Claire Beale: Spot a trend: budgets and profits are rising
A view from Claire Beale

Claire Beale: Spot a trend: budgets and profits are rising

My book of cliches for lazy journalists says one swallow doesn't make a summer, but I think advertising's spring may be coming.

Exhibit one: Unilever. The world's second-biggest advertiser has just announced that, although it only scraped together a 1 per cent rise in net profits for 2011 to EUR4.62 billion, it has ploughed another EUR150 million into its advertising pot.

Exhibit two: Reckitt Benckiser. The company last week said it's pursuing brutal internal cost efficiencies so that it can boost its investment in brand-building by an extra £100 million: more good news for the ad industry and another signal of renewed focus on brands and marketing.

Exhibit three: Coca-Cola. Here's another of the world's biggest marketers making operational savings in order to invest more money into its brands. Apparently, Coca-Cola will redirect up to $400 million of cost efficiencies into brand-building initiatives over the next four years.

Exhibit four: PepsiCo. More internal cost savings are promised at PepsiCo, but with the stated aim of generating between $500 million and $600 million additional money to direct into the advertising and marketing kitty.

Sadly, this good news can't be pinned to a revival in sales fortunes. Much of the increased budgets will come at the expense of jobs, pay rises, supplier fees and so on. But the determination to claw additional funds for reinvestment into advertising and marketing signals a general consensus that brands need continued support through recession; the temptation to reduce adspend as part of corporate cost-cutting strategies should not only be resisted but addressed by doing quite the opposite.

It's a message the ad industry has been flogging for decades, but one that has infrequently found a receptive hearing in client boardrooms. Perhaps that's changing. And the fact that these companies are making such bold public declarations about their increased advertising investment highlights another positive: the growing recognition among analysts and shareholders that advertising and marketing are key drivers and protectors of major corporate assets (brands).

For more good news, see the latest results figures from Omnicom and Publicis Groupe (WPP has yet to declare). At Omnicom, full-year profits are up 15 per cent and the group's net income is within snapping distance of the $1 billion recorded in 2008. Meanwhile, over at Publicis, revenues are up 7.3 per cent to £4.8 billion.

Both sets of results are a fair indicator that the advertising industry is continuing to pick itself up from the floor of 2008-09. Now all agencies need to do is make sure that the increased advertising investment being promised by some of their biggest clients actually translates into increased product sales and, ultimately, economic growth.

claire.beale@haymarket.com

Topics