P&G hikes adspend 8%: first increase for four years

Procter & Gamble hiked its annual advertising expense by $575 million or 8.5% to $7.33 billion in the year to June 2020, its annual report showed.

It was the first annual increase since 2016 and came despite the onset of the coronavirus pandemic in March.

P&G’s decision to boost its spend is significant because it is one of the world’s biggest advertisers and, like some other consumer packed goods companies, it has spent several years cutting spend in the face of lacklustre sales.

Net sales rose 6% on an organic basis in the most recent financial year and the owner of brands such as Always, Gillette, Pampers and Pantene appears to be investing in advertising ahead of revenue.

The annual report said it lifted its “investment in media and other marketing spending” while making “savings in agency compensation, production costs and advertising spending”—an ongoing trend since 2017 as P&G slashed the number of agencies with which it works.

“Advertising expense was up only slightly as a percent of sales (10.3% in FY20 versus 10% in FY19), as our sales also increased year over year,” a spokesman told Campaign.

David Taylor, chief executive of P&G, stressed the importance of advertising on its Q4 earnings call last week.

“We strive to communicate product and packaging benefits, with superior brand messaging,” Taylor said, noting the company was named brand marketer of the decade by Cannes Lions in June.

“Not only has our advertising been creative, it has been increasingly effective at growing markets and building our business,” he told investors.

P&G previously slashed its annual advertising expense by $350 million or 5% to $6.75 billion in the year to June 2019.

Annual adspend now stands at its highest level since 2014.

Amazon is widely regarded as the world's biggest advertiser after its spend jumped to $11 billion in 2019.