How the world’s biggest advertisers are spending (or not) as industries adapt to the coronavirus pandemic

Digiday analyzed the most-recent earnings updates and calls from the top 10 ad spenders in the world, according to RECMA’s data for 2019 to see how they are adapting their marketing strategies to the ongoing crisis. RECMA’s data calculates “integrated spending,” which combines “monitored spend” — such as TV, radio, print and outdoor — and “non-traditional activity” —such as digital, data and content.

The ranking also includes new entrants versus 2018. Nestle, Expedia and General Motors now appear in the top 10, while GlaxoSmithKline (ranked #7 in 2018,) McDonald’s (#9) and Comcast (#10) no longer feature.

1. Procter & Gamble: ‘A time to spend forward’ on advertising (2019 integrated spend: $12.2 billion)

Much like the previous two quarters, Procter & Gamble has continued to be a beneficiary of the pandemic as consumers stocked up on home cleaning and hygiene products. Net sales were up 9% versus a year ago to $19.3 billion on an organic basis and the company recorded a 19% lift in net profit. 

The maker of brands including Tide, Mr. Clean and Fairy revised upwards its full-year organic sales target to a lift of between 4% to 5%, up from its previous estimate of between 2% and 4%.

On a briefing call with journalists, which was reported by AdAge, P&G chief financial officer Jon Moeller said the consumer goods company increased its marketing outlay by more than $100 million in the quarter. While it managed to make savings of around $200 million on agency, production and other advertising-related overheads, Moeller said this money was reinvested back in marketing as media consumption remains high and the “heightened need to spend on hygiene and health.”

“We view this as a time to spend forward in terms of our advertising levels, not to spend back,” Moeller said. Still, the nature of that spending is changing: P&G’s chief brand officer Marc Pritchard used his speech at the annual Association of National Advertisers Masters of Marketing conference to call for the “antiquated network upfront system” of TV buying to get an update. This year the company negotiated many of its deals directly with broadcasters.

2. Amazon: Expecting another surge in holiday demand (2019 integrated spending: $6.7 billion)

Amazon posted another soaraway quarter in the three months to September 30 as consumers continued to rely on the e-commerce giant to top up on essentials, entertainment and just about everything else. Both its revenue ($96.1 billion; up 37%) and net income ($6.3 billion; up 200%) came in well above analysts’ expectations.

However, the company’s chief financial officer Brian Olsavsky warned that while holiday sales will easily break past the $100 billion mark, “we’ll all be stretched” to keep up with the demand, which will likely eat into its fourth-quarter profit. Amazon’s Prime Day two-day sales event took place October, which it said led to a 60% increase in sales made by third-party sellers, compared with last year.

Marketing costs increased 14% in the quarter to nearly $5.4 billion, having decreased slightly in the previous quarter, when there wasn’t as much of a need for marketing as consumer demand had surged anyway. Amazon released its 2020 Christmas ad this week, featuring a ballerina whose “show must go on” despite the coronavirus upending her prior performance plans.

As for its own advertising business, Amazon’s “other revenue” segment —which is primarily made up of advertising revenue — clocked in a 51% increase in revenue to $5.4 billion. Olsavsky said ad budgets had begun to increase from a contraction that had occurred in the earlier part of the second quarter. Plus, web traffic was up. “We do a good job of turning that traffic into valuable real estate for our advertisers and for our customers to find out more about selection and brand discovery,” Olsavsky said.

3. L’Oréal: A return to growth (2019 integrated spending: $6.7 billion)

L’Oreal marked a sales rebound in its third quarter after a “crisis of supply” in the first half of the year as stores, airport concessions and salons were forced to close. Sales rose 1.6% on a like-for-like basis to just over €7 billion ($8.2 billion,) which it credited to “remarkable performances” in China and Brazil, the reopening of salons and the acceleration of its e-commerce business.

Unlike earlier in the year when some marketing launches were put on ice, “all of the launches initially planned went ahead, business drivers and media investments were strengthened” as it pressed ahead with its “back to beauty” plan in the third quarter, said L’Oreal CEO Jean-Paul Agon.

