China’s tech crackdown has benefits for emerging brands

Behind the headlines about the Chinese government tightening restrictions on the country’s tech brands, investment – and marketing spend – is shifting towards consumer brands. 

What’s happening

Tech and education companies have been high fliers in recent years but with recent government crackdowns they’re suddenly looking less attractive for investors. In the first half of the year, for example, total video gaming revenue and gamer numbers fell for the first time since data collection started in 2008 – a consequence of far fewer new games being licensed by a government which has also instituted play-time limits.

Venture capitalists and private equity firms are now turning their attention to consumer brands, China Skinny notes. “The grocery/food & beverage category is particularly hot right now,” the agency adds, with the tea category alone receiving ¥5.3bn ($820m) investment in the first half of the year. 

What it means

The beneficiaries are emerging brands, many of which are effectively operating like tech start-ups with a focus on acquiring customers and growing revenue ahead of worrying about profits. 

China Skinny contrasts the 15-25% of revenue that foreign brands typically spend on marketing in China, with the 65% or more that many cash-rich emerging brands are spending. Much of that money is going on KOLs, KOCs and livestreaming. Beverage brand Genki Forest, for example, posts a third more content on social media than Coca-Cola. 

Brands are having to work harder than ever to stand out, but get it right and the rewards come quickly. During last year’s 618 e-commerce festival, 459 brands that were the top-sellers in their particular segments were less than three years old. 

Sourced from China Skinny, South China Morning Post, Caixin Global

Global TV media costs surge almost a third post-pandemic

Media inflation is driving up the cost of advertising across channels, with TV most affected, according to an analysis by WARC Media. 

TV costs are rising fast

The latest Global Ad Trends* report, The rising cost of incremental reach, finds that, globally, TV CPMs (cost per thousand) have increased 31.2% since 2019 – the steepest incline in more than two decades – and are up 9.9% year-on-year in 2022. 

The trend is especially pronounced in the US, where TV CPMs are forecast to reach $73.14 in 2022, an increase of 40.0% on pre-COVID costs. 

For some categories the impact is heightened. According to WARC Media data, advertisers in the food category spent on average 79.8% of their budgets on TV in 2019, and in the automotive category, 67.7%. If they were to have maintained that same level of investment, by 2021 the volume of impressions would have decreased by 18 percentage points. 

Digital media costs are increasing too 

This twin trend of declining linear television viewership and rising TV media costs is encouraging advertisers to look elsewhere for incremental reach, but price pressure is being felt across the online media landscape. 

Paid social CPMs increased by 33% between 2019 and 2021 (source: Skai) and the growing popularity of retail media formats is pushing up the cost of advertising on platforms like Amazon. 

Channels such as broadcaster video on-demand (BVOD) provide an alternative source of incremental reach. However, over-the-top (OTT or streamed video) ad costs are rising too: inflation in advanced TV formats in the US is forecast to reach 9.9% in 2022, as per World Federation of Advertisers (WFA) figures.

Relative bargains can still be found in channels like radio

The pursuit of incremental reach has generally focused on digital audio-visual channels, as they offer a more straightforward transition from television. In comparison, offline channels are often under-utilised, despite not having witnessed the same levels of price inflation since 2019.

In Australia, the cost of radio media in 2022 remains 1.1% below pre-pandemic levels, while prices in the US are largely unchanged three years on. 

A similar picture emerges in out-of-home (OOH), incorporating both static and digital panels: in the UK, outdoor ad prices are 3.1% lower than before COVID-19, while, in the US, OOH remains 5.8% cheaper than it was in 2019.

Key quote

“As the global economy teeters on the brink of an inflationary recession, media costs may experience further volatility. Nonetheless, non-video channels are worth consideration if they are right for the audience” – Alex Brownsell, Head of Content, WARC Media.

*Global Ad Trends is a bi-monthly report which draws on WARC’s dataset of advertising and media intelligence to take a holistic view on current industry developments. A complimentary sample report of WARC Global Ad Trends: The rising cost of incremental reach is available here.

Sourced from WARC Media

Gambling ads under data targeting scrutiny

Online gambling is to come under the spotlight from the UK’s Information Commissioner – the data protection watchdog – into the targeting techniques deployed by the industry amid concern that problem gamblers are being exploited.

