.6% to around $20m, and Avon Products, which lifted spend by a hefty 55.1% to around $10m.

For reasons best known to itself, Bernstein's data ignores the two major European competitors in the US market, Unilever and L'Oreal, both of which shaved spend in January. The former dammed its dollars by 6.2% to $51.5m for the month, while L'Oreal declined 3.3% to $39.9m.

Other spend-slashers were Clorox. (minus 10.3% to about $36m), Estee Lauder (down 19.7% to under $5m) and Colgate-Palmolive (a 29.7% decrease to circa $6m).

Comments Bernstein analyst Ali Dibadj: "P&G is realizing they have to spend in the US, or competitors make inroads. A panacea when growth slows is to spend more back."

But, noted the haruspex, P&G's spending hikes applied added pressure on its bottom line, already battered by northbound commodity costs,

Dibadj speculates that the RoI-fixated firm will have sought compensatory cost savings elsewhere – or is relying on substantial top-line growth to meet its earnings targets for the quarter ended March 31.

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