Israeli supermarkets slash advertising budgets ahead of Passover
Large supermarkets are the biggest advertisers in the run-up to Passover, but chains such as Super-Sol are cutting pre-holiday advertising budget by as much as 58 percent.
Still reeling from the social protests, supermarkets have drastically cut their advertising budgets ahead of Passover, according to a survey by TheMarker and Ifat Advertising Monitoring. Some retailers say money ordinarily put into advertising has been redirected to slash product prices.
Ordinarily, the large supermarkets are the biggest advertisers in the run-up to Passover. But Super-Sol cut its pre-holiday advertising budget by 58 percent so far - from $683,500 dollars last year to $286,600 dollars this year, according to the survey, which compared advertising, in real prices, from March 15-25 to a corresponding 10-day period prior to last Passover. Mega cut its ad budget by 41 percent, from $307,000 dollars to $180,700 dollars. The two retailers presented negative reports - Mega's operating profit during the fourth quarter of 2011 dropped 51 percent and its income fell3 percent. Super-Sol reported a 20 percent increase in net profit and a 3.6 percent drop in gross profit. However, Super-Sol's total net profit in 2011 dropped 17.6 percent. The two companies announced a series of streamlining measures, including employee dismissals.
"This year, the retailers are focusing their efforts and placing greater emphasis on store vouchers than on generating traffic to the stores via special deals. The fight is over the value of the voucher and penetration into companies and organizations," says a senior advertising executive.
Mega executives acknowledged that "as part of the company's streamlining process, there were also significant cuts in the marketing and advertising budgets."
They said "beyond the drop in advertising volume, the streamlining in advertising budgets is also reflected in a change in the advertising strategy. The retailer is launching more joint campaigns for its subsidiaries, Mega Sale and Mega Bool, instead of targeted campaigns for each store separately, as in its previous strategy."
Super-Sol reported "as part of the streamlining effort, we also decided to cut down the scale of advertising."
'Super-Sol and Mega would rather compete together against Rami Levi'
Also absent this year is the head-to-head battle between Super-Sol and Mega over the designation of "cheapest supermarket for holiday shopping." Last year there was a tough fight that included a barrage of ads and did not flinch at personal incriminations and appeals to the Second Channel Broadcasting Authority. Among other things, Mega hired Vicky Knafo - the single mother who walked halfway across the country in 2003 to protest economic cuts - and used her in a special ad aired during the break in the "Big Brother" finale. As part of the campaign, Knafo went to Mega Bool outlets all over the country and announced that prices there were lower than in Super-Sol Deal branches.
Super-Sol, for its part, contacted the Second Channel Broadcasting Authority and asked for the Mega campaign to be taken off the air, arguing among other things that it made cynical use of the Israeli flag Super-Sol fought back with a campaign starring actor and reality show host Zvika Hadar, who presented 1,000 inspectors who seemingly proved that Super-Sol is less expensive than Mega.
This year, however, the retailers are not featuring famous presenters or badmouthing each other. Instead they are focusing on special holiday deals, such as 10 products on sale for 10 shekels.
"It's silly to fight now with each other, because the supermarkets have a common goal - increasing profitability. So why get into a bloodbath?" explains someone connected to Mega. According to a Super-Sol associate, "this year Super-Sol no longer sees Mega as an entity it must go head-to-head against, because there are private chains, such as Rami Levi that are as much of a cause for concern."
"In the present period of the social protest, the store's ad campaigns have become more sales-oriented and less image-oriented," explains a Mega associate. "We realized that customers are looking for a supermarket that meets their needs, offers products for cheap prices and attractive sales. As in 2011, we are continuing our strategy of not using famous personalities and instead using genuine people, as part of our effort to connect to customers and speak to them at eye level."
Super-Sol and Mega are not the only ones who reduced their advertising volume. The private retailers Kimat Hinam and Hatzi Hinam also decided not to advertise - unlike last year. Zaki Shalom, the owner of Hatzi Hinam, explains: "I did a survey among workers and customers, and it turned out that it's better to lower prices than to advertise. For now, we have decided not to advertise this year. Instead, we are offering discounts so that the consumer will benefit." Kimat Hinam's management explained that "in light of this year's social protest, we decided to use the advertising budget to lower the prices the consumer actually pays. The marketing efforts for the holiday will focus on ads in local papers and in special deals in store branches."
Strauss and Osem also cut back
Other food manufacturers also reduced the scope of their advertising this year. The Strauss Group, which recently contended with a consumer boycott, has reduced its pre-Passover advertising budget by 60 percent. The Osem Group, which got much negative publicity over the selection and subsequent rejection of its Bamba baby logo as the Israeli Olympic mascot - slashed its Passover advertising budget by 57 percent.
Tnuva is the only company that increased its ad budget this year, doubling last year's pre-Passover spending. But that appears to be only a pinpoint event. Since the beginning of the year, Tnuva has also lowered its ad budget. "Strauss is sitting and just waiting for the radar to not be focused on it," says the senior advertising executive, alluding to the threatened consumer boycott, sparked by revelations that the company's Pesek Zman candy bar was much cheaper in some American locales than in Israel."Presumably the increase in Tnuva's advertising, which stemmed from the launch of new products, will also stop due to the fight against the workers' committee," says the executive."It doesn't make sense for a company with negative publicity to launch a smile-filled ad campaign. They are experiencing post-trauma."
Strauss declined to comment. Osem stated: "Osem's advertising policy is based on marketing activity and not on the timing of Jewish holidays, therefore the comparison to Passover last year is meaningless. In the first quarter of 2012 Osem chose to focus on advertising product innovation, such as that of Bissli Yala, and Bamba in economy-size packages, Crunch cereals, Shtuhim crackers in different flavors and Sof Le'nishnushim soups and others."