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Hughes blog post: Don’t wine about decline, invest in your brand

20 May 2014    

I read with interest today of the decision by the new CEO of Treasury Wine Estates, Michael Clark, to increase the company’s marketing spend by 50 per cent in the midst of a $35 million cost cutting program.

In my view, it’s a bold decision with benefits.

Too often, when times get tough, businesses pull in their belt and put their head in the sand.

Seldom do they look up and out and re-invest in building their brand with a view to stimulating market demand and driving their business from the front foot.

Mr Clark’s reasoning makes good sense.

“TWE’s brands have suffered from a lack of consumer-facing marketing investment and we will address this in fiscal 2015 by increasing consumer marketing spend in fiscal 2015 by circa 50 per cent relative to the prior year.

“It is imperative that our marketing and sales capabilities are more in line with the company’s ability to make outstanding wines across all categories.

“Despite the continuation of challenging trading conditions in the second half of the year, I am determined to act upon opportunities to drive sustainable top-line momentum and margin expansion while at the same time, improving TWE’s brand equity and connections with consumers, retailers and distributors.”

In short:

“We cut too hard with our marketing in the tough times.

“We know we make a great product – but now not enough consumers do.

“Our brand is valuable and powerful so we’re going to invest in it – and that will drive our business.”

This strategy makes even more sense when competitors are going the other way. It gives a greater share of voice and – particularly with the volume of media consumed by such a large organisation – it should add significantly to buying power.

Using its increased marketing spend to build connections with retailers and distributors is also a smart move for TWE. Involving its “market gatekeepers” demonstrates TWE is putting its money where its mouth is – and will create shared ownership in the success of its brands.

At Hughes Public Relations, we are fortunate to work with organisations who also view adversity as opportunity and who have the resources and intelligence to invest strategically in brand building when others are not.

The result, a head start when markets pick up – and a greater buffer between them and their competitors when the cycle turns down.

Counter cyclical investment – particularly in marketing – can mean the difference between make or break!

Read the original article, Penfolds owner swings the axe, in InDaily here.

- Tim Hughes