---
title: "P&G, L'Oréal, Unilever Increase Advertising Budgets: The More Downturn, the More Marketing?"
description: "Recently, P&G, L'Oréal, Unilever, and many other brands released their first-half 2023 financial reports. The most notable trend is that these world's largest brand owners almost unanimously increased their advertising budgets, which corresponded with rapid sales growth. For instance, P&G's advertising spending increased by $453 million last quarter; L'Oréal's advertising spending as a percentage of sales increased by 1 percentage point in the first half, totaling nearly $1 billion compared to a year ago, with organic sales up 13%."
author: "Morketing"
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published: "2023-12-25"
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# P&G, L'Oréal, Unilever Increase Advertising Budgets: The More Downturn, the More Marketing?

> Recently, P&G, L'Oréal, Unilever, and many other brands released their first-half 2023 financial reports. The most notable trend is that these world's largest brand owners almost unanimously increased their advertising budgets, which corresponded with rapid sales growth. For instance, P&G's advertising spending increased by $453 million last quarter; L'Oréal's advertising spending as a percentage of sales increased by 1 percentage point in the first half, totaling nearly $1 billion compared to a year ago, with organic sales up 13%.

Recently, **P&G, L'Oréal, Unilever, and many other brands released their first-half 2023 financial reports. The most notable trend is that these world's largest brand owners almost unanimously increased their advertising budgets.** At the same time, this corresponded with rapid sales growth. A closer look at their financial reports reveals that these brands' advertising expenditures were almost all substantial. For example, **P&G's advertising spending increased by $453 million last quarter; L'Oréal's advertising spending as a percentage of sales increased by 1 percentage point in the first half, totaling nearly $1 billion compared to a year ago, with organic sales up 13%; Unilever's advertising spending grew by 10%, with organic sales up nearly 8% in the first half; Nestlé's advertising spending grew by 7.5% this quarter; Hershey's advertising spending grew by 15% this quarter.** Meanwhile, Meta and Google's parent company Alphabet both reported advertising revenue growth **stronger than expected**. According to a report by Tinuiti, there are signs of a broad rebound in client marketing spending on digital platforms. Of course, there are dissenting voices in the market. For example, Peter Huijboom, CEO of Dentsu Media, predicted in his forecast for the new year's advertising market: **"Despite economic uncertainty, we still expect global advertising spending to grow. However, media price increases are the real driver of this growth."** If advertising spending is calculated at constant prices, Dentsu expects advertising spending this year to decline by 0.6% compared to the same period in 2022. But it is undeniable that with the growth in advertising budgets, we have indeed seen rapid sales growth for these brand giants.

**The More Downturn, the More Marketing** In fact, even if the significant increase in advertising spending is due to media price increases, it still means that brands are increasing their investment in marketing. If we attribute all issues to media price increases, then if brands still want to reduce costs and increase efficiency, they should maintain their original budget levels, and reducing the number of ads would likely be the final result. On the contrary, even in the face of media price increases, brands have chosen to increase investment to maintain the same advertising scale as before. This seems more like the conventional response of these century-old brands that have weathered multiple cycles and several downturns, **rather than simply increasing with investment.** As Jon R. Moeller, Chairman, President, and CEO of P&G, stated in this quarter's earnings report: "The operational, cost, and cash flow challenges we have faced over the past two years will continue in fiscal 2023, and at the start of the new fiscal year, consumers will face the impact of inflation not seen in 40 years." So why are almost all brands increasing their budgets this year? Or why has the marketing industry seen a two-tier reversal this year, with almost all brands cutting investment in the first half, but in the second half, despite continuous calls for cost reduction and efficiency, consumer brands seem to have unanimously started increasing brand budgets? Overall, the main reasons for brands increasing marketing investment are concentrated in the following two aspects:

