Unilever increases marketing spend by 1.7% to €7.27bn

…opens 38 digital hubs, content studios in one year

Godwin Anyebe

Unilever, an FMCG company has increased its brand and marketing investment (BMI) by 1.7 per cent in 2019 to €7.27billion (£6.33bn), according to its annual financial report – an increase of €122million.

The rise in BMI is significant because Unilever, one of the world’s top advertisers, slashed agency fees and the number of agencies on its roster in a major efficiency drive in 2017 and 2018.

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The company behind Dove and Marmite cut marketing spend by 5.1per cent from €7.58billion in 2017 to €7.15billion in 2018.

Speaking on a call to investors recently, chief financial officer Graeme Pitkethly said Unilever’s BMI had increased €70million in constant currency terms in 2019, meaning the remaining €52million is accounted for by changing currency exchange rates.

Pitkethly said the business was continuing to “find efficiencies in our marketing spend through investment in new digital tools and capabilities and rigorous tracking of our spend effectiveness”.

This has included the opening of 38 digital hubs and in-house content studios under the U-Studio banner.

These had come “at huge cost sitting in the overheads line, but at a total cost which is 30per cent cheaper than buying in that service outside”, Pitkethly said.

Unilever said a year ago that it made €500m in efficiencies by making digital content last longer and by bringing services in-house.

Oliver, which has pioneered an on-site agency model for clients, supplies most of the staff for U-Studios.

There were many areas of Unilever’s operations “where just looking line by line on the traditional consumer P&L… below the surface, lots and lots have changed”, Pitkethly said.

He added: “And I think the message is that there are lots and lots of opportunity to be able to generate the fuel to continue to invest in making sure that you are successful in growing your business, but the mix of doing that is quite dynamic.”

Unilever’s annual report showed BMI has remained virtually the same in 2017, 2018 and 2019 as a percentage of turnover, at about 14per cent.

At the fourth-quarter results earlier this year, before the coronavirus, went global, chief executive Alan Jope said Unilever expected to be able to make €2billion in cost savings this year, adding that this “gives us the choice and flexibility on where we want to reinvest”.

That should result in “a step up in the number of FTEs (full-time equivalents/employees) in marketing to drive the new future of marketing model”, Jope said at the time: “I think it will be a step up in BMI, definitely in the absolute and probably as a percent of turnover.”

Other areas for the investment would probably include accelerating the use of recycled plastic, he added, “which we know makes our brands more relevant for the consumer”.

In a Q&A as part of the annual report, Jope acknowledged the challenge posed by coronavirus, which has led to fears of product shortages and has prompted panic buying in several countries.

“The recent outbreak of coronavirus (Covid-19) is clearly concerning and we are monitoring developments very closely,” he said. “The safety and well-being of our people have been the overriding priority.

“We are also doing all we can to ensure business continuity and our teams are working tirelessly to help mitigate the risks. Inevitably, however, there will be an adverse impact on the business, although the extent is not yet clear.”

Conny Braams took over as chief marketing and digital officer on 1 January, replacing Keith Weed.

According to Nielsen data, Unilever’s UK traditional media spend last year fell 0.8 per cent to £82.1milliobn, after a huge 29 per cent decrease the previous year that saw the company fall out of the top three advertisers.