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To Combat Store Brands CPGs Fire Up Marketing Spends

February 23, 2010

CPG companies plan to boost investments in advertising, in-store promotions, shelf signage, coupons and packaging to more forcefully compete with store brands, according to an Advertising Age report.

At the Consumer Analyst Group of New York conference this past week, consumer packaged goods companies such as Kraft, P&G and General Mills agreed that increased advertising and marketing investment are needed to win against store brands.

Heinz CEO William R. Johnson, whose company has lagged in advertising and marketing spending noted "the industry's renewed focus on innovation and marketing in response to the challenge of store brands,” Ad Age reported. “Nothing like the thought of hanging to concentrate the mind."

In the recent quarter Heinz increased marketing spending by 40 percent, while Hershey, also lags but increased spending by 50 percent in 2009 and expects to increase spending by another 25 to 30 percent this year, according to the report.

Meanwhile P&G plan to increase media impressions by 20 percent this fiscal year, which does not mean spending will increase; last year P&G ad spending declined 13 percent to $7.6 billion globally, according to the report.

Other companies following suit include:

Clorox Co. expects reported advertising spending to increase by 6 percent to $530 million, with 40 percent of that focused on” non-traditional media such as public relations, social media, branded content and trade marketing, vs. only 10 percent in 2006.”

In 2008, Kraft spent 6.7 percent of sales, or $2.8 billion on marketing; in 2009 it spent and 7.2 percent of sales, or $2.9 billion. In 2010, the company plans to spend even more, the report said.

General Mills and Kellogg, which two years ago led CPGs in ad spending gains, “are posting smaller increases, but are nonetheless dedicated to beefing up the marketing purse,” Ad Age reported.