Global Marketing Monitor: Weekly Market Trends (April 17, 2021)

Spanishlanguage content was also in focus this past week with news of Mexico39s Televisa combining its content operations with Univision and stated plans for a global streaming service With a similar scale among Spain39s dominant media owners and significant investment in related content from Netflix ViacomCBS Disney and others significantly increased investment will likely be required to accomplish stated goalsVshaped recovery for China and the US As 2021 progresses we are more definitively able to point to the shape of the recovery from the pandemic and in China and the United States that shape increasingly looks like a quotVquot Starting with China39s economy which this week produced economic data showing that during the first quarter of 2021 GDP growth amounted to 18 over the first quarter of 2020 and 10 growth over the first quarter of 2019 Retail sales which amount to approximately six trillion US dollars last year were up by 34 in both the first quarter and March relative to their equivalent periods in 2020 Illustrating the degree to which the economy has fully recovered compared to 2019 March was up by 12 and the first quarter was up by 8 With a society only modestly impacted by the pandemic from a health perspective perhaps it39s unsurprising that economic activity in 2021 isn39t far from where one might have thought it would be two years agoStimulus payments likely helping the United States By contrast the US saw more severe human consequences from the pandemic but appears similarly positioned to come out of 2021 in better economic shape than might have been expected before any of last year39s disasters occurred Undoubtedly this outcome will be amplified by stimulus payments to consumers which amounted to approximately 1 trillion and paid out last month While economists tend to look at retail sales data on a sequential and adjusted basis we think it39s more telling to look at the yearoveryear growth rates and more relevant too marketers tend to manage their budgets on an annual basis and media owners tend to judge their performance on a similar basisUS retail sales grew 30 yearoveryear in March 2021 From this perspective the headline 10 growth rate in retail sales monthlysequential and adjusted is better understood as a 30 growth rate annual over last March and unadjusted The figure is all the more stunning because last March didn39t actually see the worst of 202039s monthly declines in retail activity in the US April was the nadir Putting the numbers into further context March 2021 retail sales were still 22 above activity in March 2019 Of course because 30 growth equated to quotonlyquot 146 hundred billion or a fraction of the stimulus perhaps it39s all unsurprising Still the numbers are remarkable to see considering that some of the fastestgrowing categories are also among the largest in the economy The following categories stood out for aboveaverage growthMotor vehicle and auto parts retailers amp8211 20 of total retail sales in 2019 for point of reference amp8211 were up 76 more than offsetting last March39s 25 decline Notably growth in motor vehicles and auto parts accounted for fully half of all growth in retail activity an important consideration when comparing this data vs other countries many of which do not include automotive sales in their numbers Compared with March 2019 auto sales were also up by 32Food services and drinking places amp8211 12 of retail activity in 2019 amp8211 grew by 35 during March 2021 While not fully offsetting last March39s 29 decline revenues for these businesses ended up only 6 below March 2019 levelsGas stations amp8211 81 of 2019 retail amp8211 grew by 36 in March 2021 reversing recent declines including February39s fall of 19 March 2020 presented an easy comparable as that month saw an 18 declineBuilding materials and garden equipment stores amp8211 62 of 2019 retail amp8211 grew 32 in March 2021 accelerating from February39s 12 growth rate This category held up particularly well through the early parts of the pandemic so the most recent month39s growth evidently compounded recent trendsClothing stores amp8211 43 of 2019 retail amp8211 produced one of the most dramatic category swings in the month more than doubling to rise by 105 in March 2021 Even accounting for March 2020s 51 decline March 2021 was still well above March 2019 levelsFurniture and home furnishing stores amp8211 with a 19 share in 2019 amp8211 saw sales up 50 in March 2021 vs a 20 decline in March 2020 February 2021 was up 48At the other extreme all of this growth occurred as Food and Beverage stores amp8211 which represented 12 of 2019 sales amp8211 faced very difficult comparables and declined by 10 during March 2021amp160 In March 2020 this retail category grew by 27 as consumers stocked up ahead of the implementation of policies restricting social activities across the country For the quarter Food and Beverage stores still grew if only by 14 yearoveryearHowever opportunities for global marketers will not necessarily be equal between the two countries for a given unit of growth Trends in China favor the emergence of domestic brands while the US probably continues to be more open With these growth levels compared with worse or more uncertain trends elsewhere both China and the US will likely remain as priority territories for marketers throughout 2021More nuanced trends will become evident as more companies report earnings Many of these trends will be observable with greater detail in coming days as increasing numbers of companies report their firstquarter earnings Already this past week global companies including LVMH L39Oramp233al and PepsiCo published data for this period of time From their results we could see relatively