Close-Up: Live Issue - Should Unilever boost its adspend?

Industry insiders say the UK's biggest advertiser must invest wisely to keep up.

It seems slightly implausible that Unilever should be under fire for neglecting its marketing spend. For years, it has backed its products with the kind of money that would make most companies blush.

With UK spend in excess of £200 million, when you combine the spends of its component companies listed in Nielsen Media Research, Unilever is the UK's biggest advertiser. It remains one of the largest in the world.

And its huge portfolio of brands has been supported by advertising from some of the world's best agencies.

But a company's advertising history counts for very little if it fails to keep pace with its competitors. The past 12 months have seen fierce competition in the FMCG sector.

Michael Steib, a research analyst at Morgan Stanley, explains: "Unilever has a strong level of profitability, having cut costs, but its competition, especially Procter & Gamble and, on the food side, Nestle and Kraft, have increased their marketing spend. As a result, Unilever has lost market share in its food and household divisions."

The extent of Unilever's woes was revealed last week when the company revealed a 3 per cent fall in turnover and a 2 per cent slump in pre-tax profits for the third quarter of the year. Its underlying sales slipped 1.3 per cent, while the company's share price fell to its lowest level in four years.

Unilever attributes this poor performance to several factors, such as bad weather over the summer affecting its bottled tea and ice-cream brands, or the Atkins phenomenon forcing it to hastily relaunch its Slim Fast range. However, few commentators accept that a company of Unilever's size and experience is unable to shake off isolated setbacks such as this, and point instead to an under-investment in marketing.

Now, Unilever has pledged to boost its marketing activity, despite being in the middle of a pan-European media review to cut £40 million from its media spend.

Whether or not this is a knee-jerk reaction, the move has largely been welcomed. "Unilever must step up its spending on promotion and advertising to revive revenue growth. It can't afford to relax in marketing ," Steib says.

An increased commitment to marketing will afford Unilever more clout with unsympathetic retailers, who, with limited shelf space available, refuse to keep faith with under-supported brands.

However, some see extra advertising cash as meaningless on its own. Bruce Haines, the group chief executive for the P&G roster agency Leo Burnett, says: "Getting a return on investment doesn't equate to just spending more - it equates to spending more wisely. You have to engage the consumer with creative work."

Unilever's creative credentials are strong and rivals such as P&G are only now beginning to follow its example. In the UK, the company has been responsible for two of the most innovative campaigns of recent years, for Lynx and Dove.

But despite a cull as part of its "Path to Growth" strategy, Unilever still has more than 400 brands in its portfolio. Unilever brands benefit little from their sister products' advertising, so if the company is to spend its way out of trouble, it will have to think hard about exactly which brands need help. Then it must afford those brands the type of creative and media thinking that has served Lynx and Dove so well.

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AGENCY CHIEF - Chris Thomas, chief executive, Proximity

"As someone who has worked on Unilever, I know how important it is to invest in keeping those brands strong to balance out retailer power.

Unilever needs to make sure it's got a high level of demand, otherwise it will get squeezed by retailers. It needs to invest in consumer equity to ensure its brands are top of mind and desired in the supermarkets.

"Should it continue to take the creative route? Absolutely. It has a huge emphasis on creativity at the moment and that is Unilever's great strength. It needs to keep believing in that because it is the key to the future. It needs to keep on investing in the emotional value of its brands."

MEDIA STRATEGIST - Tim Allnut, head, Naked Inside

"It's one of the biggest ad spenders anyway, so if shouting loud isn't working, then shouting louder isn't necessarily the right way to go.

"Upping spend could be the right strategy, providing it gets that additional money to work harder and thinks about getting its brands closer to its customers.

"It's easy to say 'my marketing investment isn't working, so I'm not doing enough of it'. It should be asking if its money is spent creatively. I've noticed how process-oriented Unilever's planning is.

"When it does it well, it does it brilliantly - look at Lynx and Dove. But there are many more examples of how perhaps the brand has been constrained by doing things in a traditional way."

ADVERTISER - Mark Trinder, head of brand communications, Woolworths

"FMCG companies have to convince retailers it is worth stocking their products. As a retailer, I'm only going to stock products if we think they are going to sell at a good margin. Part of these discussions will be about how much money a company is going to spend to tell the customers to come and buy its product from me.

"I've got a certain amount of shelf space and I don't have the luxury of carrying slow-moving or unprofitable lines . For Unilever, the marketing spend is a key part of negotiations to get their products listed."

PLANNER - Neil Dawson, executive planning director, TBWA\London

"Unilever's overall level of investment may be high, but the question I would ask is whether it is focusing it on the right brands.

"You need to have a clear portfolio strategy. You need to ask which brands can achieve growth. Unilever needs to plan its spend and identify opportunities in each category it operates in. It's about doing better thinking and creative than the competition, not just outspending them.

"All FMCG manufacturers will be continually under pressure, thanks to the grocers. Consumers are used to quality and low prices all the time. Supermarkets now have great power over FMCG brands and I don't think that tide will ever turn now."

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