Unlocking Marketing Success: Unilever's Finance Chief Urges Investors to Embrace Holistic Return on Marketing Spend

Unilever's CFO, Graeme Pitkethly, has defended the comprehensive impact of marketing expenditure on the company's overall performance to investors and financial analysts.

The multinational FMCG company, known for its popular brands such as Dove, Marmite, and Magnum, has allocated an additional €500m (£429m) towards marketing expenses in 2022. Furthermore, during the first half of the 2023 financial year, Unilever has increased its investment by €400m (£343m) compared to the same period in the previous year. Unilever remains steadfast in its commitment to further elevate its marketing spend throughout the current year.

During a fireside chat yesterday, Pitkethly addressed a crowd of investors and analysts at the Barclays Global Consumer Staples Conference 2023. Barclays managing director Warren Ackerman posed a question regarding the rationale behind intensifying the investment. "Why do you believe it's imperative? If the marketing investment were to increase by half a billion or a billion, what potential advantages could we anticipate in terms of volume mix?" inquired Ackerman.

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Pitkethly noted that Unilever's portfolio shows a contrasting landscape when it comes to measuring the return on marketing spend. In the health, wellbeing, and beauty prestige brands, a significant portion of sales occurs through direct-to-consumer channels. As a result, a large portion of Unilever's marketing efforts for these brands focus on sales-generation and lower-funnel marketing.

While I understand the inquiry regarding the expected response in terms of volume from the invested money, it actually operates in a much more comprehensive manner.

Graeme Pitkethly, Unilever

“That is an area where you can get a really, really clear sense of the performance of your marketing investment because you’re measuring direct conversion,” he said.

Compared to that, monitoring upper funnel activity to measure an immediate boost in sales volume can be a challenging task. "I comprehend your query about the outcomes of investing in this aspect and expecting a rise in volume sales. However, it functions in a more comprehensive manner," he further explained.

Instead of solely evaluating the impact on sales growth, Unilever assesses the effectiveness of its brand and advertising investment using various metrics, such as the reach and frequency of its communications. Additionally, the company also considers the quality of its communication.

Regarding marketing investment allocation, Pitkethly focuses on strengthening existing advertising platforms through increased media spending, rather than developing new ones.

"Ensuring that the investment is directed towards media allows us to create valuable assets while allocating a greater budget towards effectively showcasing these assets to consumers through the appropriate communication channels. This approach discourages hasty production of additional communication pieces," he stated.

Unilever informed its investors in February that over 80% of its marketing expenditure in 2022 was targeted directly at media.

Pitkethly spoke during a time of transformation for the consumer goods giant. Unilever recently appointed a new CEO, Hein Schumacher, succeeding Alan Jope in July. In addition, Conny Braams, the company's chief marketer, stepped down in August. Pitkethly himself will retire from the business in May 2024. Nils Anderson, the chair of the board, will also leave his position in December.

Despite the rapid succession of these changes, Pitkethly emphasized that the transition has been carefully planned and effectively managed. He noted that Unilever's structural adjustments have positioned the company well for the future.