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Many CPGs are continuing to raise prices in 2023 as they face higher costs in the supply chain amid stubborn inflation. But as they charge more, companies must also continue to win over shoppers in the marketplace, so advertising spending is getting a boost this year, as well.
A shining example of the trend comes from Colgate Palmolive. The maker of Softsoap and Speed Stick increased advertising spending 14% in the first quarter of 2023 when compared with the same three months of 2022. That outpaces even the company-wide price increase of 12%. Unlike many CPGs, however, Colgate Palmolive did not suffer from a drop in volumes, indicating that consumers are being motivated to continue to pay for the company’s personal care and pet products.
In all, net sales at the company increased 10%, and gross profit margin improved. CEO Noel Wallace told analysts that increased advertising spending was a key piece of that equation, as the company seeks to “return to a balanced algorithm of pricing and volume growth.”
The company’s brands are continuing to roll out new products, and advertising helps to put messaging might behind these launches.
“To raise awareness of our innovation plans, as well as to support our pricing actions and drive brand health, we will fund marketing investment for our brands,” Wallace said.
An increase in digital advertising is accounting for a large portion of the spending increase.
“We're seeing great ROIs on digital and our programmatic and the personalized content that we're delivering in the market,” Wallace said. “We're seeing growth in market shares relative to where we're spending the money, particularly around the Hill's business, and our oral care and skin health businesses. So we're really pleased with the fact that the advertising levels continue to deliver against the expectations that we have. And we balance that off with obviously a broad portfolio of offerings that we think are attracting and building the brands that we speak.”
The increase in digital marketing spend can have a direct impact on digital sales. Ecommerce was also up double-digits for the quarter, now accounting for 14% of sales at Colgate Palmolive. In China, the company combined “premium science-led innovation with higher levels of advertising, more targeted digital content and more persuasive advertising copy” to stand out in a crowded toothpaste market, Wallace said. The result was growth in market share.
“We believe this is a winning formula across our categories and markets globally,” Wallace said.
In the end, Colgate Palmolive views advertising as part of a “circular” strategy.
“More advertising is driving the top line, and we're able to get more leverage to the P&L to continue to support that,” Wallace said. “And we feel as we move out getting the pricing in the P&L was critically important to sustaining and increasing our levels of advertising.”
20% boost at Mondelez
At Mondelez International, the price increase was even higher. The maker of Ritz and Oreo boosted A&C, or advertising and consumer promotions, by 20% in the first quarter.
It helped Mondelez strike a similar balance to Colgate Palmolive. The company posted net revenue growth of 18%, as prices increased 16.2 percentage points. Volume/mix grew 3.2 percentage points, which bucks a trend of negative volumes observed at other CPGs.
“We in the end sell brands and it is important that we keep line of sight to that," said CFO Luca Zaramella. "And I don't think you're going to see a consistently at 20% A&C increase, but at this point in time, where we are moving price points, where we are trying to retain and increase our consumer pools, it is important that we use these as an important accelerator of growth for years to come."
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Trending in Marketing
On the Move has the latest from Amazon, Lovesac and more.
This week, leadership is changing at GameStop, Sorel and Beautycounter. Meanwhile, key executives are departing at Amazon, Wayfair and Lovesac.
Here’s a look at the latest shuffles:
GameStop CEO fired
GameStop announced the termination of Matthew Furlong as CEO on Wednesday. A brief statement did not provide a reason for the firing.
With the move, Chewy founder and activist investor Ryan Cohen was named executive chairman of the video game retailer. Cohen will be responsible for capital allocation and overseeing management.
It came as the company reported a 10% year-over-year decline in net sales for the first quarter. Meanwhile, the company’s net loss improved by 62%.
In an SEC filing, GameStop further added this “We believe the combination of these efforts to stabilize and optimize our core business and achieve sustained profitability while also focusing on capital allocation under Mr. Cohen’s leadership will further unlock long-term value creation for our stockholders.”