In a presentation during L’Oreal’s capital markets day in September, the company’s chief digital officer Lubomira Rochet said 50% of its business is digital and 50% of its “growth drivers” are now digital. The company now expects to record like-for-like sales growth for 2020, despite a tough few months related to the pandemic. 

4. Unilever: Increased spending and tooling up “digital hubs” (2019 integrated spend: $6.3 billion)

Unilever, the maker of Dove deodorant and Hellman’s mayonnaise, reported a 4.4% lift in underlying sales growth in its third-quarter, surpassing analysts’ expectations of 1.3% growth. Like P&G, Unilever benefited from consumers in western markets continuing to stock up on hygiene and cleaning products — but also saw a 5.3% bounce back in emerging markets where lockdown restrictions had begun to ease.

Speaking on the company’s third-quarter earnings call, Unilever CEO Alan Jope said the company increased marketing spend in the quarter and planned to increase marketing spend again in the fourth quarter.

That outlay won’t just be on traditional spending, but also investing in people and “future-facing skills,” particularly around digital marketing, he said. The company is ramping up hiring for new digital hubs, charged with managing “content-driven, highly-targeted, data-led campaigns,” Jope added.

That said, Unilever also plans to invest “heavily in marketing to support our brand campaigns” now that many markets have stabilized versus the beginning of the year. 

5. Volkswagen: Strengthening ‘digital competence’ (2019 integrated spending: $4.5 billion)

Volkswagen, the world’s biggest automaker by sales, marked a return to profit in its third quarter as sales began to recover in China — its largest market — and western Europe. The company sold 2.6 million vehicles in the quarter and while sales have fallen more than a fifth so far this year, it posted a pre-tax profit €3.6 billion ($4.2 billion) in the three months to September.

Still, its full-year global sales are expected to drop by as much as 20% this year and the outlook is still uncertain, given the potential for further countries to return to lockdown measures.

“In this challenging situation, we … succeeded in making significant progress in implementing our strategy, for example by further expanding e-mobility and strengthening our digital competence and in maintaining the financial leeway required for the substantial investments in the future,” said Frank Witter, Volkswagen CFO.

The company still expects to post an operating profit in 2020. However, that profit will be much lower than last year and its margins are lower than that of its competitors, such as Ford and Fiat Chrysler.

6. Renault Nissan Mitsubishi Alliance: A focus on electrification and boosting Nissan’s image in the U.S. (2019 integrated spending: $4.4 billion)

Renault reported an 8.2% drop in revenue for the September quarter, but that was a considerable improvement on the 35% dip in sales it recorded in the prior quarter. The company said its cost-cutting plan is paying off, plus it had helped increase its market share in Europe, largely thanks to a surge in sales for its Zoe electric hatchback, which almost doubled in the period. New CEO Luca de Meo plans to announce a full strategic plan for the company in January.

Meanwhile, while Japanese alliance member Nissan forecast its biggest ever operating loss ($4.48 billion for the year ended March 31) in July, the outlook is now looking less bleak. Nissan CEO Makoto Uchida said in an interview with Automotive News “if you look at the past three months, I think the number is much better,” referring to global demand for vehicles. A key focus for the coming months will be the U.S. market, where Uchida said “we really need to rectify ourselves in terms of operations and reestablish our brand image.” Leading that charge is Allyson Witherspoon who this month was promoted to the role of U.S. CMO.

Mitsubishi is also expecting to report a loss for the 2020 fiscal year. Like other members of the alliance, it is streamlining its operations and placing a big focus on electric vehicles. Mitsubishi wants electrified vehicles to count for half of its global sales in 2030, up from just 7% now. Its midterm plan, through to 2022, focuses largely on cost-cutting and eco-friendly models.

7. Coca-Cola: A refined “master brands” strategy (2019 integrated spending: $4.3 billion)

Lockdown conditions continued to hit beverage sales in restaurants, bars and other out-of-home venues, but Coca-Cola’s third quarter was a marked improvement on the second. Revenue dropped 9% to $8.6 billion, compared to a 28% slump in the prior quarter.

