1. WitsNotes
  2. RetailWit QuickWit
  3. QuickWit Weekly

QuickWit Weekly (11/15) – WitsNotes Vol. 6 & Last Week’s Top Retail News

Volume 6 of WitsNotes brings you Kearney’s “Brand Spend Basics, Understanding CPG trade and marketing budget decisions.”

  • Title: Brand Spend Basics
  • Author: Kearney
  • Topic(s): Budgeting, Marketing, Trade, Shopper, eCommerce 
  • Length: 24 pages
  • RetailWit Summary: 3 pages

There are 4 key steps to understand the marketing budgeting process:

  • Step 1: The budget allocations process 
  • Step 2: Players involved in leveraging (i.e. spending) budgets
  • Step 3: Size and trends of marketing budgets
  • Step 4: Allocation and size of spend per department and tactic

Step 1: Understand the budget allocation process

The following is illustrative, as the budgeting process is nuanced for different CPGs. Right or wrong, they typically they flow from the top down. Starting with the C-suite during the annual strategic planning process, then moving down to the heads of marketing & sales. 

RetailWit note: It is important to note that organizational structures often are different as to where shopper and eCommerce roll into, the Sales or the Marketing organization. 

Step 2: Understand the different constituents involved in the budgeting exercise

The next step is understanding the 4 Key Players in allocating and investing (i.e. spending) the marketing & trade budgets to drive a CPG business:

  1. The Brand 
  2. Trade (Sales)
  3. eCommerce
  4. Shopper
RetailWit note:  The lines are very much blurring due to the explosive growth of eCommerce and Retail Media Groups in terms of who 'owns' what marketing activity and what channel.

Step 3: Understanding the relative size and trends of marketing budgets

It is important to note that marketing spending has been growing and there are three major forces driving the growth of marketing budgets:

  1. The growth of Private Label
  2. The diversification of the retail landscape
  3. The growing importance of an omnichannel approach

Step 4: Allocation and size of spend per department and tactic

While marketing spending has been increasing, the proportional allocation of those budgets have been shifting as well. 

Note that Kearney used the assumption that ~25% of total CPG’s revenue will go into Marketing following the trends above.  So for the example below they used $250B of total marketing spend. 

The proportion of budgets by department allocated are:

  • Trade: $135B (54%) – down 5 points (since 2019)
  • Digital: $65B (26%)- up 6 points (since 2019)
  • Traditional: $35B (14%)- down 1 point (since 2019)
  • Shopper: $15B (6%) – flat (since 2019)

Finally, taking it down one notch to tactics it shows that while trade spending and traditional advertising are decreasing, as a percentage, the individual tactics of: 1. Price Discount, 2. Physical Display and 3. TV/Print/Radio still represent a majority of spend. 

Summary

Kearney’s recommends 3 potential opportunities based on today’s CPG priorities:

  • Priority 1: Move volume / win share – Leverage New mechanics (e.g., group buying) and focus efforts to increase penetration on niche categories
  • Priority 2: Activate New Product Launches – Utilize Pre-launch test vehicle tied to shelf-space & look to smaller brands that are largely under-served
  • Priority 3: Build Consumer Loyalty – Move to Enhanced granularity in ad buying

The full whitepaper is available at www.kearney.com

*All views presented in this article are those of Kearney and the original authors, not necessarily the views of RetailWit.

RetailWit Last Words: While we believe this is a fantastic basic starting point in learning how budgets are developed, allocated and spent, the blurring of lines between functions and unique CPG nuances are exponentially growing in today’s marketing & sales organizations. This is a challenge being addressed today by many leading CPGs, many who are actively trying to figure out:

  • Who ‘owns’ Retail Media Groups?
  • Where should ecommerce sit?  
  • Top-down vs bottom-up budgeting?
  • Budgeting for growth vs ‘cost to serve’ at the retailer level?
  • How to achieve consistent measurement at the tactic level?

Now onto last week’s top retail news stories……….

Trending Retail News Topics

Last Weeks Top Retail News

Albertsons launches retail media group

The Albertsons Media Collective will be “focused on providing opportunities to connect brands with their most loyal shoppers by opening up native display and sponsored product inventory throughout the company’s websites.” Media opportunities include advertising placements on Albertsons owned properties such as its homepage, department, category, sub-category, email, search, app, pharmacy, as well as on Albertsons’ off-site targeted ad placements. And another retailer brings their media group internal, not surprised by the news but will be interesting to see how quickly this group can get up to speed and be a force.

Linktree partners with Shopify

The popular “link in bio” service, is launching a Shopify integration to give users a way to promote their businesses and products directly on its platform. With this integration, Linktree users can launch a Shopify storefront on their Linktree to showcase their products and services to drive more sales. Similar to the Youtube story we saw this week, many platforms are looking to remove barriers to purchase. 

