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Investor view: Investing in brand works, so why do agencies lack confidence?

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13.09.2021

One of the more noticeable features of the last reporting season was the re-emergence of the importance of brand for advertisers.

Firms such as Procter & Gamble, Kellogg’s and Colgate all highlighted the strengths of their brands as a key competitive advantage when driving growth and meeting the challenges of greater competition.

While that may have always been the case to some degree, the emphasis placed by companies on the importance of brand certainly seems to have increased in recent quarters.

What is driving this? A key factor in the short term (at least) is the impact of inflation, which is forcing many companies to pass on these costs to consumers via price increases.

Input costs have risen extraordinarily high for many companies, not just in commodity prices but also areas such as logistics, distribution and (in some cases) staffing levels.

Take P&G: it mentioned that, for fiscal 2022, it faces a $1.8bn (£1.3bn) cost headwind in terms of rising commodity costs, with a further $100m headwind from freight costs.

Some of these price increases have already come through, but the bulk are to come and will be punchy (this month is when many are due to take effect).

It has not been uncommon to hear companies talk about high single-digit, or even double-digit, price increases. If you are going to ask the consumer to accept those sorts of price increases, especially........

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