Why it matters

Gambling is addictive, and online gambling has made it easier than ever to access. As an industry, it is a heavy advertiser whose presence across football has long drawn criticism, even if the evidence that sponsorship leads to problem gambling is limited. As much for the sport as for the exchequer, the gambling industry makes a lot of money.

But a House of Lords report found that 60% of its profits come from just 5% of its users, a proportion that hints at the overspending of some individuals. UK gambling laws are currently under review – though the government’s proposals have been shelved repeatedly amid political turmoil.

More broadly, it could be an important moment for online advertising at large, as the investigation explores what kind of personal data is appropriate for advertising, especially in categories with potentially significant impacts on public health. It also highlights the major disparities in the regulation of online advertising relative to TV, where the industry has agreed to voluntary curbs.

The story

The investigation, reported by the FT, is set to look at the tracking activity of Sky Bet, which is majority owned by Flutter Entertainment – which also owns major brands like Paddy Power and Betfair.

It’s the result of a critical report commissioned by Clean Up Gambling, a pressure group that also made the complaint, which alleges building of detailed profiles that are then used to win back profitable customers by using it alongside and with third parties. It argues that many users didn’t know they were being profiled.

The company argues that it doesn’t see users’ financial data beyond its own platform and intends to target social media ads away from problem users.

Yet it follows a £1.17m fine issued in March by the industry’s regulator, the Gambling Commission, against Flutter for emailing promotions to people who had opted out of communications.

Sourced from the FT, The Guardian, House of Lords

Exit the metaverse, enter metaNesia 

In the current economic climate the tech sector’s appetite for virtual worlds appears to be declining, but Indonesia’s government sees them as an opportunity to wrest back control of the online world from the likes of Google and Facebook.

What’s happening

Metaverse hype has been everywhere since Facebook became Meta nine months ago. But now figures from workplace researcher Revelio Labs, reported by Bloomberg, show new monthly job postings across all industries with “metaverse” in the title declining 81% between April and June.

That coincides with the tech sector’s first stumble in its previously unstoppable forward march: Meta, Twitter and Snap all recently flagged falling ad revenues while Alphabet is growing at its slowest rate in several years.

Even as Big Tech seems to be reassessing the potential of the metaverse, the Indonesian government has just heralded PT Telkom Indonesia’s launch of “metaNesia” – a virtual world that aims to act as a platform for Indonesia’s micro-, small, and mid-sized enterprises to showcase their goods on an equal footing with larger foreign businesses.

Why it matters

One person’s problem is another’s opportunity – and Big Tech certainly has plenty of problems at the moment, from regulatory issues to political ones. The Financial Times highlights new EU rules driving towards interoperability of messaging services and, in the US, moves by the FTC to prevent tech giants simply buying up emerging potential competitors; at the same time, geopolitical divisions are leading away from the global internet towards a fragmented one

Those developments pose a potential threat to the network effect that has powered the tech giants to their current pre-eminence. Anything that loosens their grip on the ad dollars they have hoovered up along the way may occupy more of their time and effort than building new worlds (about which many people remain cynical in any case). It also creates a window for smaller, alternative players, such as metaNesia, to build a base. 

As Indonesia’s State-Owned Enterprises Minister said: “Don’t let other countries create a new world with their own payment system, while the market remains in Indonesia. Then we will regret it.”

Sourced from Bloomberg, Financial Times, WARC 

Consumer mind share is Alibaba’s most valuable asset 

With one billion annual active consumers in China, consumer mind share is Alibaba’s most valuable asset, according to CEO Daniel Zhang.

“We don’t need to be paying money to induce the consumers to come back,” he said during an earnings call. “We have that mind share of the consumers, and that’s what’s capable of driving a lot of organic traffic; we get consumers coming back even when their willingness to consume may have weakened during the pandemic period.”

Why it matters

That user base, along with a portfolio of different apps, “positions us to further improve that mind share and capture the opportunities”, Zhang believes. It also plays into reduced marketing spending, as CFO Toby Xu reported the “sales and marketing expenses ratio decreased to 12% in June quarter [from 13% a year earlier], reflecting our efforts in optimizing user acquisition and retention spending across businesses”.

