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Tag: Zenith report

  • Rising audiences and investment in ecommerce to drive 7% annual growth in FMCG digital adspend, as per the Zenith report

    FMCG adspend expanding by 14% a year in India: Zenith

    By Our Staff

     

    Media agency network Zenith has forecast that fast-moving consumer goods (FMCG) food and drink brands will increase their ad expenditure on digital channels by 7% a year to 2023, according to its Business Intelligence – FMCG Food and Drink report, published on Monday. That’s well ahead of the 4% annual growth forecasts for FMCG adspend as a whole in the 12 markets included in this report.

     

    Zenith has forecast that India will be the fastest-growing market by some distance over the next three years, with FMCG adspend expanding by 14% a year. It will benefit from blossoming consumer demand as disposable incomes rise rapidly, coupled with the catch-up expansion of the underdeveloped ad market: advertising accounts for only 0.3% of India’s GDP, less than half of the global average of 0.7%. All of the other markets in the report are predicted to grow steadily at between 2% and 5% a year.

     

    Said Jai Lala, CEO, Zenith India: “FMCG growth will continue to be robust considering various reasons. Firstly, despite the pandemic, it is one category where the demand is constant, if not seen increasing. Secondly, with evolving consumer demand, FMCG continues to see a slate of new product launches and category expansion. Lastly, with the vast population being in Tier 2 and rural areas – it is one untapped potential market where the FMCG brands continue to increase penetration.”

     

    Meanwhile, FMCG brands still rely heavily on traditional TV, spending 39% of their budgets on television advertising in 2020, compared to 24% for the average brand. Excluding China, where FMCG brands have already adopted digital advertising as their main form of commercial communication, FMCG brands spent 52% of their budgets in television, compared to an average of 26%. Their principal goal is to maximise brand awareness and reach so they are front of mind at the point of purchase for as many consumers as possible. This is something that TV has historically excelled at, but its declining reach – particularly among the young – is making it less effective.

     

    “FMCG brands need a new comprehensive approach to reach-based planning,” added Ben Lukawski, Global Chief Strategy Officer, Zenith. “That means combining TV, paid advertising in online video, virtual placement in SVOD platforms and perhaps even a presence in gaming, using first-party and second-party data to prevent duplication and optimise incremental reach.”

     

    FMCG brands are therefore following audiences to digital channels. Zenith forecasts that FMCG digital adspend will increase from US$12.3bn in 2020 to US$14.9bn in 2023, and that its market share will rise from 46% to 49%. After the pandemic gave FMCG ecommerce its urgent stimulus in 2020, brands will look to support and expand their ecommerce capabilities, channelling consumers to DTC operations or retail partnerships. But the big challenge will lie in using digital to replace television effectively – creating large-scale brand awareness while managing frequency. The rise of Subscription Video on Demand (SVOD), which locks away high-value audiences from direct advertising, will make this even harder, as will the end of third-party cookies.

     

    Out-of-home is the exception to the declining reach of traditional media. As traffic returns to normal after the COVID-19 slump, the spread of digital displays will make it even more effective at reaching consumers with targeted and relevant ads near the point of sale. FMCG out-of-home advertising is forecast to grow by 9% a year from 2020 to 2023, while its market share rises from 6.1% to 7.0%, slightly ahead of its pre-pandemic share of 6.8% in 2019.

     

    Ad expenditure by FMCG brands fell more sharply than the ad market as a whole in 2020, shrinking by 10.7% to US$26.7bn. This was not because of any shortfall in demand. On the contrary, demand soared as people stopped eating in restaurants, cafes and bars and shifted consumption to the home. Instead, FMCG companies were faced with the challenge of ramping up production while supply chains were disrupted, and using limited available distribution to get their products onto shelves in stores, or to consumers’ homes. Many FMCG companies therefore cut back on promotional activity for products they couldn’t get to consumers quickly enough to satisfy demand, and invested in distribution infrastructure instead, especially ecommerce operations and partnerships.

     

    Zenith forecasts that the recovery of FMCG adspend will roughly track the market as a whole in 2021-2023. A bounce-back is almost inevitable in 2021 given the comparison with the sharp drop-off in 2020, particularly during Q2, though it will still be 6% below 2019 levels. FMCG companies face uncertainty over how quickly consumers will return to shops, and how much their behaviours have been permanently affected by the pandemic. However, now that FMCG ecommerce infrastructure is being put in place, brands will need to increase their investment in advertising to support it. Zenith forecasts 4.4% annual growth in FMCG adspend between 2020 and 2023, reaching US$30.3bn in 2023. At this point it will have fully recovered from the pandemic-induced drop in adspend, exceeding 2019 levels of spending by US$0.5bn.

