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Life in the old FMCG dogs yet; and Simon Cowell - why?

29 Apr 2019  |  Dominic Mills 
Life in the old FMCG dogs yet; and Simon Cowell - why?

High share prices at P&G and Unilever show their classic branding and marketing skills are still enormously effective, writes Dominic Mills. Plus: Not knowing whether to laugh or cry at Simon Cowell’s Barclaycard ad

Anyone following the travails of the holding companies will have noticed how, among other factors, they are marking out the big FMCG companies as one source of their problems.

The list of difficulties faced by FMCG is as follows: one, weak growth in the wider global economy; two, the threat from Amazon, own-label and fast-growing direct-to-consumer brands; three, upward pressure on raw material costs; and four, ferocious competition among retailers, limiting their ability to increase prices.

Not so fast. This month, the old dogs of the FMCG duopoly, Procter & Gamble and Unilever, both reported surprisingly upbeat figures for their latest quarters.

Let’s start with P&G. Last week it announced sales up 5%, built on a combination of volume and price increases. With the exception of grooming (hah - is that the old Gillette problem again?) — down 1%, they were up across all categories. The standout performance was in beauty and fragrances, up 9%, but even in dull and boring fabric and homecare, the most commoditised sector, sales were up 5%.

And there’s no sign of a let-up. P&G is forecasting full-year growth of 4%.

The picture at Unilever is equally bright. Just before Easter, it reported underlying sales for the most recent quarter up 3.1%. Like P&G, this was down to a mix of volume increases (up 1.2%) and higher prices (up 1.9%). And Unilever is similarly optimistic, pencilling in full-year growth of 3-5%.

Investors share this optimism: shares in both companies are at five-year highs — here’s P&G’s performance and here’s Unilever’s.

How does this read across to the ad industry? First, it tells me that the classic branding and marketing skills as practiced by P&G and Unilever are still enormously effective. The crucial evidence is in their ability to lift prices, the ultimate test of brand power. This is never easy and tougher still in the current climate.

But what is driving it? To what extent is it quick-turnaround digital activity, exemplified by the activity from Unilever’s in-house studios where it claims to produce more work, faster and cheaper? And to what extent is it big-brand advertising of the old-school type mostly on offer from traditional agencies, and generally driven by TV/video? You don’t have to be a genius to understand that it’s a mixture of both — although from the outside it’s impossible to see what the balance is — but my guess is that the ability to lift prices is underpinned by the latter.

Some of the credit therefore must go to the creative agencies that produce those 'tent-pole' campaigns Sir Martin Sorrell takes such a dim view of. And it is those creative agencies where those insight and creative skills, the skills that form the foundation of brand power, lie.

Across the board too, if you look at the creative output of both, the ads are markedly better than five to ten years ago. Marmite, Persil and Magnum are standouts for Unilever; for P&G take Always, Old Spice, Bold and Pampers.

Both have also led the way in advertiser efforts to act in more socially responsible and inclusive manners, whether that’s in the content of the ads or in where they appear, particularly in the digital landscape. I don’t think these are major factors, but collectively at the margins they add up.

Contrast P&G and Unilever with the lamentable news from Kraft Heinz where earlier this year it took big write-downs on the value of its Kraft and Oscar Mayer brands, cut dividends and saw its share price crash. It wasn’t that long ago that you’d put both Kraft and Heinz up there with Unilever and P&G as masters of the FMCG sector. The consensus is that at Kraft Heinz, a product of financial engineering and an adherent of zero-based budgeting, the accountants are in charge and the marketers have been relegated to second-class citizens.

If you were one of the holding companies, which of those three FMCG rosters would you rather be on?

A question for Simon Cowell: why?

In between not knowing whether to laugh or cry at Simon Cowell’s repayment calculator Barclaycard ad, a two-way ‘why’ question presented itself.

And that’s even before the ad ran into trouble with the Greens.

The ad itself, by the way, is clunkiness in the extreme, from the script to the performance. If he was appearing on one of his own talent shows, Cowell would vote himself off after ten seconds. Perhaps the ad is post-modern joke, but if it is it's a) too clever and b) not very funny. (Incidentally, full marks to Barclaycard rival Capital One for buying the pre-roll slot here on The Daily Mail to promote its own calculator.)

The first ‘why question’ is this: what possessed Barclaycard or its agency Droga5 to think Cowell had the right celebrity magic to sprinkle on this ad? In no way, other than for a short-lived novelty, ‘did-I-just-see-that?’ factor, is he appropriate.

The second ‘why’ is why did he do it? The man himself says, and I’m quoting him directly, “I wanted to work on this campaign because I love the fact that Barclaycard has created something that’s entirely in the customers’ interests. Paying off a little extra each month could save a lot in the long-term etc etc”. This verbiage has obviously been through the spin dryer of the Barclaycard corporate communications team, and then signed off by Cowell (or his people, because he’s far too busy for that stuff) without even a cursory glance at it.

Anyway, that clears it up: it’s got nothing to do with the money.

But keen readers of the tabs and celebrity mags who know that Cowell’s £15m mansion is apparently haunted by the ghost of Emperor Hadrian’s lover (you just can’t make this stuff up), may be able to deduce the real reason.

There’s only one reason celebs plant these stories and it’s because they think their currency is on the wane. As with the story, so with the ad. Either that, or Cowell is paranoid that BGT audiences are too low and desperate measures are needed.

And by the way, as I write this, a third question emerges: is this the unique sort of creative excellence from Droga5 that Accenture paid millions for?

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22 May 2020 

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