flat or slight growth in the staples these companies sell paired with rapid growth in luxury productsTelevisaUnivision was one of the big stories in media last week In media one of the bigger stories of the past week related to the announcement that Televisa would combine its contentrelated operations with Univision into one entity The two companies have had longstanding and intertwining financial and commercial relationships and this news represents a deepening of those ties On a combined basis Televisa and Univision had approximately 4 billion in revenue last year of which more than 2 billion was advertising mostly originating from televisionrelated propertiesStreaming was a key element of the announcement A key element of the positioning of the agreement relates to the development of a streaming business building on Univision39s PrendeTV AVOD service which became available in the United States last month The companies stated that their quotcombined financial strength will allow the company to invest in the anticipated launch of its global streaming platform which is expected in early 2022quot This is understandable as focusing on streaming is de rigeur for any owner of traditional TV assets in the present day However the biggest challenge for the combined entity will relate to whether or not financial strength translates into financial flexibility capacity to invest and tolerance to potentially lose money in the near term This will be especially important if TelevisaUnivision wants to expand outside of their home countries of the United States and Mexico let alone appeal to the larger market of nonSpanishlanguage speaking consumers who watch highquality Spanishlanguage contentContent spending at current levels is not unique As it stands Televisa and Univision spent approximately 1 billion on content last year For a sense of scale among other large multinational Spanishlanguage content packagers Spain39s two largest television networks Atresmedia 19 of which is owned by Luxembourgbased RTL and Mediaset Espana controlled by its Italybased namesake collectively generated just under 2 billion of revenue for their Spanish properties last year and incurred slightly less than 1 billion in costs amp8211 similar to TelevisaUnivision39s spending amp8211 on contentMeanwhile multiple press reports from earlier this year conveyed that Netflix spent 200 million in Mexico on production last year and plans to spend 300 million this year Spending in Spain where the company has established itself as a content producer will undoubtedly become comparably significant The Spanish government will likely help last month it announced a amp836416 billion of funding for years between 2021 and 2025 to increase production of audiovisual content in the country Netflix will surely be encouraged because it has demonstrated the global appeal of Spanishlanguage or bilingual content as with the Narcos franchise or Casa de Papel This week Netflix announced it was opening an office in Colombia with 30 new projects through 2022 to follow on 175 million of original content investment from 2014 through this yearCompetition from other largescale media owners is picking up Other USbased global streaming services are also making meaningful investments in Spanishlanguage content production as well ViacomCBS which already owns one of Argentina39s leading broadcasters announced this month that it bought one of Chile39s from ATampampT39s WarnerMedia and will be building out Parmount in the region Meanwhile both WarnerMedia and Disney have announced significant plans to expand their production efforts for their streaming services in Latin America Further within the United States Comcast39s Telemundo has become substantially more competitive in recent yearsCapacity for further investment and tolerance for losses will be among the keys to success At the same time TelevisaUnivision will remain highly levered in terms of debt relative to operating profit or cashflow at the close of the proposed transaction High leverage is usually associated with less financial flexibility than might be optimal for any given company This is particularly relevant here as successful streaming services require the capacity to incur higher costs for content delivery marketing and customer service than traditional broadcasters do Global success is strongly impacted by local presence and cultural relevance even when a language is shared That leads to extra costs too And then revenues are constrained by limited or nonexistent advertising loads and the fact that only subscribers who want a service are likely to pay for it unlike traditional TV where bundles of networks may be forced on paying consumers by distributorsA tolerance for sacrificing profitable traditional business also helps as efforts to sustain those businesses can have the effect of distracting management teams or otherwise incent them slow down the pace at which they transform their businesses None of these rules out success for TelevisaUnivision However identifying key factors behind successful transformations of media businesses may help anticipate the probability that it may occur as the company hopes it willPhoto courtesy of GroupMCopyright and Republished with permissionClick the social buttons to share this story with colleagues and friendsThe opinions expressed here are the author39s views and do not necessarily represent the views of MediaVillagecomMyersBizNet

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Global Marketing Monitor: Weekly Market Trends (April 17, 2021)

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Brian Wieser

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Global Marketing Monitor: Weekly Market Trends (April 17, 2021)

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