US restaurants slow down spending on advertisements
Restaurants have been slowing down on advertisement spending in the US. The reason behind the trend is that many US restaurants are offering fewer limited time offers (LTOs).
Restaurants have been slowing down on advertisement spending in the US. The reason behind the trend is that many US restaurants are offering fewer limited time offers (LTOs).
Restaurants reined in advertising spending in 2014鈥檚 first quarter after significantly exceeding the average throughout 2013. According to聽Kantar Media, total US advertising expenditures increased a surprisingly strong聽5.7 percent聽to $34.9 billion in the first quarter.
However, restaurant spending in Q1 increased聽just 1.9 percent聽to $1.678 billion. That ended the industry鈥檚 year-old streak of topping the average in each of the last four quarters.
Full-year 2012, total US advertising rose 3 percent. Restaurants were roughly in line with a 4 percent increase. But once 2013 began and slowing sales by many restaurant chains fueled an overheated competitiveness that translated into heavier ad spending. In 2013鈥檚 Q1, total spending declined by 0.1 percent but restaurant ad spending jumped up by 8 percent.
Spending accelerated in Q2 with restaurant spending up 12.6 percent while overall ad spending rose 3.5 percent. Them restaurant industry calmed itself a bit in Q3 with a 5.5 percent increase (vs. 3.5 percent overall) and ended the year with a 5.2 percent increase. Total US ad spending was up just 0.9 percent for the year.
Now 2014 has begun fairly meekly with a 1.9 percent gain despite the presence of the ad-heavy Winter Olympics. The first quarter is traditionally fairly quiet in sales growth but last year鈥檚 8 percent spike in Q1 spending shows that this year鈥檚 soft spending isn鈥檛 a seasonal phenomenon.
What I think the 1.9 percent ad spending increase represents is the impact of the this year鈥檚 slowdown in menu introductions that McDonald鈥檚 and Burger King and others have instituted. Fewer LTOs require fewer ad bursts to support them. Q1 did see some rollouts, including McDonald鈥檚 Bacon Clubhouse (introduced in March, it was the chain鈥檚 first significant new product of the year), Burger King鈥檚 quarter-pound Big King, Wendy鈥檚 Ciabatta Bacon Cheeseburger and Jack in the Box鈥檚 Bacon Insider. But there fewer 鈥渟econdary鈥� product introductions and a less frenzied marketplace overall. Worn out by 2013, chains aren鈥檛 as eager to one-up each other this year.