Coca-Cola is dramatically streamlining its businesses and said it aims to cut its 430 “master brands” down to just 200. Among the brands being discontinued are its Zico coconut water brand and Tab cola. 

Marketing spend was down 30% in the most-recent quarter, compared with last year, though this was still a sequential increase on the first half of the year when the company dramatically cut its expenditure. 

The company is still on a marketing efficiency drive, though CEO James Quincey emphasized on the earnings call that “this is not a top-down-driven exercise to reduce expenses” but rather a way to increase effectiveness and reinvest savings back into its reduced portfolio of brands. For example, the company was “marketing strongly” behind the Coke brand in the third quarter, which Quincey said helped it gain share. The company plans to increase marketing investment behind Coke in the fourth quarter and into 2021, he added.

8. Nestle: A focus on healthy and “trusted brands” (2019 integrated spending: $4.2 billion)

Throughout the coronavirus crisis, Nestle has credited a consumer desire for “trusted brands” — such as Maggi noodles and DiGiorno frozen pizza —for providing a boost to its sales. 

The Swiss food giant revised upwards its like-for-like full-year sales forecast last month, saying the number would come in at 3%, up from its previous estimate of between 2% and 3%. 

The company posted third-quarter sales growth of 4.9%, in which it credited gains in its health-science business as consumers stocked up on vitamins, supplements and nutritious drinks.

Last month, Nestle upped its stake in healthy meal delivery startup Freshly, to take full ownership of the company — a move designed to diversify its portfolio and cater to the increased consumer demand for e-commerce.

Elsewhere, Nestle has embarked on a big sustainability push, having committed to making 100% of its packaging recyclable or reusable by 2025.

9. Expedia: Sharp pullbacks (2019 integrated spending: $4.2 billion)

Back in April, Expedia Group chairman Barry Diller said while Expedia usually spends around $5 billion a year on advertising, “we won’t spend probably $1 billion this year” as the travel sector felt the brunt of lockdown measures and consumers’ leeriness of airplanes. A great deal of the company’s ad spend goes on digital performance channels, particularly Google.

“The second quarter of 2020 represented likely the worst quarter the travel industry has seen in modern history,” said CEO Peter Kern in July, though he added that April was the “bottom of the trough” and that bookings began to improve through May and June. But as lockdown measures once again get enforced around the world, the outlook looks bumpy.

The company laid off around 12% of its global workforce in February and, as Skift reported last month, is preparing to lay off more employees within its travel partners group as it continues the streamlining of its business and looks to make more than $500 million in cost savings.

Selling and marketing costs were drastically reduced in the second quarter, down 83% to $283 million. The company merged its brand groups as well the performance marketing groups that sit within them. “There’s big opportunities ahead, we believe, in doing the work as a portfolio of brands and optimizing for that portfolio as opposed to optimizing each brand by itself,” said Kern on the company’s second-quarter earnings call. Expedia reports its third-quarter earnings on November 4.

10. General Motors: Catering to “pandemic-induced auto demand” (2019 integrated spending: $3.9 billion)

General Motors reports its third-quarter earnings on November 5. Like other automakers, analysts also predict its profit will return to pre-coronavirus levels, the WSJ reported. 

The company revealed in October that its third-quarter vehicle sales dropped by around 10% compared to the year-ago quarter, but that sales improved sequentially each month within that quarter. 

The company’s chief economist Elaine Buckberg said the pandemic had led to a build-up in demand for automobiles. Research from McKinsey & Company and Ipsos showed that many consumers see private vehicles as a “safe space” and that more city residents have sought to buy vehicles as they move out to the suburbs. Very low automotive loan interest rates plus savings from a cutdown on vacation, restaurant and other entertainment costs had also driven up demand.

In an interview with Digiday, Melissa Grady, CMO of GM-owned Cadillac explained how the luxury auto brand had changed its advertising “around every two weeks” through the pandemic. In September, Cadillac launched a new brand campaign for the Escalade starring actress Regina King dubbed “Never Stop Arriving.”