Packaged goods companies shifted money from trade promotion to advertising in 2004 in the second year of trade-spending declines.
CPGs spent 48% of their total marketing budgets on trade promotion, down from 49% in 2002 and 51% in 2001, reports Cannondale Associates in its annual Trade Promotion 2005 study.
Dollars shifted to advertising, now 25% of total budgets (up from 24%, steady since 2000). In 2002, CPGs moved trade-promotion dollars to consumer promotion to make it 17% of total budgets. Consumer promotion shrank to 16% of total spending in 2004, down from 24% in 1997, per Cannondale data. Account-specific marketing stays steady at 10%. (Wilton, CT-based Cannondale didn’t track budget allocations in its 2003 survey.)
Cannondale attributes the shifts to changes in accounting practices rather than actual decreases, and chides CPGs for ignoring retailers’ need to focus on categories and consumers rather than short-term, brand-level growth.
CPGs and retailers are bracing for “significant change” in trade promotion practices. “The challenge is to figure out ways to overcome organizational inertia,” Cannondale concludes.
Retailers ranked Kraft Foods (cited by 36%), Procter & Gamble (32%) and General Mills (19%) as the CPGs that are best at trade promotion overall. But all three slipped from their 2003 ratings. Retailers told Cannondale that the factors that set top manufacturers apart are “clear promotion strategy” (cited by 90% of retailer respondents), category perspective and innovation (87% each) and effective consumer programs (84%).
CPGs ranked Wal-Mart Stores (cited by 69%), Publix (28%) and Kroger (26%) as the retailers with the best strategic vision for trade promotion.
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