July was a cruel month for the advertising and media industries.
Ad spending for the first half of the year was sluggish, and based on a slew of indicators last month, folks had better suck in their guts: The belt-tightening has more notches to go.
"The weather conditions are dreary and worsening," says BMO Capital Markets analyst Leland Westerfield. In July, Westerfield, along with several other ad prognosticators, ratcheted down their spending forecasts for how 2008 will finish.
The auto industry is "retrenching" on ad spending, and "the outlook for retail, financial and telecommunications advertising is negative for the second half of the year," Westerfield says.
Robert Coen, director of forecasting at Interpublic Group's Magna unit, downgraded his 2008 U.S. ad-spending estimate to 2% growth, from 3.7% at the start of the year. He sees no recovery soon. "It'll be 2010 before you see any real improvement overall," he says.
Signs of trouble in July:
•Carmakers tap brakes on spending:On its second-quarter earnings call, Ford said it slashed advertising and sales promotions spending to $100 million, vs. $300 million for the same period in 2007. Faced with a dismal market, cash-strapped automakers won't be loosening the purse strings anytime soon.
"We're in a tough industry right now … most of the players in the automotive space are cutting back" ad budgets, says Mark LaNeve, GM's North America sales and marketing chief.
Among GM ad cutbacks: fewer sponsorships and less truck advertising. The money left will focus on GM's "fuel-efficient cars and crossovers," LaNeve says.
Those cuts hurt: GM was the No. 4 U.S. ad spender in 2007, shelling out $2.1 billion, reports TNS Media Intelligence. Ford was the sixth, with $1.6 billion.
•Big spenders lose marketing chiefs:The nation's top two ad buyers — Procter & Gamble and AT&T — revealed major marketing executive shifts in July. Longtime P&G Global Marketing Officer Jim Stengel stepped down, while AT&T's advertising head, Wendy Clark, said she's leaving the company.
P&G spent $3.5 billion last year on advertising; AT&T, $2.3 billion, says TNS.
•Soft drink giant cuts back:While beverage ad spending and sales have traditionally held up in economic downturns, Coca-Cola CEO Muhtar Kent said in July that Coke is "aggressively reviewing" its marketing expenditures. It's part of Coke's overall plan to cut $400 million to $500 million in annual costs by 2011.
•Beer budget under scrutiny:Big spender Anheuser-Busch agreed in July to be bought by Belgian brewer InBev.
While CEO Carlos Brito says he won't scale back A-B's spending as long as it creates brand growth, InBev is renowned for its cost-cutting.
A few boost budgets
There are some bright spots amid the gloom, say forecasters. Media outlets should benefit this month from spending around the upcoming Olympics and presidential elections.
And a few marketers, such as Kraft and PepsiCo, are responding to the economy by strategically pumping up their ad budgets to keep or gain market share.
"Across the board, we are planning to invest even more in 2008 than 2007 for marketing, quality and innovation focusing on our key brands and categories," says Kraft spokeswoman Lisa Gibbons.
Pepsi added spending this year to promote its new Gatorade G2. In a July earnings call, CEO Indra Nooyi said Pepsi is "not backing off" ad spending. "We really have an eye towards the long-term future of the company," she said.
Jon Swallen, senior vice president of research at TNS, says these food companies have increased spending in a "shrewd" and "deliberate" way.
Not only do they want to keep their brands front and center as shoppers consider cheaper store brands, they're also "anticipating that people will be eating out less and eating in more."
Contributing: Theresa Howard
NEW AND NOTABLE
Food for thought.
The Ad Team has noticed a spate of not-so-good-for-you foods trying to play up their "natural" side in recent ads. For instance:
•A print ad for Frito-Lay's Fritos shows the chips neatly lined up as kernels on an ear of corn. Says the copy: "3 simple ingredients. Corn. All natural oils. And a dash of salt."
•A Pepperidge Farm print ad boasts "real fruit baked into light, flaky cookies." It shows a bushel of fresh fruit next to a picture of three cookies.
•Print and online promotions for Hellmann's mayonnaise's "real" ingredients: eggs, oil and vinegar.
•Outdoor ads with oversize McDonald's burgers above the line: "100% beef."
We think this wholesome approach is a bit much for these products. What's your take?
Makes us misty-eyed.
Johnson's may have taken the tears out of baby shampoo — but it put them into its "Thanks, Mom" Olympic ads. The baby care company, a unit of global Olympic sponsor Johnson & Johnson jnj, is running heart-tugging ads that show Olympic athletes sharing unscripted stories about how their moms helped shape their lives. Among those featured: U.S. track and field star Shalane Flanagan; triathletes Sarah Haskins and Jarrod Shoemaker; and swimmer Cullen Jones.
The campaign will run online at baby.com/thanksmom, as well as on NBC Universal's broadcast and cable networks during the Games.
Gobbling up resources.
Tofurky, the tofu meat alternative, has concocted a plan to not only save animals' lives, but also to save the world from global warming: "Tofurky Tuesdays."
You go to Tofurky.com and pledge to go meat-free one day a week — preferably Tuesdays. In exchange, you'll get information and two free magazines on vegetarian eating. Tofurky maker Turtle Island Foods and the Humane Society of the United States are co-sponsors.
Their thinking: It takes a lot of energy to raise and transport animals for food. By Tofurky's math, the greenhouse gas emissions saved by going meatless one day a week equal those of driving a 20-mile-per-gallon car for 16.5 miles.
Joining the party.
Sure, Pepsi will get free exposure when the Democratic National Convention takes place Aug. 25-28 in Denver's Pepsi Center. And yes, Invesco will share the spotlight when Barak Obama give his acceptance speech at Invesco Field at Mile High.
But that doesn't mean small-scale businesses won't get a piece of the action with the Democrats in town. Two examples:
•The Cry Baby Ranch:The retailer in Denver's historic Larimer Square district expects to sell wagonloads of Western wear, from $38 Western scarves (for women) to $400 boots (for men). Owner Roxanne Thurman also plans to unload a bunch of Colorado-made glass cowboy hat paperweights — at $58 each.
•Chipotle:In Denver 15 years ago this summer, Steve Ells opened the first Chipotle Mexican Grill. Convention attendees can grab a piece of Chipotle history by visiting that first store on Evans Avenue near the University of Denver and buying a $10 "I've Been to Evans" T-shirt — sold only at that store.
New and Notable by Laura Petrecca, Bruce Horovitz and Theresa Howard