Takeaways

• Alibaba’s three core strategies embrace consumption, cloud and globalization. On the first of these, “we will focus on growing our wallet share in different consumer segments instead of pursuing further absolute increase in our user base in China”, Zhang said.
• Premium users are growing in number as consumers with the highest spending power show “strong loyalty to our platforms”, he added.
• Alibaba is focusing less on the nationwide market and more on particular cities and regions to achieve local economies of scale. “The digitalized network integrating intercity commerce and fulfillment has become a new infrastructure in modern urban life”, Zhang noted.
• On the Taobao app, more than half of products are now being displayed to consumers via short-form video, rather than images and text. 

Key quote

“The most valuable asset that Alibaba owns today, that we built up over the years, is mind share. Users come to Alibaba with a consumption mindset” – Daniel Zhang, CEO, Alibaba.

Sourced from Motley Fool

Clorox strategy takes inflation and COVID into account

The Clorox Co., the consumer packaged goods firm, is paying careful attention to shopper activity both in response to inflation and as habits grow closer to their pre-COVID form in some categories.

Consumers not switching to private label

• As yet, Clorox has not witnessed any “significant trade down” to private-label goods among inflation-hit consumers, Linda Rendle, its CEO, told investors on an earnings call.
• “We are seeing some trade down within our own portfolio, for example, and we would’ve anticipated and expected this, and we’re working this as part of our sales plan,” she said.
  
• Shoppers, for instance, could “move to some opening price points” for its products. “They still want the branded player, but they don’t have a lot of out of pocket and so they’re buying a smaller size,” Rendle said.
  
• Other buyers are opting for larger pack sizes to get the “very best price per ounce”, and Clorox is working with its retail partners to find the right assortment in response.

The COVID “new normal” is still taking shape

• Working alongside the rising cost of living is the on-going consumer reaction to the fluctuations of the COVID-19 pandemic.
• “We’re seeing changes in more normal behavior coming from consumers, and we’re trying to understand: When are we at a new normal?” Rendle said.
  
• In cleaning and disinfecting, for example, consumer interest is “definitely lower than it was at the height of the pandemic, but higher than it was pre-COVID,” said Rendle.
• The cold and flu season, by contrast, has not been “normal” since the pandemic began, so the company will carefully monitor this area.

Price elasticity lags historical norms

• The company has implemented three price increases, the most recent in July 2022. As such, it is able to monitor price elasticity, or whether consumers are switching away for its products.
• Prior elasticity levels did not “play out over this last year” and have been “slightly better than that historical elasticity that we had experienced,” said Rendle.
• Looking forward over the next 12 months, elasticity could be “better in line with what we saw pre-COVID given the level of pricing and given what's going on with the consumer,” she warned.

Ad support still key

• Clorox will continue to support its brands with a nuanced mix of ads and promotions that will be adjusted in line with “where the consumer is”, its CEO reported.
• “We continue to spend on our brands, we'll spend 10% of sales on advertising and sales promotion next year,” Rendle said. “And we’re proactively working with our retailers on tailored shopper plans to ensure that we’re offering the right value for the moment, depending on where the consumer is.”
  

Sourced from Seeking Alpha

How the cost-of-living crisis is biting 

Almost everyone in Britain is being hit by increases in the cost of living, with millions cutting back on energy use in the home and on food and essentials.

In the latest ONS Opinions and Lifestyle Survey (data collected over the last 12 days of July), 89% of adults reported their cost of living has increased – that’s up from 62% in November last year.

Where people are being hit 

The most common reasons reported by these adults for their increased cost of living were:

• an increase in the price of their food shop (94%),
• an increase in gas or electricity bills (82%),
• an increase in the price of fuel (77%).

What people are doing 

The most common lifestyle changes being made include (based on data collected from 30 March to 19 June):

• spending less on non-essentials (57%, around 26 million people),
• using less gas and electricity in their home (51%, around 24 million people),
• cutting back on non-essential journeys in their vehicle (42%, around 19 million people),
• more than a third have cut back spending on food and essentials (35%, around 16 million people), 
• almost a quarter (23%, around 11 million people) used savings to cover costs, and 13% (around 6 million people) said they were using more credit than usual.

What it means for brands 

The figures lay bare the scale of the crisis that has been building for months. While there are differences in the responses of consumers depending on their income, age, whether they’re home-owners or renters, and what part of the country they live, it’s clear that very few people are not affected to some extent – and this is before yet another energy price hike scheduled for the autumn. Marketers need to be thinking about every aspect of their brand – price, value, creative, media – to weather the storm that’s about to hit. WARC’s Economic slowdown and inflation hub offers some guidance. 

