How Could P&G Spend 8.2 Billion A Year on Advertising? What Does It Mean? (1)

Even though P&G cut $700 million off its budget, it still remains the largest advertisers in the world, spending $8.2 billion in 2015 fiscal year. When the traditional communication and selling systems were simultaneously weakened, how could P&G spend money to find their new young consumers?

P&G didn't perform well on last year's sales performance.

As on fiscal year ending, on June 30 2015, P&G's sales in all business sectors dropped, sales fell 5% to $ 76.3 billion and net income was $ 7 billion, dropping by 40%compared with last year. As of September 30, the first quarter of 2016 fiscal year, it performs even worse. Revenues fell 12%, which is the biggest decline over the past seven quarters.

When 2015 came to an end, news from P&G were mostly negative. In June of this year, 43 of its beauty brands were purchased by the world's largest fragrance company "Coty"; this $12.5 billion deal became the last step of P&G's "Downsizing Plan". Moreover, David • Taylor announced he was immediately taking over Lafley (A.G. Lafley) as the new president and CEO.

Lafley went back to P&G in 2013 and served as CEO. He designed the biggest brand selling strategy in P&G's history. This plan is about stripping small brands with less than 100 million sales for two successive year. Instead, it will focus on 70-80 core brands, which contribute more than 90% and profit more than 95% for the group.

In April, John Moeller, chief financial executive of P&G announced that they will cut down 500 million dollars from the advertising agency budget. 

FMCG giants like Unilever, Coca-Cola also suffered challenges. They are also adjusting to meet marketing expenses. For the FMCG industry, this is not a good thing.

If P&G, as the representative of the FMCG multinational companies, has lost its influence on Chinese market already, it is not as prosperous as before anyway. P&G is failing its consumers, especially among young middle class - which represents the biggest problem.

"In fact, we are standing to a point of how to optimize marketing efficiently. As for the Chinese market, we did not reduce spending, on the contrary we invested more." P&G Greater China District Transmission and vice president of public relations Xu Youjie told the "QDaily” he has been working in P&G for 30 years and served as general manager of P&G in Hong Kong during the period 2000-2006.

"We would go where consumer is going"

According to the data provided to "Q Daily" by Group M, China's chief digital officer Nils Roehrig, the FMCG industry has significantly increased the cost of digital marketing. Over the past three years, it is possible to notice an increase of 35% (2015) and 60% (2013) on digital marketing expense and the proportion of mobile terminals is rising too.