Johnson & Johnson to spin off their consumer health unit

This covers some big brands at J&J, the likes of Tylenol, Neutrogena, Listerine and Band-Aid will now be part of its own stand alone public company. “The new Johnson & Johnson and the new consumer health company would each be able to more effectively allocate resources to deliver for patients and consumers, drive growth and unlock significant value,” said Joaquin Duato, who is expected to become J&J’s chief executive officer in January. We saw the General Electric conglomerate break up this week and now another big one splits, is this the start of a trend for some of the big legacy manufacturers?

Instacart tests delivery options

Instacart is testing reduced or free delivery for orders with more than 24 hours notice. They know consumers are starting to pinch pennies, so having some options like this makes a ton of sense.

Hasbro has first livestream shopping event.

The livestream, featuring toys, is part of a campaign coming from Hasbro. Shoppable videos and livestream are part of a larger trend that’s happen around impulse shopping—it’s estimated to be a $25B market in around a year and a half.

Beyond Meat stock falls 17% with concerns about long-term growth.

The Street’s analysts are questioning how much growth is left for Beyond Meat. One analyst, Robert Moskow, said they “could be reaching market saturation faster than expected.” Beyond’s quarterly results and forecasts have been weak. There’s an undertone that the category as a whole could have lower-than-anticipated growth.

Instacart tests making online grocery shopping less expensive.

On already razor thin or negative margins, Instacart is looking to make delivery cheaper. The test will be on orders schedule at least 24 hours in advance. An assumption worth testing, but most customers probably don’t care if they get their Yankee Candle today or in three—they just want it “quick enough” and on the promised delivery date.

Dollar General partners with DoorDash.

After a successful, 600 store pilot in the summer, DG and DoorDash expand their partnership to ~10,000 locations by December. Instead of outsourcing, firms should have ownership of their delivery (or at least begin building the capability). It’s a vital part of the customer experience.

Arby’s to launch a limited run vodka

“Feels like an Arby’s Night” just got a whole new meaning (bonus points if you know the TV character made famous for saying that line). Arby’s launches two limited-run vodka flavors inspired by their curly and crinkle-cut fries. The Curly Fry Vodka and Crinkle Fry Vodka will exclusively be distributed through Surdyk’s Liquor, with orders placed via ArbysVodka.com. We are intrigued, sign us up for a case…I mean, it’s all just potatoes right??

Ahold Delhaize with a positive Q3

Ahold Delhaize posted net sales of $13.55 billion, up 6.8% from a year earlier. Comparable sales rose 3.6% year over year and were up 2.9% excluding fuel. On the earnings call, Ahold Delhaize President and CEO Frans Muller shared they are evaluating whether to launch their own instant delivery service. If there is smoke there is fire, you can bet we will hear more about this very soon.

Doordash acquires Wolt

Doordash spends $8.1 billion to acquire Wolt and make their first competitive move into Europe. Wolt operates in 23 countries and serves over 10 million customers. This was part of their 3rd quarter earnings call, in which it reported a net loss of $101 million. Doordash clearly still working to grow marketshare, with profit coming as an afterthought. 

Youtube looking to become a shopping platform

YouTube is launching a holiday stream and shop livestream event as it aims to steal a piece of the eCommerce pie. YouTube creators will be able to sell their own merchandise and other brands directly through the platform. With so many content creators living on YouTube it was only a matter of time until they started a direct commerce channel. Now it will be “don’t forget to like, comment and subscribe, and for a limited time we are offering free shipping on everything you saw in this video…”

Kantar: Grocery sales down 1.9% in previous 12 weeks.

From August – October, grocery sales were down according to Kantar. However, sales are still 7.3% higher than in 2019. Kantar is still optimistic for Christmas, as they’ve seen holiday products move early and well. New consumer baselines are becoming established, with the online sales stabilizing around 12% of total grocery sales and the general trend of bigger, less frequent trips is staying.


Walmart is using fully driverless trucks for e-commerce.

Since late summer, Walmart has been using fully autonomous trucks (not even a safety driver napping at the wheel) in a small scale route. It hits the “middle mile”—transport from warehouse to fulfillment center or retail store. Dancing on razor thin margins already, this is an operational milestone for retail by optimizing operations and reducing costs.


Coca-Cola names WPP global marketing partner.

OpenX, a newly formed WPP team, will be Coca-Cola’s integrated agency team. The team will manage marketing end-to-end: creative, media, data, and technology, across the CPG’s entire business and portfolio. The CMO released a statement that had more buzzwords than normal, but Coca-Cola should see efficiency and effectiveness come out of consolidating their agency roster.

https://retailwit.com
Do you like RetailWit's articles? Follow on social!
People reacted to this story.
Show comments Hide comments
Comments to: QuickWit Weekly (11/15) – WitsNotes Vol. 6 & Last Week’s Top Retail News
  • November 15, 2021

    Enjoying WitNotes? what else would you like us to cover? any long articles you don’t want to read but need to? – let us do the heavy lifting for you. Let us know! Have a great week!

Write a response