Sourced from ONS

India OOH evolves post-Covid

India’s OOH channel has evolved over the past two years of the pandemic, with digital out of home taking a greater share of revenues and local grocery and pharma touchpoints registering high mobility levels. 

That’s according to the GroupM-e4m India OOH Report 2022 which studies mobility, advertiser behaviour, and the growth of DRACO (DOOH, Rurban, Airport, Clustering and Offices) as touchpoints for the medium.

Why it matters

With COVID movement restrictions lifted, people are returning to work, are keen to travel again and are spending more time out of home. It’s important to understand the changes that are taking place, not just in consumer behaviour and mobility, but also in how brands are now using the medium. 

Takeaways 

• The 2022 festival season is imminent and estimated mobility for the next 90 days is predicted to average 107.63% of pre-COVID levels.
• Certain regions follow similar patterns of festivals, celebrations, religious practices and display similar traits with regard to retail, recreation, transit and workplace mobility.
• Mumbai has, proportionally, the most big format “impact”units at 13% of all sites; Delhi has just 5%. For both Bangalore and Hyderabad the figure is 8%. 
• Real estate/builders, consumer services, retail, BFSI and media are the top five categories investing in OOH. 
• Advertisers are now placing greater emphasis on technological breakthroughs and data-driven strategies. 

Sourced from e4m

Starbucks' cold beverage boom led by Gen Z

Starbucks, the coffee house chain, has seen demand for cold beverages surge, with members of Gen Z driving this trend as they personalise their drinks then share images on social media.

The background

• Cold drinks accounted for approximately 75% of total beverage sales in Starbucks’ US company-operated stores in its last trading quarter.
• Howard Schultz, the firm’s CEO, said the “modifiers” for these drinks – like syrups, purée and fruit pieces – yield a “virtually unlimited range of taste, flavor and colour profiles”.
• This means the brand can serve many “different need-states while creating opportunities for customers' self-expression”, he told investors on an earnings call.

The Gen Z connection

• Cold beverages are very much “a Gen Z product”, Schultz reported. “That is a key customer cohort for Starbucks.”
• Iced Shaken Espresso, launched last year, has been “wildly” popular with members of this cohort, according to Schultz, and has witnessed sales double over the to date.
• This offering has effectively created “new customer occasions” around midday and the afternoon, helping drive traffic for the brand.

The role of social media

• Personalising cold drinks is not only popular with Gen Z, but members of this demographic often post images of their favourite brew on digital platforms, too.
• “The modifiers are raising the ticket [price], and the modifiers produce colour and excitement to the Gen Z audience and they immediately put it on social media,” Schultz said.
• The impact of this trend is significant: “We have never been, in our history, more relevant than we are today to Gen Z,” he said. “And to me, that cohort is so powerful and the attachment rate that we have with them and the loyalty is just building.”

Sourced from Seeking Alpha

Insights from the 2022 Cannes Lions Creative Effectiveness winners 

Consumer participation, a step-change in brand purpose, tech partnerships and agile solutions for new media habits lead to commercial success, according to a new report from WARC. 

Insights from the 2022 Cannes Creative Effectiveness Lions winners  identifies trends and themes common to the award-winning campaigns of this year’s Cannes Creative Effectiveness Lions, which celebrate the measurable impact of creativity. The findings are critical to understanding how marketers are driving business performance.

Four key themes

1. Tapping into fans supercharges creative ideas

Fan-first approaches can drive engagement with specific fandoms while being the starting point of mass-reach campaigns. Cheetos, Michelob and McDonald’s explored the potential of engaging fans, which is reflected in an increase in ‘participation’ as a creative strategy this year.

2. Ecosystems for change are brands’ new growth engine

As the discourse around purpose evolves, there is a new focus on long-term platforms able to deliver business growth while tackling systemic issues. Renault and Three created ecosystems to show their products in action, and Michelob transformed its supply chain to help farmers transition to organic.

3. TV returns to fuel visually arresting creative

With lockdowns leading to shifts in media consumption, TV became a trusted companion for at-home audiences. Data shows TV was the lead media for 47% of the shortlist, and winners used it for powerful visual executions.

4. Brands explore AI-driven creativity

Be it to repair fractions in society or for entertainment reasons, winners experimented with creative AI applications. For Michelob and the Canadian Down Syndrome Society, partnering with a tech giant was key to the success of the initiative. Reflecting this trend, partnerships rose in popularity this year: 40% of shortlisted campaigns used partnerships, up from just 1% last year.

