As we approach the end of the year, we’re covering trends from key markets in 2022. We’ll recap the state of each industry over the past year, the ad strategies of its biggest players, and what we predict 2023 will hold.
Consumer packaged goods (CPG) companies experienced unprecedented stress during the pandemic as supply-chain challenges and industry volatility left their bottom lines in limbo.
Still, many of the industry’s biggest names grew.
The Hershey Company grew as well ($2.3M in sales, an increase of 6.4%).
Despite the pandemic making way for a recession, the industry’s resilience during the former could point to how it’ll weather this storm; L’Oréal experienced double-digit growth in H1 2022.
Is this growth extending to advertisers, or are they taking a reserved approach given the uncertainty?
MediaRadar Insights on CPG Advertising in 2022
The market volatility appears to be weighing on advertisers, with spending flat through November, although they’ve still spent $8.5b or an average of $773mm per month.
A level deeper, nearly $3.7b (43%) went to digital ad formats, while 49% ($4.1b) and 8% ($686mm) went to T.V. and print, respectively.
How CPG advertisers spent on digital formats
CPG advertisers mostly divided their dollars between YouTube, retail media, and social media platforms.
- YouTube: Advertisers spent ~$1.5b on YouTube channels related to music (20%), society & culture (13%), gaming (10%), entertainment & movies (7%), and beauty (7%). L’Oreal, P&G, and Unilever were responsible for more than a third of the investment.
- Retail media: Advertisers invested nearly $912mm in retail media, including Amazon, Kroger, Target, and Walmart. L’Oreal, P&G, and Reckitt were responsible for 12% of the investment.
- Social: Advertisers spent around $845mm on Facebook, Instagram, Snapchat, and Twitter.
While spending in 2022 was mostly flat, it could be on the up and up.
In October, spending increased by 11% YoY, followed by a 20% YoY spike in November, which is likely the result of several factors, including the start of several major sports seasons, return-to-work policies, and in-person schooling beginning in the fall.
Top CPG Advertising Categories & Advertisers in 2022
Through November, five categories accounted for 76% ($6.4b) of the spending: snacks & desserts, household products, skincare, cosmetics, and hair care.
Snacks & desserts
Advertisers for snacks & desserts, who accounted for 24% of the industry’s investment, increased spending by 1% YoY to ~$2b. That said, they followed the greater industry trend by increasing budgets by 11% YoY in October and 10% MoM in November.
Mondelēz, in particular, is in a unique situation.
While spending is up—Q3 by 15% QoQ and November by 93% MoM—change may be coming.
In December, the company announced the sale of its gum business, including Trident, which received significant ad dollars in 2022. (Oreo, Ritz, and Trident received 58% of its ad dollars.)
The sale comes a few years after CEO Dirk Van de Put announced the company was turning to a strategy in which “90% of the company’s revenue would come from chocolate and biscuits.”
The sale of its gum business and acquisition of Clif Bar & Company shows that he’s still committed to that promise.
Although advertisers for Mars reduced spending for much of the year, they could be in a position to launch campaigns for Extra Gum to fill the void left by Mondelēz. Through November, Extra Gum, M&M’s, and Snickers accounted for 48% of the company’s spend.
Advertisers for household products (20% of CPG ad spend) decreased spending by 6% YoY despite the spike in the usage of cleaning products. That said, following a Q3 decrease of 4% YoY, spending in November increased by 11% YoY and MoM.
While the dip in spending seems counterintuitive to market demand, it could speak to these companies’ greater strategies—ones that prioritize other products, including air fresheners/home fragrances, dishwashing detergent, and laundry products.
Through November, advertisers spent more than $1b to promote these products.
Henkel, for example, leaned into T.V. to promote Stainlifters, Persil ProClean, and Snuggle, which accounted for 74% of its investment. Although Henkel decreased spending in Q3, November saw a 49% MoM increase from October.
Meanwhile, advertisers for Reckitt, who promoted Air Wick, Finish, and Lysol Laundry Sanitizers (59% of spend) across TV, native, and retail media, decreased spending by 23% YoY in Q3.
That said, not all advertisers spent less in 2022.
Despite announcing a reduction in marketing, advertisers for P&G increased spending by 6% QoQ in Q3. November was also up by 16% MoM as it launched campaigns for brands like Febreze, Downy, and Downy Liquid Fabric Conditioner.
Some of these campaigns entered the OTT and CTV world, which is becoming common for industry advertisers. The move to the streaming ecosystem shows advertisers still want a presence in peoples’ living rooms—as does an upcoming push during Super Bowl LVII—but their entry point is changing.
The mixed signals from P&G also point to the complex nature of these companies. While spending may be down, there are likely products that’ll warrant millions in ad dollars.
Skincare advertisers, who accounted for 19% of spending ($1.6b), increased their investment by 8% YoY. Three industry mainstays—Johnson & Johnson, L’Oreal, and Unilever—were responsible for almost a third of the investment.
For L’Oreal, which increased spending by 32% MoM in November, the spike comes at an interesting time.
On the one hand, advertisers are innovating by charting their course in the metaverse. Their willingness to invest in channels with limited proof of ROI speaks to what they may do in 2023.
On the other hand, advertising is putting pressure on its stock; calls from the Board and investors would almost certainly put a damper on spending moving forward.
Additionally, L’Oreal recently awarded its media account to OMG. The big shift for the world’s third-largest advertiser leaves its budget in limbo. While ad dollars will surely flow, Q1 could be relatively slow as the partnership forms.
Although industry giants have historically dominated spending across all categories, new entrants are making waves, including Hims & Hers Health, Inc. (previously Hims Inc.).
Founded in 2017, the company has grown its revenue to more than $400mm. The explosive growth has understandably translated to a booming ad budget.
Through November, advertisers increased spending by nearly 80% YoY. As they continue their attack on once-unencumbered grounds, ads will follow even as the recession limits consumers’ discretionary income.
CEO Andrew Dudum said that the company’s in a position to “not only thrive in a recessionary dynamic but also to take meaningful market share.” He continued, “We leaned in aggressively to efficient marketing where it was working as others were pulling back.”
A Tale of Two Tapes
Ad spending is typically a function of company revenue.
Despite many CPG companies growing during the pandemic and the onset of the recession, ad spending remained flat. Many companies decreased spending—some more than others.
Advertisers for cosmetics and hair care, who each accounted for 7% of spending, decreased budgets in November by 177% and 140% YoY, respectively. For cosmetics advertisers, the decrease comes despite the lipstick effect, which often provides immunity to beauty brands.
While the mixed signals make it difficult to predict how CPG advertisers will approach the new year, it seems likely that spending will remain steady and lack any significant ebbs and flows (although they’re still in a position to spend billions).
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