Reckitt overtakes Safaricom in new spending on ads

Manufacturing giants have emerged as top advertisers in Kenya as they battle for choosy consumers, with Reckitt Benckiser replacing Safaricom as the biggest corporate advertiser.

Data from research firm Ipsos shows that Reckitt, Unilever, and Coca-Cola accounted for 53.3 per cent of the Sh7.7 billion gross ad spend in the six months to June.

This was up from a share of 35.3 per cent in the same period last year, with the three firms growing their ad spend by between 45 and 127 per cent.

Reckitt raised its ad spend by 79.1 per cent to Sh1.7 billion from Sh966.2 million, beating Safaricom for the first time.

The firm topped the list of corporate advertisers and came second to government agencies, which spent Sh2 billion up from Sh1.2 billion.

Safaricom nearly halved its spend to Sh1.6 billion from Sh3.1 billion, mirroring deep cost-cutting among mobile telephony firms in the wake of vicious price wars in the voice business.

In 2011, Safaricom, Airtel, and Telkom Kenya reduced their collective ad spend to Sh7.5 billion from Sh9.1 billion the year before.

The cuts have been linked to the price wars that were introduced in August 2010 which have seen call tariffs drop from Sh8 to Sh3 per minute, hurting profitability of the telcos.

The reduced spend comes at a time when consumer goods manufacturers are boosting their marketing budgets to protect and grow their market share in the wake of increased competition, with smaller players also raising their budgets.

“We are seeing an increase in the number of new advertisers among small and medium-sized companies,” said Joe Otin, the media monitoring director at Ipsos.

“This can be attributed to the realisation that advertising works,” he said.

Fighting rivals

Reckitt, the manufacturer of household cleaning products like Jik bleaches, is fighting rivals like Haco Tiger Brands which is expanding locally and in the region.

According to research firm Euromonitor International, large manufacturers are increasingly using advertising to retain their market leadership as new players enter the market.

“They also use advertising extensively to maintain customer awareness,” Euromonitor said in a research note of the local personal care market that is dominated by Unilever, Beiersdorf East Africa, and PZ Cussons East Africa Ltd.

Some of the products introduced by rivals in the local home care market include Bolt Insecticide and a liquid variant of Sunlight washing solution. Unilever raised its ad spend 44.5 per cent to Sh1.5 billion in the first half, up from Sh1 billion the year before.

Soft drinks giant Coca-Cola also increased its marketing budget as its global rival PepsiCo made a return to the local market in what is expected to raise competition in the beverage market.

Largest margin

Coca-Cola’s ad spend rose by the largest margin at 127.2 per cent to Sh899 million from Sh395.6 million. PepsiCo, which currently relies on imports, is building a plant along Thika Road that will serve the local market.

“Even though Coca-Cola remains the leading player in soft drinks with a 41 per cent volume share and in carbonates with a 63 per cent share, it will be interesting to see what happens following the strong entry of PepsiCo Inc and SABMiller, which has acquired Crown Foods,” Euromonitor said.

The large manufacturers helped lift total gross ad spend, which climbed 42.8 per cent to Sh40 billion from Sh28 billion in a move that is expected to benefit media firms and advertising agencies.

The growth in advertising spend is linked to an increase in new advertisers and higher spend among existing ones who are confident that investment in brand visibility will yield good returns as the economy picks up.

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