MNC Brands Play China Catch-Up

With soaring year-on-year 19.8% growth in monitored adspend for the first quarter of 2010, it looks like business as usual for China’s red-hot ad market – no less so for some of the world’s biggest advertisers looking to reassert themselves after a cautious 2009.

Procter & Gamble, China’s biggest advertiser, ramped up adspend by a colossal 52% year-on-year in the first three months of 2010, while the second biggest spender L’Oréal wasn’t far behind with a 44% hike. Unilever and Yum Brands, two other multinationals among China’s top five spenders, also committed to hefty year-on-year increases in monitored spend, 41% and 56% respectively.

While local companies in China tended to sustain adspend momentum during a sometimes shaky 2009, their international counterparts were more cautious, points out Rohan Lightfoot, business director for media agency Carat China.

Global goals
Now, in a visible reminder of how important China is to global growth strategies, they are making massive commitments to get back on track in a market which is again surging ahead on double-digit growth.

“The huge established multinational players are absolutely pushing ahead with investment in China,” Lightfoot says.

Key brands spearheaded these steep increases, particularly in toiletries, a major category accounting for 5% of China’s ad market. P&G brands Olay and Pantene hiked year-on-year quarterly spend by 38% and 84% respectively, while L’Oréal’s eponymous beauty care brand was up 49%.

Top-tier gains
The impact of the multinationals playing catch-up with China’s growth story was also felt in top-tier cities, where international brands tend to have a disproportionate share of spend.

Shanghai, China’s biggest city, experienced the biggest boost in monitored year-on-year adspend at 42% for Q1, though spend increases in Beijing and Guangzhou were also significantly above the 19.8% national average, at 29% and 27% respectively.

The picture was mixed at tier two cities and below, although some saw hefty hikes in spend. Shenzhen for example was up 31%.

Another notable side effect of international brands renewing marketing drives is an increasing shift towards local media. This is especially notable in an increasingly mature and competitive ad category such as toiletries. Here especially, brand-owners are turning to targeted strategies for increasingly segmented product line-ups, having reached a competitive impasse for their core brands at a national level, points out Lucy Zhang, future director at GroupM’s Knowledge Center, the company's research arm.

Localized strategies
While toiletries brands devote most of their media budgets to TV, the share of this budget taken by national and near-national provincial satellite stations declined year-on-year in the first quarter – from 7% to 5% for national TV and by an even sharper drop for provincial satellite TV, from 19% to 11%.

Non-satellite provincial stations gained, from 42% to 45%, but the real beneficiaries have been city stations outside provincial capitals, up from 13% to 21%. Stations in provincial capitals remained relatively steady.

This trend, generally more pronounced among international brands, was reflected in adspend shifts as a whole, as new product launches started to take off following a relatively subdued 2009.

This is an edited extract from a feature published in the Q2 2010 edition of The Asia Media Journal. The latest issue of The Asia Media Journal is available in full here.