**First, increasing advertising investment during a downturn to gain a larger market share.** If we look closely at the changes in major companies, including P&G, during past economic crises, it is not difficult to find that almost all brands have unanimously increased advertising budgets, especially in industries with fierce competition and high relevance to consumers' daily lives. After all, regardless of the market environment, brands need a moat to resist risks. The width of the moat lies in the depth of brand differentiation. **Thus, the more downturn, the more marketing has become one of the ways many large enterprises navigate cycles.** As Forbes said in its latest analysis, "Competitors cutting advertising spending due to the pandemic, on the other hand, frees up promotional space for capable brands. Therefore, persisting with marketing at this time makes it easier to win consumer attention and trust, thereby enhancing the brand's long-term sustainable influence." In years when the economic system is disrupted, the economic environment is sluggish, and the "Matthew effect" is prominent, most companies will also feel panic and reduce investment in brand building. However, **for a few companies, when media prices drop and competition cools, it is actually an excellent time to advance and enhance the brand.** Furthermore, even if media prices are stable or even increase, during economic downturns, consumers become more rational and thus have more considerations when purchasing goods. Consumers naturally tend to buy better products, and of course, "better" here includes many dimensions. This means consumers need to spend a lot of effort to discern and research the products they buy. But we must realize that consumers are essentially "lazy" and will avoid thinking as much as possible. At this point, the value of brands naturally becomes higher because brands help consumers filter the pre-purchase thinking process. This is also true for performance advertising or other advertising channels that can quickly prompt consumer purchases. The downturn brings natural purchase exclusivity for brands. If consumers can be prompted to place an order for their brand's products, due to consumers' more cautious mindset, the probability of a second impulse purchase is extremely low, which naturally means they are unlikely to spend money on other brands' products. From a long-term perspective, due to the shrinking total market, if companies cannot gain growth by increasing investment, as market space continues to shrink, many competitors will naturally disappear from the track. What does the market's bubble squeezing squeeze out? It squeezes out brands without moats, brands lacking differentiation, and many that cannot even be considered brands.

**Intensifying Inflation, More Investment Needed** The second key reason for increasing investment is that although sales are growing, brands must also consider the impact of price increases on the brand. If we look closely at the financial reports of international giants like P&G, Unilever, and L'Oréal, it is not difficult to find that almost all brands have seen overall revenue growth despite economic, inflationary, and pandemic challenges. P&G, in particular, achieved its highest sales in nearly a decade in fiscal 2023. The company's fiscal 2023 (July 2022 - June 2023) annual report shows that during the reporting period, P&G's sales reached $82 billion (approximately RMB 586.5 billion), a year-on-year increase of 2%; however, net profit attributable to shareholders was approximately $14.7 billion (approximately RMB 105.2 billion), a year-on-year decrease of 0.6%. In fact, although P&G is the most representative example, all major companies are facing a similar dilemma: **the main source of brand sales growth is price increases. The financial report shows that in Q4 of fiscal 2023, price increases brought P&G a 7% organic sales growth, while shipment volume declined 1%; for the full fiscal 2023, price increases contributed 9% growth, but shipment volume declined 3%—that is, P&G sacrificed shipment volume to ensure sales growth.** This price increase is precisely due to the brand premium brought by these companies' continuous brand building in the early stage. **They have successfully shaped a high-quality, high-value brand image by continuously launching new products, optimizing product lines, and strengthening brand marketing.** Obviously, behind this premium is continuous marketing investment. Otherwise, as market competition intensifies, consumers' awareness and loyalty to the brand gradually decrease, and they begin to pay more attention to the actual cost-performance ratio of products. Brand decline is almost an inevitable path. Of course, from another perspective, the brand's pricing power itself is an important competitive capability during market downturns. After all, if a brand has sufficient premium space, it means the brand can pass on the cost of raw material price increases caused by inflation to consumers by raising prices, thereby obtaining more sufficient cash flow to increase advertising investment in the next step, further compressing the living space of brands with smaller premium space, and ultimately achieving growth.

**Conclusion** Overall, it cannot be said that brands increasing marketing investment is a bad thing. To a large extent, as a bellwether for the advertising and marketing industry, increasing investment at this time indeed makes it hard to say that this is a signal of overall market improvement. But it is undeniable that if we only look at the advertising industry, recovery is indeed on the horizon.


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