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FLEXO Magazine : January 2010
www.flexography.org JANUARY 2010 FLEXO 21 curate gauge of this year's marketing activity when its sales tanked in the third quarter of last year. This year, Bases sales are sharply rebounding. "It is the one encouraging side of the quarter," said Nielsen Chief Financial Officer Brian West on a Nov. 12 conference call. "We're actually starting to see more clients starting to spend more of their discretionary market-research dollars in that [new product] pipeline." For most of the past year up to now, he said, they 've focused more on de- fensive research, such as analyzing the impact of price changes. CLUES IN PACKAGING Schawk is also seeing signs of a turnaround, though not nearly as robust as Bases'. Since Schawk's work comes closer to launch time than Bases,' the results may signal an uptick in product launches that won't come until later in 2010. Schawk's packaging-related sales were still down year over year last quarter, but they 've been improving se- quentially, both quarter to quarter and month to month, over recent quarters. A slowdown in new products and marketing by brand marketers helped fuel growth of private label this year, said Chief Operating Officer Alex Sarki- sian on a Nov. 10 earnings call, leading Schawk to shift focus toward retailer private-label programs. "Now," he said, " we see that there is a bounce-back coming the other way, where the CPGs (consumer goods companies) don't like to lose market share very much, so they 're coming forward with some of the new products that frankly they have been holding back on." P&G has been perhaps the most forthright in promising more innovation for 2010, if less forthright in offering de- tails. Its executives have said the fiscal year started July 1 could be its biggest in a decade, though the innovation and accompanying marketing spending are back-loaded into the January-to- June period. In a Nov. 20 investor presentation, P&G Chief Financial Officer Jon Moeller said the company will increase "media impressions" by at least 10 percent for the fiscal year, which isn't that ambitious given that it comes in comparison to a year when the company slashed global ad spending 13 percent to $7.6 billion. TOO MUCH SKEPTICISM But Deutsche Bank analyst Bill Schmitz believes Moeller may be low- balling the projection and thinks retail- ers, unimpressed by what they 've seen of the industry 's 2010 offerings, may be off-track or overly skeptical. Many of the innovations of years past that had more of a gee-whiz factor, such as home dry-cleaning kits, turned out to be flops, he said, and lack of such talk-worthy products doesn't necessar- ily mean companies don't have strong innovation pipelines. Among other things, 2010 could see a heating up in the diaper wars be- tween P&G and Kimberly-Clark Corp. The latter 's chief marketing officer, Tony Palmer, earlier this year projected stepped-up innovation in 2010, though he declined to elaborate. The former is coming out with a substantial improve- ment to Pampers in March that's 20 percent thinner, according to a report last week by Goldman Sachs. A K-C spokesman said his company will likely increase innovation and marketing support in 2010, but it's more focused on categories other than diapers. Energizer's Schick appears poised to launch a new shaving system early next year, Schmitz said. That's the linchpin in an accelerated innovation pipeline. He expects to produce a 26 percent, or $108 million, increase in global ad spending to more than $500 million. U.S.-based consumer-package goods marketers generally are rela- tively flush with cash, facing lower commodity costs and increased margin flexibility thanks to the effects of a weaker dollar. Those factors, combined with new P&G CEO Bob McDonald stak- ing his reputation on a vow to take back market share, should make for more vigorous industry new-product competi- tion this year, he said. But while 2010 may be a bigger year for innovation, it will probably be a lot bigger in developing markets than the U.S. P&G has targeted Brazil and India, for example, for assaults on oral care, laundry and skin-care markets largely dominated by Colgate-Palmolive Co. and Unilever. 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