Colgate Palmolive, Mondelez boost ad spend amidst inflation
By Felicia Nwosu
Despite the continuous high cost of production and higher cost in the supply chain heightened by severe inflationary effects, some notable brands such as Colgate Palmolive have continued to navigate the strong economic and sectoral headwinds. Colgate Palmolive, irrespective of the high price, did not suffer from a drop in volumes, indicating that consumers are being motivated to continue to pay for the company’s personal care and pet products.
According to a report from The Current, a digital home base for contemporary issues on ecommerce, the global brand increased advertising spending by 14% in the first quarter of 2023 when compared with the same three months of 2022. That outpaces even the company-wide price increase of 12%. It stated that digital marketing saw double-digit increases at both CPGs during the first quarter.
It has demonstrated strongly that, as they charge more, companies must also continue to win over shoppers in the marketplace, which has also impacted immensely as advertising spend is getting a boost this year, as well.
Noel Wallace, Chief Executive Officer of Colgate-Palmolive revealed that, in all, net sales at the company increased 10%, and gross profit margin improved. The CEO said that increased advertising spending was a key piece of that equation, as the company seeks to “return to a balanced algorithm of pricing and volume growth.
“The company’s brands are continuing to roll out new products, and advertising helps to put messaging might behind these launches. To raise awareness of our innovation plans, as well as to support our pricing actions and drive brand health, we will fund marketing investment for our brands. An increase in digital advertising is accounting for a large portion of the spending increase,” he said.
He reiterated that the increase in digital marketing spend can have a direct impact on digital sales. Ecommerce was also up double-digits for the quarter, now accounting for 14% of sales at Colgate Palmolive
“We’re seeing great ROIs on digital and our programmatic and the personalized content that we’re delivering in the market,” Wallace said. “We’re seeing growth in market shares relative to where we’re spending the money, particularly around the Hill’s business, and our oral care and skin health businesses. So we’re really pleased with the fact that the advertising levels continue to deliver against the expectations that we have. And we balance that off with obviously a broad portfolio of offerings that we think are attracting and building the brands that we speak,” he added.
Wallace also pointed out that in China, the company combined “premium science-led innovation with higher levels of advertising, more targeted digital content and more persuasive advertising copy” to stand out in a crowded toothpaste market, said. The result was growth in market share.
“We believe this is a winning formula across our categories and markets globally. In the end, Colgate Palmolive views advertising as part of a “circular” strategy. More advertising is driving the top line, and we’re able to get more leverage to the P&L to continue to support that,” Wallace said. “And we feel as we move out getting the pricing in the P&L was critically important to sustaining and increasing our levels of advertising.”
Meanwhile, the same positive result shined at Mondelez International, despite the high increase in price as well. The maker of Ritz and Oreo boosted A&C, or advertising and consumer promotions, by 20% in the first quarter. The company disclosed that this helped Mondelez strike a similar balance to Colgate Palmolive.
“The company posted net revenue growth of 18%, as prices increased 16.2 percentage points. Volume/mix grew 3.2 percentage points, which bucks a trend of negative volumes observed at other CPGs. We in the end sell brands and it is important that we keep line of sight to that,” said CFO Luca Zaramella. “And I don’t think you’re going to see a consistently at 20% A&C increase, but at this point in time, where we are moving price points, where we are trying to retain and increase our consumer pools, it is important that we use these as an important accelerator of growth for years to come,” the report added.
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