CEOs at consumer goods companies are feeling the heat from investors to deliver top-line growth, forcing them to treat marketing as a value driver rather than a cost.
Investors used to hail digital expenditure of CPG companies as an important metric for growth, said Alan Erskine, managing director at Credit Suisse, at an Advertising Association event in London on Jan. 25. But that stance has shifted amid concerns over digital ad effectiveness, the Facebook-Google duopoly and transparency, as growth in the CPG category remains elusive.
Investors are now asking whether the sector’s “cost-cutting scalpel has been cutting into muscle rather than fat,” he said. Perhaps sensitive to this, CEOs have upped pressure on senior marketers to justify their investments, as many companies in the sector abandoned their margin targets in the second half of 2017, in favor of greater investment behind top-line growth, Erskine added.
Procter & Gamble summed up the shift in its latest update to financial analysts on Jan. 23. Whereas previous updates highlighted the company’s marketing efficiency savings to the bottom line, chief financial officer Jon Moeller drew analysts’ attention to investment increases in the latest update. P&G increased ad spend by 2 percent in its last quarter, said Moeller, and further rises are planned.