There has been plenty of speculation over brands’ advertising strategies for the year ahead, and a number of industry projections have been released in recent weeks gauging how ad spend is likely to fare across 2023.
But broad, industry-wide projections and analysis miss a lot of the nuance in what’s driving brands’ approaches to advertising. One of the best ways to get insight into this detail is via advertisers’ quarterly financial results, where they lay out and justify their business decisions for investors and analysts.
We’ve gone through recent financial results for five of the world’s largest advertisers (according to COMvergence data) to find out how they’re thinking about advertising, and what their marketing plans are going forward.
P&G is focusing on ROI in digital
Procter & Gamble kept ad spending high throughout the pandemic, so while some advertisers are still talking about raising ad spend back to pre-pandemic levels, P&G have maintained high levels of investment.
And the company remains committed to advertising as a growth drive, though with a big focus on efficiency. Through in-housing of media buying and scheduling, and through use of data to optimise digital campaigns, P&G has been seeking out media with high ROI.
This will allow the company to make significant savings on its media spending: CFO Andre Schulten said that P&G is looking to make between $400-$500 million per year in savings on programmatic media spending. But this money is largely being invested back into advertising. Schulten said that as ROI on ad spend increases, that “actually makes investment in media spending more attractive”.
And CEO Jon Moeller said he believes there’s still plenty more value to be found. “We simply have, though it may be hard to believe, a lot of low-hanging fruit that’s out there,” he said. “We have many categories where we are not at our target levels of reach. And that’s a very high ROI activity. When we can reduce waste and frequency, reinvest that into expanded reach, very good things happen.”
Unilever looks beyond the cost of living crisis with high brand investment
Unilever increased its BMI (brand marketing investment) by half a billion dollars last year, which CFO Graeme Pitkethly said on Unilever’s earnings call was driven increasingly by increases in working media. And he said that he expects further increases this year, again with a focus on working media.
But Pitkethly acknowledged that in the current macroeconomic context, this is a long-term strategy, and not something that will necessarily grow market share in the short term.
“Right now, when we’re leading on price, price is a bigger driver of competitiveness than BMI is,” he said. But he added that Unilever is “very happy” to continue increasing its spend on media since “at the end of the day, we have to have brands that our consumers are aware of, and consumers have to be clear how great our products are and how great the performance of our product is even as they’re paying more for those products.”
CEO Alan Jope meanwhile spoke about the growing importance of retail media for the company, and the overall convergence of retail and media. The company has invested in a set of digital marketing, media and ecommerce hubs (DMCs), which Jope said are now delivering for the business. “Most of our retail channels are becoming media platforms and many media platforms are becoming retail channels, and it’s our DMCs that are giving us the ability to take advantage of this secular trend towards convergence,” he said.
Coca-Cola experiments with AI
Coca-Cola has been investing more of its marketing spend in digital over the last three years, which chairman and CEO James Quincey said is now delivering with young audiences for the company. “If I were to take the U.S. […] we can see that the growth in the Coke franchise is not just being driven by increased recruitment by increased engagement and recruitment of Gen-Z,”said Quincey.
He pointed specifically to ‘The Coke Studio’, a music platform developed with WPP. “The Coke Studio concept first drove cultural relevance and brand performance in Pakistan with the latest season streamed over a billion times,” said Quincey. “We scaled the program to 30 markets last year and in 2023 it will become an always on platform across the globe.”
And Quincey said the company will continue looking for new ways to reach younger audiences, with AI being one option. He highlighted a campaign run in partnership with OpenAI and DALL·E where audiences could design Coca-Cola ads and have them appear on a billboard in Times Square.
Overall, chief financial officer John Murphy hinted that the company will continue investing in advertising, stating that it will “reinvest in our brands with more rigor and discipline,” adding that there will be “more focus behind the country and category combinations that can deliver the best return in the near-term”.
McDonald’s looks for scale and efficiency with creative
McDonald’s CEO Chris Kempczinski highlighted the importance of marketing for the company’s recent strong performance, stating that “marketing excellence” had been a driver for US growth in particular. But a lot of McDonald’s focus seems to be on creative, and finding ways to increase efficiency while maintaining quality with ad creative.
“As [ex-McDonald’s CEO] Ray Kroc once famously said, we’re not in the hamburger business, we’re in show business,” said Kempczinski. “This showcases the importance of marketing our brand, which is more than just the food that we serve.” He later added that “we have expectations of what creative excellence should look like, and we’re certainly proud of the progress we’ve made”.
In order to facilitate this, McDonald’s is looking to encourage more cooperation between different teams in different markets, so that learnings about what’s worked in one market can inform strategies and creative in other markets. “We’re already seeing success in how our marketing teams are implementing common processes to quickly scale great creative such as the Raise Your Arches’ campaign,” said Kempczinski. The campaign referenced by Kempczinski initially launched in the UK, but was then quickly scaled to 30 markets globally based on its initial success, which CFO Ian Borden said “drove brand affinity around the world”.
Nestlé plans high spend for the year ahead
Nestlé ad spend last year was hit by global supply chain constraints, as the company had to ensure it would be able to meet demand for the products its advertising.
CEO Mark Schneider has said this would change in 2023, and had previously stated that marketing spend as a proportion of sales would increase. But sales in Q1 were particularly strong, leading one analyst on the call to question whether this commitment to higher marketing spend as a proportion of sales would hold.
But Schneider confirmed that “just because Q1 came in stronger than expected, there is no change in plans here when it comes to our marketing spend going forward”. This suggests that Nestlé’s outright marketing spend, which was already penned for an increase this year, will grow even faster than originally expected.
