Unilever pledges increased marketing spend as it adjusts to ‘living with Covid’

FMCG giant makes emphatic case for contribution of marketing as it reports strong results.

Lifebuoy: Unilever brand was relaunched in August with campaign by MullenLowe
Lifebuoy: Unilever brand was relaunched in August with campaign by MullenLowe

Unilever boosted its marketing spend in the third quarter of the year and will do so to a greater extent in the fourth quarter, its chief executive and chief financial officer have said.

“We are investing heavily in marketing, let's be clear, to support our brand campaigns,” CFO Graeme Pitkethly said.

“In the third quarter, there was a big step forward against Q3 of 2019, a big step up in [brand and marketing investment], and I think we will spend even more of an absolute step up in the fourth quarter that is coming up. We'll continue to do that because we've got great assets, great innovations to invest behind.”

Pitkethly argued that increased spend was justified because “the effectiveness of what we spend on our brands is more effective than anyone else”.

He pointed to the 2020 Effie Index, which identified Unilever as the world’s most effective marketer, and claimed that “we have stronger safeguards than anybody in making sure that when we spend digitally, it's not in fraudulent media activities, that our advertising shows up in safe environments in the digital world, and most importantly, that it's viewed by humans and not by robots”.

Pitkethly and CEO Alan Jope were speaking on an analyst call as Unilever reported underlying sales growth of 4.4% in the third quarter of 2020 – although turnover fell 2.4% to €12.9bn (£11.7bn), mostly due to the impact of currency exchange rates.

Unilever’s underlying sales growth varied by region; it was 8% in the Americas and 4.5% in Asia, the Middle East and Africa, but in Europe, underlying sales fell 0.8%.

More than six months into the pandemic, and with no indication of when it may be brought under control, Jope painted a downbeat picture in describing the global economic and societal context in which Unilever is now operating. 

“We’ve moved from response mode to now living with Covid-19, but the environment that we're operating in remains highly unpredictable and we believe an economic downturn is inevitable,” he said. “We think that planning for a quick macro economic recovery is too optimistic. We don't expect to see an acceleration in the near future. 

“Even though the spread and impact of the pandemic varies considerably across the world, a clear pattern is emerging in terms of the way countries are responding. There's a period of intense lockdown, which is followed by an easing of restrictions, which is in turn, followed by a re-imposition of restrictions, as cases begin to spike again. And we see this pattern repeated on just about every continent. Very few major countries seem to find a stable, new normal, outside of China.”

These circumstances require Unilever to “invest heavily in marketing support for our brands and behind an innovation programme that is tailored to the changing environment as consumers learn to live with Covid”, he explained.

Jope made clear that overall increases in Unilever’s brand and marketing investment would not necessarily result in equivalent boosts to media spend.

He described the “vexing question” of the balance between spend in traditional media and investment in people “for a more manpower-intensive marketing world, where digital programmes take more resources".

He continued: "So I think you'll see continued investment in our brands, continued investment in sustainability [for example, by moving to renewable agricultural materials and recycled plastics] and some investment in future-facing skills, especially in the digital marketing spaces.”

Unilever’s response to the Covid pandemic has included investment in brands such as Lifebuoy, which was relaunched in the UK in August with a campaign by MullenLowe.

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