The last two years have been unpredictable for consumer packaged goods (CPG) brands. In 2020, Covid-19 and pandemic-induced shortages realigned consumer shopping behavior and caused marketers to pull or pause campaigns. These unprecedented changes had a cascading impact on publishers with millions of ad dollars lost and considerable resources exhausted to cater to the shifts.
Unfortunately, the coronavirus continued to wreak havoc on CPG well into 2021. The second half of the year — and the holiday period, in particular — was hurt by supply chain challenges. Long, unpredictable delivery times, and low inventory left brands and consumers scrambling. To complicate the situation even further, all of this occurred while overall consumer spending was on the rise, widening the gap between supply and demand.
As we embark on what is sure to be another challenging year, MediaRadar wants to understand market headwinds for publishers who rely on ad dollars from CPG brands. So, we looked at our U.S. data, and here’s what we found.
How did the CPG market shift in 2021?
As a result of the pandemic, online shopping for groceries and toiletries — staples of brick-and-mortar convenience stores and drug chains — has normalized. Significantly, an impressive 45% of consumers report shopping online for groceries. That trend will only continue, driven by convenience and safety on the consumer side.
“Ecommerce will be the key battleground for CPG brand growth over the coming years,” says Jonathan Barnard, head of forecasting at Zenith, and the numbers are bearing this prediction out. Another driver of increased online shopping is CPG brands getting into more direct online sales. Clorox, Nestle, Ocean Spray, and others are launching or investing in web-based DTC offerings amid the pandemic. These same CPGs are also increasing their social activations with live streaming and live shopping options in the U.S., to build direct relationships with a growing cohort of online shoppers.
Where are the ad dollars going?
With more CPG brands shifting focus to ecommerce sales versus brick-and-mortar channels, our analysis reveals that ad spend is following. Comparing media spend in 2019 to 2021 through November, here is what we saw:
Print spending is down by over half (53%), totaling $970 million in 2021 versus 2.08 billion in 2019. TV is also down by 16%. Spend totals topped $3.1 billion in 2021 compared to roughly $3.7 billion in 2019.
Digital, however, grew like gangbusters and is up an eye-popping 742% over the last two years. Spending last year approached $1.6 billion ($1.59 billion) while 2019 saw investments sit at just $189 million. The growth speaks to changing strategies for CPGs, who are investing more and more in online sales.
CPG ad spend has fallen
Even with the exploding online spend, CPG ad spend has steadily decreased since 2019, and is now down 6%. Digging deeper, we see that 2021 CPG ad spend is down ~1% from 2020 to $5.7 billion, while 2020 dropped 5% from the previous, pre-COVID year. Pandemic-driven sensitivities and supply chain challenges are likely the causes of this downshift, as advertising adjusts to stay in line with available supply — or adapts to mitigate shortages.
Unsurprisingly, TV stays on top
Overall, spendings on TV ads still tops other media and remains hugely popular among CPGs for brand lift. Even as consumers spent more time with entertainment apps, TV still owned 55% of all ad spend in 2021 at $3.1 billion. However, digital overtook print as the second most popular medium, with spend at $1.6 billion.
Changes in monthly ad spending
Note the month-to-month changes as there were decreases with ad spend in February (-16%) and November (-18%) and increases in April (+16%) and May (+13%) as a result of CPG companies reacting to supply chain challenges and leveraging data to react to consumers’ needs.
The top CPG advertisers
According to our analysis over the last three years, the number of CPG advertisers grew annually: 9,329 in 2019; 9,666 in 2020; 12,300 in 2021. This rise was due, in part, to companies who didn’t advertise previously starting to advertising in 2021. (Such as Beautcella offering DERM iNSTITUTE and The Naked Bee.)
Top spenders remained unchanged from pre-pandemic all the way through 2021: L’Oreal, The Hershey Co, Johnson & Johnson, Procter & Gamble, and Unilever. These companies account for more than a quarter (28%) of the overall 2021 category spend. While each brand’s total spend is down YoY, they all experienced growth in digital. L’Oreal, Hershey and Unilever saw increased digital advertising more than 100% YoY. With each, we witnessed large video and Facebook buys adjusting to consumer buying patterns.
What’s next for CPG in 2022?
We believe that CPG companies will continue to reshape portfolios with DTC offerings and investment. They’ll also continue to zero in on health-conscious lines to support changing consumer demands. Ad spend distribution will likely shift in tandem, with more budget allocated to digital and social media. To win those open web dollars and compete with the walled gardens of Meta, Google, Snapchat, Pinterest, and TikTok, publishers should emphasize in-demand formats like video and OTT. As livestreaming continues to grow, advertisers are reconsidering how they can approach their marketing efforts through this medium to help create brand awareness and increase sales.
Overall, there have been many changes within the CPG advertising space. These include navigating external factors like supply chain issues as well as a changing marketplace. Ecommerce and digital advertising are a necessity within this space as consumers shop online more than ever before. While top CPG advertisers remain the same as in previous years, their tactics are shifting. Publishers need to keep a close eye on these trends to understand how to best serve the changing needs of these potential advertisers.