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Food marketing spending during economic hardships
As originally posted on my blog: http://blog.gourmetbusinesssolutions.com/2008/09/10/food-marketing-...
I just read a very interesting article in Advertising Age (from last month) stating that larger food companies have increased marketing/advertising spending recently by over 10% on average . In the same article, it mentions that other large consumer packaged goods companies in different segments have slashed ad spending significantly due to rising commodity costs, big price increases, and other factors.
So, should smaller food companies follow suit and increase marketing spending during times like these (like General Mills, Hershey, and Kellog)? It seems that in our recent experience with clients, most of the smaller food companies are cutting back. Perhaps this is due to the fact that:
1. Instead of increasing their prices in response to higher commodity/ingredient costs, smaller companies take a hit on their margins (thus leaving less room for marketing) for fear of losing shelf space to larger companies and private label brands that can beat them on price, possibly from having the cash to take advantage of greater economies of scale and/or have larger marketing budgets.
2. Smaller food companies are forced to increase their prices to avoid serious cashflow crunches and/or not being able to pay bills, causing retailers and consumers to opt for cheaper alternatives or private label brands, thus decreasing gross sales - and ultimately trickling down to cutbacks in non-fixed costs such as marketing/advertising (ESPECIALLY experimentals).
So, to all of you smaller food companies, what have you done with your marketing spending this year? Thoughts? Comments?
I just read a very interesting article in Advertising Age (from last month) stating that larger food companies have increased marketing/advertising spending recently by over 10% on average . In the same article, it mentions that other large consumer packaged goods companies in different segments have slashed ad spending significantly due to rising commodity costs, big price increases, and other factors.
So, should smaller food companies follow suit and increase marketing spending during times like these (like General Mills, Hershey, and Kellog)? It seems that in our recent experience with clients, most of the smaller food companies are cutting back. Perhaps this is due to the fact that:
1. Instead of increasing their prices in response to higher commodity/ingredient costs, smaller companies take a hit on their margins (thus leaving less room for marketing) for fear of losing shelf space to larger companies and private label brands that can beat them on price, possibly from having the cash to take advantage of greater economies of scale and/or have larger marketing budgets.
2. Smaller food companies are forced to increase their prices to avoid serious cashflow crunches and/or not being able to pay bills, causing retailers and consumers to opt for cheaper alternatives or private label brands, thus decreasing gross sales - and ultimately trickling down to cutbacks in non-fixed costs such as marketing/advertising (ESPECIALLY experimentals).
So, to all of you smaller food companies, what have you done with your marketing spending this year? Thoughts? Comments?
Replies to This Discussion
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Permalink Reply by IMKENOBI on
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Hi Ryan,
I think I will survey this one. Great idea!
My experience suggests that when a recession hits, we are all in the barrel. So, pricing goes up (or down) for everyone.
Also, the specialty food industry has historically been recession-resistant (not proof). The "staycationer" will still have some discretionary income for the affordable luxury of fancy food even though forgoing that cruise.
Saludos,
Steve
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