Key quote

“Marketing as a discipline is living an existential crisis: it’s losing its credibility, its gravitas, its stature. CEOs and CFOs are perceiving marketing to be fluffy; they have very little confidence in their marketing teams being able to drive business growth.

“With some companies even disposing of CMO roles, the marketing function is getting fragmented. This is why it’s important to focus on creative effectiveness: proving marketing’s impact and ROI for businesses will bring it back to the C-suite table and give it the gravitas and stature that it deserves” – Jury president Raja Rajamannar, Chief Marketing & Communications Officer, Mastercard. 

A sample of the report can be downloaded here. The full report is available to WARC Creative and WARC Strategy subscribers.

Tune in for a WARC Cannes Creative Effectiveness podcast, to be released at the end of August, featuring the strategists behind two of the winning entries.

Brands need to up their game on trust amid consumer angst

Poor customer experience, sky-high prices and mismanaged expectations have been a hallmark of the northern summer in categories ranging from utilities to travel, impacting on brand perception and brand trust as the economic outlook worsens.

Energy companies see record profits 
As energy companies invest their record profits from high prices in share buybacks and shareholder dividends, accusations of profiteering are increasing. Profits at British oil giant BP have tripled to $8.5bn, thanks to strong refinery profits and high energy prices. Shell and Centrica have also announced record windfalls. 

Meanwhile, in the real world… 

• The National Institute of Economic and Social Research said in its most recent report that about seven million British families would be living “paycheck to paycheck”, while for 1.2 million people, energy bills would exceed disposable incomes by next year.
• More than 8m households – one in three in the UK – will fall into fuel poverty after October’s price cap rise, according to National Energy Action.

Why it matters

Mistrust is on the rise, especially if consumers perceive companies as prioritising profits over people. A growing sense of anxiety could see a tinderbox of angst in coming months. Consumers generally expect brands to act in line with their values; trust will decline if brands don’t respond accordingly. Brands need to handle this sentiment delicately, or risk turning off their customers for good. 

What it means for brands

All brands are operating in a climate of growing consumer mistrust. This impacts how marketers should think about customer engagement.

• Carefully consider public statements with sensitivity in mind. A case in point of what not to say: Shell’s chief executive, Ben van Beurden, said the company could not “perform miracles” to bring oil and gas prices down, adding: “It is what it is.”
• Focus on actions and transparency, not just words, to maintain consumer trust.
• Build marketing and communications plans based on various scenarios to ensure the brand is not caught off guard in a fast changing situation. 

Source: The Times, Guardian, BBC

Gambling front-of-shirt sponsorships rise ahead of potential ban 

With reports that Premier League football clubs will vote on voluntarily banning betting firms from team’s front of shirts, new research reveals this type of sponsorship is back on the rise following a huge fall last year.

Why it matters

Gambling’s share of sponsorships nearly halved from 2019 to 2021, but the sector has staged a mini-comeback this year following deals in rugby and cricket. 

“[That] will surprise many as publicity on gambling sponsorship centres on football,” says Alex Burmaster, head of research and analysis at sponsorship intelligence firm caytoo which conducts the annual study.  “The big questions are: will the Premier League voluntary ban happen and, if so, will other divisions or sports such as rugby and cricket follow suit?” 

The state of play

• Gambling saw the joint third-highest rise in the number of front of shirt (FoS) sponsors in the last year across the 226 professional football, cricket and rugby teams in England. It now accounts for 9.2% of sponsors, jumping back into second place behind Automotive (10.5%) and ahead of Retail (8.8%).
• The Manufacturing/Engineering sector has seen the biggest increase in FoS sponsorships from 4.9% to 7.5%. It’s now the fourth most prevalent sponsor, overtaking stalwart sectors such as IT, Construction and Travel & Tourism. Retail (7.1% to 8.8%) is the next fastest-growing sector.
• Financial Services – the second most dominant sector in 2021 – has seen the biggest drop (down from 8.4% to 6.1%) and is now ranked fifth. The next biggest faller is Alcohol, down from 3.1% to 1.3% – just one quarter of the share it held three years ago.
• In terms of individual sports, Gambling is football’s most prevalent FoS sponsor (15.4% share), while cricket’s is Automotive (17.7%) and rugby’s is Manufacturing/Engineering and Retail (both 13.3%). 

