After what Zenith Media says was a “tough time” in 2020 for food and drink brands, it is projecting the packaged goods category will see a rebound in sales in the next few years. At the same time, Zenith says the challenge for traditional media like radio will be to convince brands to slow their shift of marketing dollars toward digital.
“A bounce back is almost inevitable in 2021 given the comparison with the sharp drop-off in 2020,” says Zenith in a new report. It estimates packaged goods ad spending shrank 10.7% to $26.7 billion last year across a dozen key countries, including the U.S., despite a shift to cook-from-home during the pandemic. The hurdle was supply chain disruptions that left store shelves empty in what Zenith calls the FMCG or Fast-Moving Consumer Goods category.
“Many FMCG companies therefore cut back on promotional activity for products they couldn’t get to consumers quickly enough to satisfy demand,” says the Zenith report. “However, now that FMCG ecommerce infrastructure is being put in place, brands will need to increase their investment in advertising to support it.”
Zenith is projecting packaged goods ad spending will grow 4.4% per year between 2020 and 2023 when it is estimated to reach $30.3 billion. In the U.S., that annual growth rate is forecast to be a slightly lower 3.8%. Doubts that hang over the forecast include the uncertainty over how quickly consumers will return to shops, and whether their behaviors have been permanently affected by the pandemic.
Television accounts for the largest share of packaged goods ad spending, with magazines still capturing a larger share in this product category compared to advertising overall. And while radio has made inroads – especially led by the giant Procter & Gamble’s embrace of the medium – Zenith says radio still needs to do more to close the gap. Across 11 of the biggest global ad markets, including the U.S., it says packaged goods companies invest 3.2% of their ad dollars with radio compared to a 5.8% share for advertising overall. Zenith says more packaged goods companies are shifting ad dollars to digital with the pandemic’s focus on ecommerce helping accelerate the trend.
Zenith forecasts that FMCG digital ad spend will increase from $12.3 billion in 2020 to $14.9 billion in 2023, and that its market share will rise from 46% to 49%.
But because it remains difficult to create a larger scale brand awareness campaign using digital media alone, Zenith suggests it would be better if brands use a variety of advertising forms. “They can continue to use TV for cost-effective reach among older audiences – but they will need to use online video to reach younger audiences,” the report suggests.
The Zenith report covers a dozen countries – Australia, Canada, China, France, Germany, India, Italy, Russia, Spain, Switzerland, the U.K. and the U.S. – which it says account for 73% of global ad spending.
Download the full report HERE.