Here’s how some industry leaders are adapting:
Heineken is increasing marketing investment in response to consumer concerns over pricing and inflation. CFO Harold van den Broek notes the shift towards a more balanced growth approach to meet consumer needs.
Nestlé is celebrating a return to positive real internal growth, with improved volume and mix growth in Q2. CEO Mark Schneider emphasises innovation and the growth of iconic brands to sustain RIG.
P&G is focusing on creating new occasions and recruiting new consumers through superior products. This strategy aims to grow the market rather than just taking share from competitors, providing a profitable path to brand growth for them and their customers.
As we will review in more detail shortly, Unilever is taking a forensic approach to high-quality brand growth and gross margin expansion, led by its Power Brands.
Significant inflationary cost pressures led McDonald’s to make selective price increases, causing some consumers to reconsider their buying habits. CEO Chris Kempczinski is steering the company towards new product lines and meal deals to entice customers back.
Diageo is implementing a Consumer Choice Framework to understand consumer occasions and motivations better.
There are 4 emerging themes to achieve high-quality Brand Growth
Increased Brand Investment to Generate Demand
Heineken has set a trajectory to invest 11% of revenue as they “set themselves up for years of volume and pricing growth.”
P&G, Unilever and Nestle have increased their marketing investment by 300, 180 and 100 basis points, respectively, with P&G calling out the importance of reaching more buyers and building “brand superiority.” This second objective is one shared by Kraft Heinz CEO, Carlos Abrams-Rivera who has committed to increasing marketing investment “to drive brand superiority across our portfolio.”
If you are in the position where you have also secured more marketing investment then it is worth noting the importance of spreading media budgets across the year.
https://marketingscience.info/when-brands-stop-advertising
Focus on Innovation
Innovation forms a key part of the strategy of many of the brands mentioned with Nestle seeking to address new consumer needs and P&G want to bring new buyers into the category by creating products for new occasions.
Kraft Heinz will ramp up both innovation and renovation, whilst Diageo recognise the need to respond quickly to new insights.
The challenge for these organisations, in the light of the increased investment commitments, will be to get the right balance between supporting existing brands and backing the new innovations beyond the launch period.
Portfolio Prioritisation
As a former CMO for a global brewer, I remain in awe of the size of these businesses and smile when Unilever states their intent to focus on only 30 Power Brands. That is still a vast portfolio to invest behind.
Reckitt use the same Power Brand terminology and have gone through a methodical process to define which brands are core. Those brands that do not meet three criteria will be sold.
Nestle are focussing on their iconic brands and McDonald’s are maximising the potential of their core menu.
To execute these strategies effectively they will need to work through regional nuances and bring retailers and distributors on the journey.
In my experience, a significant amount of time needs to be dedicated to engaging all stakeholders.
In 2020 Molson Coors Brewing Company changed its name to Molson Coors Beverage Company to leave everyone in no doubt that the strategic shift to take its portfolio beyond beer was real. As a CCO within the organisation at the time, it is impossible to overstate how significant this was in securing the alignment needed to make the right portfolio decisions. Fast forward 4 years and Molson Coors are posting record results as a result of high-quality brand growth.
Effective Ways of Working
To fuel demand, investment needs to be unlocked from elsewhere. For a number of the companies mentioned so far these funds appear to be coming from two areas.
i) Restructure:
Diageo, Unilever and Reckitts are either in the middle of, or have completed, a reorganisation.
ii) Efficiency and Effectiveness.
There is a desire from many to demonstrate they have a brand growth playbook that minimises waste and maximises returns. Jon Moeller reassures investors that the effectiveness and efficiency of P&G’s increased investments is a high priority, but urges those attending the 30 July results call to be patient,
“While our portfolio is constructed to focus on categories where the product is used daily, that doesn’t mean it’s purchased daily, and so it sometimes takes a little bit of time to evaluate and see the market response to those investments.”
Unilever CEO Hein Schumacher has completed his first year in charge and is keen to highlight a change made in October which saw the introduction of a new “unmissable brand superiority” framework which “looks holistically at brand performance.”
As he explains in the H1 Results Q&A session, Unilever have identified 21 drivers of market share growth and have applied these across their 6P’s (product, packaging, proposition, promotion, place and price), “to improve execution power” across the entire organisation.
This level of rigour is admirable, but time will tell if this marketing effectiveness narrative is clear enough to engage key stakeholders and reassure shareholders.
The Importance of Credible Marketing Metrics
Broadly speaking the organisations referenced are facing similar challenges and have identified the same levers to improve performance and achieve sustainable brand growth.
They report their financial performance the same way with instantly recognisable metrics.
Yet when it comes to the marketing metrics it is a less consistent picture. P&G, Unilever and Kraft Heinz share “brand superiority” as a key objective but these companies appear to judge superiority in different ways.
There is something to be said for the simplicity of The Ehrenberg Bass Institute’s work. They are able to demonstrate a clear link between the metrics of building Mental Availability and the positive impacts on brand growth and business metrics. It is certainly easier to translate for investors and given the applicability of these theories across most categories it comes with a high level of reassurance.
The role of CEO’s and CFO’s in Brand Building
I applaud all of the CEO’s and CFO’s who made brand building and long term investment a theme in their investor calls. The really big win would be for the marketing industry to align behind a simple set of brand metrics that could transcend organisations. Imagine if you could move from one investor call to another and brand growth was being measured in the same way.
Metrics should be easy to understand
Linda J Popky, HBR, ‘identify the metrics that actually matter’
Metrics should be easily replicated
Metrics should provide useful, actionable information that impacts the business
https://hbr.org/2015/07/identify-the-marketing-metrics-that-actually-matter
Preparing for Future Challenges
Looking ahead, brands will need to remain agile and responsive to ongoing economic pressures and changing consumer behaviours. This means continually reassessing their strategies and ensuring that their investments in marketing, innovation, and organisational efficiency are yielding the desired results. By staying committed to these principles, they can navigate the complexities of the market and achieve sustainable brand growth.
In conclusion
In 2024, companies are pursuing more balanced brand growth strategies, prioritising buyers’ needs, increasing investment in their core portfolios and innovation. Underpinning this is a desire to demonstrate a commitment to marketing effectiveness. P&G’s Jon Moeller captures this well,
“Our strategy is dynamic and sustainable. It adapts to the changing needs of consumers, customers and society and is focused on growing markets, creating versus taking business, the most sustainable and typically most profitable way to grow.”
Martin Coyle is a former Chief Marketing Officer and Chief Commercial Officer at a global Bevco, with 30 years experience in FMCG. He is an expert in building Mental and Physical Availability, Portfolio Strategy development and aligning organisations behind brand execution.
Brand Growth Further reading
Unilever H1 2024 Results:
https://www.unilever.com/files/h1-2024-video-transcript.pdf
P&G 30 July Results call:
https://seekingalpha.com/article/4708081-procter-and-gamble-pg-q4-2024-earnings-call-transcript
From SmilingCFO website:
Why the CMO/CFO relationship is the most important one in the C-Suite.