Sourced from caytoo

China’s tech crackdown has benefits for emerging brands

Behind the headlines about the Chinese government tightening restrictions on the country’s tech brands, investment – and marketing spend – is shifting towards consumer brands. 

What’s happening

Tech and education companies have been high fliers in recent years but with recent government crackdowns they’re suddenly looking less attractive for investors. In the first half of the year, for example, total video gaming revenue and gamer numbers fell for the first time since data collection started in 2008 – a consequence of far fewer new games being licensed by a government which has also instituted play-time limits.

Venture capitalists and private equity firms are now turning their attention to consumer brands, China Skinny notes. “The grocery/food & beverage category is particularly hot right now,” the agency adds, with the tea category alone receiving ¥5.3bn ($820m) investment in the first half of the year. 

What it means

The beneficiaries are emerging brands, many of which are effectively operating like tech start-ups with a focus on acquiring customers and growing revenue ahead of worrying about profits. 

China Skinny contrasts the 15-25% of revenue that foreign brands typically spend on marketing in China, with the 65% or more that many cash-rich emerging brands are spending. Much of that money is going on KOLs, KOCs and livestreaming. Beverage brand Genki Forest, for example, posts a third more content on social media than Coca-Cola. 

Brands are having to work harder than ever to stand out, but get it right and the rewards come quickly. During last year’s 618 e-commerce festival, 459 brands that were the top-sellers in their particular segments were less than three years old. 

Sourced from China Skinny, South China Morning Post, Caixin Global

Ad trust is low but news media are worse 

Just 13% of Americans place a great deal of trust in advertising, but that’s still more than the news media in which they may encounter such content, research from Brand Keys shows.

Even allowing for the depredations of the Trump years, the brand researcher notes that “media brand trust took a nosedive” in its most recent tracking study, which surveyed 6,850 US adults in July. Trust in news media stood at just 10%, although within that radio (14%) and newspapers (11%) fared better than the sector average, MediaPost reports. 

Why it matters

In general, it doesn’t bode well that people don’t much trust regular information channels, but when the cost of living is rising precipitously, the lack of trust shown in sectors that are in the front line of the crisis – government, financial and energy – signals difficult times ahead. Marketers need to find ways to build trust and, crucially, to deliver on expectations. 

Takeaways

• Four in ten Americans trust technology brands “a great deal”, followed by entertainment (39%), telecommunications (38%) and luxury goods (36%).
• Around a third place a lot of trust in pharma (35%), healthcare (34%), shipping (32%), apparel (31%) and beauty brands (30%). 
• Things start to tail off with food and beverage (29%), auto (28%), retail (26%), travel (22%) and sports brands (20%).
• Finally, the least trusted are financial (16%), energy (15%), advertising (13%), government (11%), news media (10%) and social media brands (8%) 

Key quote

“Consumers [are] three times more likely to trust their shampoo brand than news media” – Brand Keys. 

Sourced from Mediapost

Colgate-Palmolive's strategy in response to 'unprecedented' inflation

Colgate-Palmolive, the consumer packaged goods (CPG) manufacturer, is leaning on advertising, analytics and a balanced portfolio as it responds to the “unprecedented” inflationary environment.

The background

• Noel Wallace, CEO of Colgate-Palmolive, told investors on an earnings call that current levels of inflation represent an “unprecedented environment” for the CPG sector.
• The firm’s price rises in response will be tailored to categories and competitive structures in different markets, but Wallace anticipated that increases were likely across the globe.

Advertising has a key role

• In terms of advertising, Colgate plans to match last year’s expenditure for the remainder of the year, with an emphasis on moving funds to working media from non-working media.
• “We’re spending a lot more time thinking about our digital advertising and the return on investment,” Wallace added. “We feel pretty good about where we are from an advertising standpoint and intend to continue to invest to build our brands.”
• For Colgate, strong profit margins are vital, as they will allow it to continue supporting advertising expenditure and so, in turn, build sustainable growth.
• “We will continue to be focused on getting pricing into the P&L as that allows us to maintain the advertising support to drive the top line and make sure we get our innovation well-seated in the marketplace,” Wallace said.