     

    China stands out as the market where brands have most rapidly embraced ecommerce and digital advertising. In 2020, Chinese FMCG brands spent 71% of their budgets on digital advertising, compared to 46% across all 12 markets. Here, these brands focus on online video, which has a high and broad reach, and is open to commercial partnerships. This can mean advertising in online shows, or special livestreams by influencers, in which viewers can directly purchase the items being demonstrated. They also routinely advertise on ecommerce platforms to drive sales at the point of purchase. Chinese FMCG brands spent 35% of their total budgets on online video and 13% on ecommerce advertising in 2020.

     

    “Ecommerce will be the key battleground for FMCG brand growth over the coming years,” said Jonathan Barnard, Head of Forecasting, Zenith. “Western brands should look to China for best practice in using digital communication to drive FMCG ecommerce sales.”

     

    *The 12 markets included in this report are Australia, Canada, China, France, Germany, India, Italy, Russia, Spain, Switzerland, the UK and the US, which between them account for 73% of total global adspend. FMCG food and drink includes all packaged foods and soft drinks.

     

     

  • Digital advertising spend to be 19% higher in 2022 than in 2019, notes the Zenith report

    Continued social distancing will limit recovery in beauty advertising to 1.7% in 2021: Zenith report

    By Our Staff

     

    Decreased consumer demand for cosmetics and fragrances amid continued social distancing will restrain the recovery in beauty and personal luxury advertising to 1.7% in 2021, according to Zenith’s Business Intelligence – Beauty and Personal Luxury report, published on Monday. This is below the 4.4% growth rate for total adspend in the 11 key markets included in the report. Beauty adspend will total US$7.5bn across these markets in 2021, and then rise to US$7.7bn in 2022, growing by 2.6%, compared to 4.5% for the market as a whole.

     

    Beauty and personal luxury adspend fell roughly in line with the market in 2020. The sharp drop in spending on cosmetics and fragrances as people stopped meeting in person was mitigated by continued demand for both hair and skin care. With hairdressers and salons harder to reach, consumers took hair care into their own hands at home. Skin care, meanwhile, benefited from the heightened desire for health-enhancing products during the pandemic.

     

    During the recovery, though, overall demand for beauty will not change much as consumers remain reluctant to return to their pre-pandemic habits, reducing sales of cosmetics and fragrances in particular. Most beauty and personal luxury brands will not raise budgets substantially, and will be more likely to redeploy spending from underperforming channels instead.

     

    Better environments and ecommerce help digital compensate for declining reach of magazines and TV.

     

    Beauty and personal luxury brands spend much more of their budgets on magazines and TV than the average brand. Beauty, the quintessential category of appearance, thrives on its ability to create emotional connections through imagery in a high-quality environment. Zenith estimates that in 2020 beauty brands spent 18.3% of their budgets on magazines advertising, 4.3 times more than the average brand, and 42.2% on television, 1.6 times more than average. But these media are becoming less effective as their reach continues to decline and the scarcity of their audiences pushes up prices.

     

    Beauty and personal luxury brands have been relatively slow to adopt digital advertising, spending 34.1% of their budgets digitally in 2020, compared to 53.1% for the market as a whole. This is a result of the historic lack of premium digital environments that support the high-quality brand imagery that beauty and personal luxury brands need to convey. It is also due to the difficulty the beauty industry has had adapting to ecommerce, because consumers feel the need to sample and try on beauty products in person before committing to a specific product. According to Euromonitor International, 11.8% of beauty and personal luxury sales were through ecommerce in 2019, compared to 13.2% for the market as a whole.

     

    However, technologies like video-on-demand and connected TV, and social platforms like Instagram and TikTok (now banned in India), are creating new premium environments that showcase beauty and personal luxury brands effectively. Brands have also greatly stepped up investment in their ecommerce offerings since the start of the pandemic as a matter of necessity, as bricks-and-mortar retail sales shrank. Digital channels are therefore becoming more valuable for both brand and performance advertising.

     

    Zenith estimates that the beauty category increased its spending on digital advertising 2.8% in 2020, despite the pandemic. This was twice the 1.4% growth rate of digital advertising across all categories, as beauty and personal luxury brands began to compensate for previous underinvestment. Zenith forecasts average growth of 5.9% a year in digital advertising between 2019 and 2022. Beauty and personal luxury adspend on all other media will decline over this period, by between 1.2% a year for TV and 12.4% a year for magazines.

     

    “Beauty brands were forced to accelerate their ecommerce strategies in 2020, some pioneering the use of virtual and augmented reality to allow consumers to try on and model products online,” said Christian Lee, Global Managing Director, Zenith. “Continued innovation in ecommerce technology to improve the consumer experience will be key to unlocking brand growth for 2021 and beyond.”

     

    France and India to lead beauty and personal luxury adspend growth: Zenith expects France to be the best-performing beauty ad market over the next two years, growing by 13.3% a year on average. That’s a reaction to the depth of its decline in 2020, when beauty brands cut budgets by 32.9% whole. The market will start to recover quickly from this reduced base in 2021, but is still expected to be 13.8% lower in 2022 than it was in 2019, compared to the 3.6% average drop across all eleven markets over this period.

