Unilever stunned its ad agencies and broadcast partners earlier this month when it announced dramatic cuts in its fourth-quarter media spending.
Calls to the Toronto-based conglomerate were not returned.
However, one industry source, who describes the cuts as ‘ massive,’ says he understands the reductions are part of a short-term competitive strategy and do not signal a move by the company to roll back its spending in the long term.
The source says the cuts are also intended to ‘help Unilever meet a performance promise made to head office.’
Another source says the company has devised a short-term competitive plan, involving reduced media spending and increased trade promotions, in order to counter Procter & Gamble’s everyday-low-price strategy.
Recently, P&G revealed it was considering a sharp reduction in its promotion allowances to the retail trade. Such a move would pressure retailers to move away from attracting customers with regular, deep-discount price promotions and to begin selling products at the same price day in and day out.
The source, who says the spending cuts will largely affect soap products marketed by the the company’s Lever Brothers unit, says Unilever has assured its industry partners ‘it plans to come back hard with advertising in the new year.’
John C. Williams, president of John C. Williams, a Toronto retail consultancy, says it appears Lever might be trying to ‘capitalize on industry confusion over how to react P&G’s everyday-low-price strategy.’
Williams says that by beefing up its trade promotions, Lever might be hoping to gain shelf space from retailers at at time when P&G has caused discontent with its talk of cutting trade allowances.