Building a balanced portfolio

• One strategy Colgate-Palmolive has developed based on previous inflationary periods is to ensure its portfolio has a balanced slate of options for consumers.
• “We compete across multiple price points – in some countries, five to six different price points in a specific category,” Wallace said. “That allows us to be very thoughtful on where we take pricing and when we take pricing.”
  
• The ability to “flex” its portfolio in this way “buffers us a bit … against any trade down that we see in the marketplace,” Wallace continued.

Analytics informs strategy

• Analytics has a valuable role in guiding Colgate’s approach in a rapidly-changing environment where financial variables are in a state of flux.
• “A lot of the analytics that we have in place … now allow us to see where consumers are trading in and out of, to ensure that we’re adjusting our strategies accordingly,” Wallace said.
• Equally, the firm’s learnings from past times of high inflation have given it the chance to “think very carefully about how we want to adjust to this moving forward”.

Promotions are lagging

• While it might be assumed that promotions have a more important role as the cost of living rises, Wallace argued supporting price increases is currently more common industry-wide.
• “My instinct is you’re not going to see a lot of people chasing volume by discounting price,” he added.

Sourced from AlphaStreet

FMCG companies eye India’s growing pet market 

Pandemic lockdowns accelerated an existing trend in India towards increased pet ownership; FMCG brands and others are taking note.

Why it matters

India is one of the fastest-growing pet care markets in the world, according to the managing director of Mars Petcare India, who cites a combination of factors, including rising incomes, smaller families, and changing attitudes toward pets – as well as the effects of lockdowns. Marketers will need to understand how owners feel about their pets and adapt their messaging accordingly. 

Background

• There are now an estimated 30 million pets in the country and the number is growing at 11% a year, while the market for pet food alone is forecast to more than double to Rs 10,000 crore by 2025.
• Just last week, Nestle India, the F&B giant, acquired the pet foods business of its fellow subsidiary Purina Petcare India, launched five years ago as a separate entity, giving it direct access to the pet market.
• Health & beauty FMCG Emami is investing in a startup, Cannis Lupus Services India, offering Ayurvedic remedies for pets under the brand Fur Ball Story.
• Mars Petcare, whose brands include Pedigree, Whiskas and IAMS, is expanding its Hyderabad pet food factory to meet rising domestic demand and to export to other Asian markets.
• It’s not just FMCG companies that see an opportunity: last year, packaging firm Cosmo Films launched into the pet care business with its ZIGLY brand.

Sourced from Economic Times, Mint

Nike’s secret brand weapon: supply chain transformation

As other brands struggle to navigate product availability issues, Nike is pushing forward as investments in its supply chain resiliency and digital ecosystem start to pay off for the brand. 

Why it matters

The challenge of the pandemic, including the temporary closure of factories in Vietnam, forced Nike to accelerate its digital transformation plans. The brand’s direct-to-consumer model is increasingly central to the company’s strategy as it builds out an omnichannel retail ecosystem. Smart supply chain management is a crucial part of its brand growth.

The operating model as competitive advantage 

Nike’s direct-to-consumer business is worth around US$10 billion a year. D2C is now responsible for 24% of the company’s revenue, more than double the pre-pandemic level. 

Like many brands during the pandemic, Nike found itself trying to accommodate booming demand at a time when global supply chains were creaking at the seams. While Nike wasn’t entirely insulated from these issues, the company’s investments in its own supply chains – especially in inventory management – have allowed the brand to weather the storm and drive growth despite challenging conditions.

“As we accelerate our consumer-led digital transformation, we are developing and refining new capabilities that are transforming our operating model, quickly becoming a competitive advantage for Nike,” said Matt Friend, Nike’s Chief Financial Officer, during its 2022 Q1 earnings call.

“This will give us real-time visibility to inventory across our network, plus dynamic transactional capabilities to optimize consumer demand and inventory productivity,” Friend said in a Q2 earnings call in June.

Nike’s ‘Consumer Direct Acceleration’ plan

• Create e-commerce platforms such as websites, apps, and Nike-owned stores to sell directly to customers.
• Use data from direct-to-consumer platforms to inform supply-chain and logistics decisions, based on real-time analysis and demand tracking.
• Develop more precise inventory management including the use of RFIDs in hundreds of millions of Nike products
• Install 1000 robots to hasten deliveries from distribution centers
• Use machine learning and artificial intelligence tools to predict consumer trends and buying behaviors

Source: CFO Brew, CIPS, Supply Chain, Nike