Cohen was revealed as GameStop's largest shareholder when he disclosed a 10% stake in the retailer in 2020. GameStop went on to become a leading name in the meme stock rise of 2021.
Sorel president steps down
Mark Nenow is stepping down as president of the Sorel brand in order to focus on his health.
After rising to the role in 2015, Nenow spearheaded a transformation of Columbia Sportswear-owned Sorel from a men’s workwear brand to a fashion-focused brand that led with a women’s offering of boots, sandals and sneakers.
“Mark led the brand to sales of $347 million in net sales in 2022,” said Columbia Sportswear CEO Tim Boyle, in a statement. “His leadership has been invaluable to this company, and we wish him the very best.”
Columbia will conduct a search for Nenow’s replacement. Craig Zanon, the company’s SVP of emerging brands, will lead Sorel in the interim.
Beautycounter appoints interim CEO
Beautycounter appointed board member Mindy Mackenzie as interim CEO, succeeding Marc Rey. According to the brand, Rey and the board “mutually decided to transition to a new phase of leadership for Beautycounter.”
McKenzie, a former executive at Carlyle, McKinsey and Jim Beam, will lead the company as it conducts a search for a permanent CEO. Additionally, former Natura & Co CEO Roberto Marques will join Beautycounter’s board as chair.
As part of the transition, Nicole Malozi is also joining the company as chief financial officer. She brings experience from Tatcha, Nike, and DFS Group Limited.
Amazon’s North America fulfillment chief departs
Melissa Nick, a VP of customer fulfillment for North America at Amazon, will leave the company, effective June 16, CNBC reported. Nick joined the company in 2014, and oversaw a region that included nearly 300 fulfillment centers. After doubling its supply chain footprint during the pandemic, Amazon recently reorganized its fulfillment operations to take a regional approach, as opposed to a national model that often resulted in items shipping across the country.
Wayfair’s chief commercial officer to retire
Jon Blotner (Courtesy photo)
Steve Oblak will retire from the role of chief commercial officer at home goods marketplace Wayfair. With the move, Jon Blotner will be promoted to chief commercial officer.
"Steve has served as a critical part of our leadership team and played a pivotal role in Wayfair's growth, helping us grow from a $250 million business when he joined to $12 billion in net revenue today,” said Wayfair CEO Niraj Shah, in a statement. “He oversaw countless milestones, from helping to launch the Wayfair brand as we brought together hundreds of sites into a single platform, to launching new categories, business lines, and geographies while overseeing our North American and European businesses, to leading our debut into physical retail.”
Blotner previously oversaw exclusive and specialty retail brands, as well as digital media at Wayfair. Before joining the company, he served as president of Gemvara.com prior to its 2016 acquisition by Berkshire Hathaway.
Lovesac announces CFO transition
Furniture retailer Lovesac said Donna Dellomo will retire as EVP and CFO, and move to an advisory role, effective June 30. Dellomo was with Lovesac for six years.
Keith Siegner was appointed as the next EVP and CFO. He brings experience as CFO of esports company Vindex, as well as executive roles at Yum! Brands, UBS Securities and Credit Suisse.
Additionally, Jack Krause will retire from the role of chief strategy officer, effective June 30. His responsibilities will be divided between CEO Shawn Nelson and president Mary Fox.
“Since joining Lovesac, Jack has played an instrumental role in transforming the Company into a true omni channel retailer by helping expand our physical touchpoints and digital platform as we continue to disrupt the industry,” said Nelson, in a statement.
NRF adds board members
The National Retail Federation announced the addition of five new board members. They include:
- Marguerite Adzick, founder and CEO, Addison Bay
- Harley Finkelstein, president, Shopify
- Ian Kahn, partner, PwC
- Sharon Leite, CEO, Ideal Image
- Carrie Tharp, VP, strategic industries, Google Cloud