Some listed companies played catch-up in the first six months of 2021, by spending more on advertising, marketing, and sales promotions expenses, while the blue chips cut back their spending. These and more are some of our findings from the 75 listed firms on the Nigerian Stock Exchange that were analysed in order to understand the pulses of the economy from the viewpoint of those in the entertainment and media industry in Nigeria.
The 75 listed firms were drawn from all the sectors, only that the banking and insurance sub sectors have representations to the tune of 40 percent, an indication of their prompt compliance with regulatory authorities which expect the release of quarterly results as at when due.
Also, the high number of banking and insurance firms is an indication of the comprehensiveness of their reports as they made most information that analysts and other stakeholders needed available in their periodic financial statements.
At half year 2021, the advertising and marketing expenses of the 75 listed companies in Nigeria rose slightly above the level of the corresponding period in 2020, indicating companies were cautious about spending big on promoting their brands in 2021. Total advertising, marketing, sales promotion and distribution expenses amounted to N87.42 billion in H1 2021, translating to 3.2 percent above N84.74 billion expended on the same activities in June 2020.
The marginal growth in advertising and marketing expenses is in line with the prediction that from now through 2025, the global spending on newspapers and magazines will continue to decline as consumers find more attractiveness in the offerings through the internet platforms.
According to PwC, by 2025, about 85 percent of Nigeria’s entertainment and media industry’s revenue will come from platforms that are linked to the internet. The fulfilment of this forecast may be sooner than later.
Food and beverages giant, Nestle Nigeria, and Nigerian Breweries (NB) emerged as the big spenders on advertising, marketing, promotion and distribution at half year 2021. For Nestle, its marketing and distribution expenses rose by 18 percent from N19.9 billion in June 2020 to N23.5 billion as of June 2021.
NB’s expenses on advertisement and sales rose by a record 58 percent at half-year from N10.5 billion in June 2020 to N16.7 billion as of June 2021. Also in the brewery sub sector, International Brewery spent N5.3 billion on marketing and distribution, representing an increase of 57.8 percent over N2.3 billion committed to the same project in the same period in 2020.
Another big spender is MTN Nigeria, which committed N8.56 billion to advertisement, sponsorship and sales at half year 2021, indicating an increase of 26.7 percent over N6.75 billion that was spent on the same activities in the first six months of 2020.
Since the gradual reopening of the Nigerian economy, a lot of initiatives have been taken by companies to endear themselves to consumers in the marketplace. This analysis only aims to gauge firms’ responses to competition as economic activities pick up gradually.
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The four firms mentioned above, that is, Nestle, Nigerian Breweries, MTN Nigeria and International Breweries were responsible for 62 percent of the total advertising and marketing expenses in H1 2021 compared with 48 percent in H1 2020.
The building and construction sub sector recorded one of the highest declines in advertising and marketing spending, from N5.6 billion in June 2020 to N1.8 billion as of June 2021. The decline came from Dangote Cement and WAPCO. As of June 2021, Dangote Cement spent N1.35 billion on advertisements compared with N5.3 billion spent in June 2020. WAPCO’s budget shrank from N182.5 million last year June to N470.7 million as of June 2021.
BUA cement on the other hand, increased its spending on advertisement from N31.3 million to N216.5 million during the same period. The reason for this may not be far-fetched. The cement industry parades giant firms like Dangote Cement and WAPCO and each of these firms have created a niche for itself in Nigeria and beyond. To win customers, BUA has to invest more in promoting its brands and products.
That BUA Cement committed more resources to advertising, marketing and sales should not come as a surprise because the company had indicated it wanted to take full advantage of the African Continental Free Trade Area (AfCFTA).
“The commencement of AfCFTA provides boundless opportunities because of the potential involvement of 1.2 billion Africans, spanning 54 nations, with a combined GDP of about US$2.5 trillion; thereby actually increasing intra-African trade by up to 52.3%. In view of the emergence of this economic union, Nigerian manufacturers and service providers can connect with regional and continental value chains and customers.
“More importantly, AfCFTA would expand market access for Nigeria’s exporters, thereby stimulating economic growth alongside attendant multiplying effects. BUA Cement is well positioned to take advantage of these opportunities, given the limited number of integrated cement plants in West Africa due to limited limestone deposits, the expected rise in urbanisation rates and the continued housing and infrastructural deficits”, said Yusuf Binji, MD/CEO BUA Cement in their audited financial statement of 2020.
In the same sub-sector, Julius Berger increased advertising, marketing and sales promotion expenses by 8.7 percent, from N107.1 million in H1 2020 to N116.4 million in H1 2021. UPDC equally raised advertising and marketing expenses by 63 percent.
The banking industry witnessed one of the highest cuts in advertising and marketing expenses, especially from the tier one banks while tier two banks increased their spending. This sub sector, which used to be one of the big spenders, committed just N19.9 billion to advertising and marketing at half year 2021, a decline of 33.9 percent when compared with N30.2 billion expended in June 2020.
Tier-one banks such as Access Bank, Zenith UBA, First Bank and GTB reduced their advertising, marketing and sales promotion expenses by between 25 percent and 55 percent. Also, tier two banks such as Fidelity Bank and Wema also cut their advertising expenses by 53 percent and 7 percent respectively.
On the other hand, banks such as Stanbic IBTC, Sterling, Union Bank, Jaiz Bank increased their advertising and marketing expenses during the period. Stanbic IBTC increased its advertising and marketing budget by 47 percent; Sterling Bank jacked up its advert spend by 22 percent; Union Bank by 29 percent while Jaiz Bank’s advertising expenses rose by 97 percent.
“I would like to think that it was part of the general cost cutting strategy especially as operation costs trended higher last year due to regulatory costs, IT spending and COVID 19 related donations”, says Timchang Gwatau, research associate with Meristem Nigeria.
Another analyst from the same firm supported this position.
“Industry revenue is not growing, and every bank in the country is cutting costs to have a better bottom line at year end. Some of these banks see advertising and marketing as one item they can reduce”, says David Adu, an analyst with Meristem Nigeria.
Microfinance, investment and mortgage bankers appropriated more resources to advertising, marketing and sales promotion at H1 2021 compared with a similar period in 2020. Their budget during the period increased from N48.6 million at half year 2020 to N162.6 million as of June 2021. United Capital and NPF MfB accounted for the bulk of their advertising and marketing expenses.
Insurance industry’s advertising and marketing expenses rose by 42 percent, with companies such as Veritas, Standard Alliance, Cornerstone, Universal and NEM making a big impact in H1 2021.
All but one firm from the chemicals and paints industry reduced their advertising and marketing expenses. The industry advertising and marketing expenses fell by 38.8 percent to N208.4 million as of June 2021 down from N340.5 million in June 2020. Notore reduced its expenses by 30 percent; CAP cut advertising and marketing expenses by 59 percent while Berger Paints reduced its advertising and marketing expenses by 37.7 percent. The odd one out is Meyer Paints that recorded an increase of 10.9 percent in advertising and marketing expenses.
Conglomerates companies increased spending on advertising and marketing to N3.4 billion at half year 2021 from N1.8 billion in June 2020. Unilever increased its advertising budget by 87 percent while UACN’s advertising and marketing expenses rose by 29 percent.
Further, all the energy companies including Conoil, Total Energies, Ardova, and MRS Oil except Eterna, reduced advertising, marketing and distribution expenses. Eterna just had a new major investor, and consequently, the 20.2 percent rise in advertising, marketing and promotion expenses may be due to the rebranding going on in that firm.
