Consumer goods giant Kraft Heinz plans to slash the number of creative and design agencies it works with by half, although the company also intends to increase its media spend by 30% in support of its leading brands.
Miguel Patricio, CEO of Kraft Heinz, made the announcement last week during an earnings conference call in which he described 2019 as “very difficult” but also a period of “new understanding and new change”.
The company, known principally as the maker of Heinz ketchup, Kraft cheese and Planters nuts, disclosed that net sales in Q4 2019 were down 5.1% year-on-year to $6.5bn.
Even in the US, its biggest market, net sales fell 2.7% to nearly $4.7bn, while net sales in the rest of the world (excluding Canada and EMEA) dropped 10.1% to $708m.
Determined to turn the situation around, Patricio expressed confidence that the company’s bid to become stronger and more agile had begun already and that the “essential ingredients” for this to happen are “now in place”.
Apart from understanding the consumer journey better and getting the right staff in key roles to drive change, Kraft Heinz – like many of its rivals – also wants to reassess its marketing mix.
“In marketing, we have defined optimal media spend by portfolio role. And in 2020, we will be redirecting dollars disproportionately toward support of our flagship brands,” Patricio confirmed.
“We are also finding efficiencies in nonworking marketing, such as fewer research dollars necessary for the more concentrated innovation pipeline … as well as cutting the number of agencies we employ in half,” he added, without naming any or giving an exact figure.
However, Marketing Interactive reported that a presentation slide shown during the earnings call revealed that the number of agencies will be reduced from 36 to 19.
“As a result, we plan to increase working media, what consumers actually see, by 30% in 2020 with even greater increases behind the brands that are the biggest drivers of our profitability,” Patricio concluded.
Separately, Under Armour, the sportswear and apparel firm, also announced plans to increase its marketing spend significantly this year – close to 12% of revenue – as it refocuses on brand and top-of-funnel activity.
“I keep saying that there isn’t anything wrong with the brand, the problem is consideration,” said CEO Patrik Frisk, in an earnings call covered by Marketing Week. “To be able to drive consideration you need to spend against the brand,” he added.
Sourced from The Motley Fool, Marketing Interactive, Marketing Week; additional content by WARC staff