     

    India, by contrast, is forecast to grow as a result of strong consumer demand. Beauty adspend was stable in India in 2020, and is forecast to grow at an average of 7.6% a year as more consumers take up the habit of regularly buying beauty products. Beauty and personal luxury adspend in India is forecast to be 15.2% higher in 2022 than it was in 2019.

     

    Demand will recover more slowly across North America and the rest of Western Europe, leading to annual growth in beauty adspend of 1%-2% a year in Canada, Germany, Italy, Spain, the UK and the US.

     

    “Growth in beauty and personal luxury advertising will lag behind the market while consumers remain cautious about travelling in public and meeting in person,” added Jonathan Barnard, Head of Forecasting, Zenith. “But by investing in digital technology that embeds ecommerce into the heart of their operations, brands will prime themselves for more rapid growth when demand picks up.” Beauty and personal luxury is defined as the combination of four sub-categories: cosmetics, fragrances, hair care and skin care.

     

     

  • Programmatic adspend to grow 19% next year, reaching US$84bn, notes Zenith report

    65% of digital media to be programmatic in 2019

     

    By A Correspondent

     

    Sixty-five per cent of all money spent on advertising in digital media in 2019 will be traded programmatically, according to Zenith’s Programmatic Marketing Forecasts, published today. Advertisers will spend US$84bn programmatically next year, up from US$70bn this year, which represents 62% of digital media expenditure. We predict that in 2020 advertisers will spend US$98bn on programmatic advertising, representing 68% of their expenditure on digital media advertising. By digital media we mean all forms of paid-for advertising within online content, including online video and social media, but excluding paid search and classified advertising.

     

    The breadth of ad formats available through programmatic trading is improving, with more mobile, video and audio formats coming online all the time, though brands and agencies need to do more to push publishers to improve the quality of their inventory, which needs at minimum to be safe and viewable.

     

    Growth in programmatic advertising is slowing as it cements its position as the most important method of digital trading. We estimate that programmatic adspend will grow 24% in 2018, down from 32% growth in 2017, and forecast 19% growth in 2019, followed by 17% growth in 2020.

     

    In dollar terms, the biggest programmatic market is the US, where we expect US$40.6bn to be spent programmatically in 2018 – 58% of the total. China is in a distant second place, spending US$7.9bn on programmatic advertising this year, followed by the UK, with US$5.6bn of programmatic adspend.

     

    The US is also the market that has most embraced programmatic advertising, trading 83% of all digital media programmatically this year. Canada is in second place, trading 82% of digital media programmatically, followed by the UK, with 76%, and Denmark, with 75%. By 2020, programmatic advertising will account for more than 80% of digital media in all four markets. Canada will have almost completed the transition to pure programmatic trading, spending 99% of digital media programmatically that year.

     

    We expect all markets to follow Canada and use programmatic trading for all digital media transactions eventually. Indeed, it’s only a matter of time before programmatic trading becomes the default method of trading for all media. However, the transition is taking slightly longer than we expected – last year we forecast that 64% of digital media would be programmatic in 2018, and 67% would be programmatic in 2019, so we have pulled back both forecasts by two percentage points. The introduction of privacy legislation such as the EU’s GDPR has had some chilling effect by making certain data previously used in programmatic transactions unavailable, and making other data more costly to process. But we think the main reason for the slowdown in spending on programmatic media is that advertisers are investing more in infrastructure and data to make their programmatic activity more effective.

     

    To make the most of their programmatic campaigns, advertisers have to reorganise internally to give programmatic trading the high-level support and understanding it needs. Agencies can only extract maximum effectiveness from their programmatic strategy in a proper partnership with their clients. And a programmatic strategy can only ever be as effective as the data used to execute it.

     

    “Programmatic trading improves efficiency and effectiveness, and is gaining a dominant share of digital media transactions,” said Benoit Cacheux, Zenith’s Global Head of Digital and Innovation. “The scale of operational restructuring to make the most of it is both extensive and expensive, though, and advertisers are spending more carefully while they invest in infrastructure and data and review the quality of media. All programmatic advertisers need a strategy for acquiring the best and most comprehensive data available, and to treat this data as a vital corporate asset.”

     

    The most valuable data is first-party data, either explicitly provided by consumers or gained by tracking their activity on owned websites. It is also becoming more common to use second-party data, by forming data sharing partnerships, between – for example – brands and online retailers. Third-party data is widely available but does not give advertisers a competitive advantages, since all advertising can use it to target the same segments. Advertisers should continually vet and interrogate third-party data to ensure they are truly adding incremental reach. By combining all this data with their own CRM systems, advertisers can model consumer behaviour, and the more advanced are using machine learning to predict it. Data and new technology is enabling brands to move from tracking cookies to communicating with individuals.

     

    “Technology is making programmatic advertising work harder for brands,” said Jonathan Barnard, Zenith’s Head of Forecasting and Director of Global Intelligence. “Artificial intelligence promises to unlock new understanding of customers as people, as well as improving the optimisation of the trading process.”