Luxury Brands Advertising Spend

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Part
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Luxury Brands Advertising Spend - Part 1

Lancome, Coach and Fendi divert approximately 30.2%, 3.87%, and 12% of their turnover to advertising while Dolce & Gabbana diverts about 6.99%. This information has been entered into the following spreadsheet.

LANCOME

  • Lancome is a brand of L'Oreal Paris.
  • L'Oreal does not break out advertising budget for individual brands.
  • In the first half of 2019, advertising and promotion expenses for L'Oreal as a whole were 30.2% of sales, or €4,471.7 million.
  • For the whole year of 2018, advertising and promotion expenses for L'Oreal as a whole were €8,144.7 million.
  • As of May 2019, Lancome had annual sales worth $5.2 billion USD.
  • Assuming the percentage of sales spent on advertising and promotion expenses are the same across all L'Oreal brands, we can calculate (5.2 billion x 30.2%) that the total spent on advertising and promotion expenses for Lancome is $1.57 billion USD.

DOLCE & GABBANA

  • During FY 2018, Dolce & Gabbana recorded annual sales of €1.29 billion (equivalent to $1.43 billion). 
  • MediaRadar estimates that Dolce & Gabbana spends nearly $100 million on advertising in digital, TV, and print.
  • Following the assumption made by MediaRadar, we can estimate (0.1/1.43*100) that the advertising spends as a percentage of revenue for Dolce & Gabbana is 6.99%.

COACH

  • Coach is a brand of Tapestry, Inc.
  • The group does not break out advertising costs for individual brands.
  • In 2018, Coach generated revenues worth $4.22 billion.
  • For the 12 months ended December 31, 2018, advertising costs for Tapestry were $228.4 million, or 3.87% of sales ($228.4 million/$5.9 billion x 100).
  • Assuming the percentage of sales spent on advertising expenses are the same across all Tapestry's brands, we can estimate (4.22 billion x 3.87%) that the total advertising expenditure for Coach is $163 million.
  • FENDI

    • Fendi is a brand of LVMH Group.
    • The group does not break out sales or marketing costs for individual brands.
    • In 2018, LVMH Group spent 5.52 billion euros ($6.12 billion) on advertising and promotion costs — representing 12% of revenue.
    • Analysts at Bernstein estimates Fendi's revenues at 1.17 billion euros ($1.30 billion).
    • Therefore, if we assume that LVMH's percentage of sales spent on advertising is the same across all its brands, then Fendi's total advertising cost is approximately $156 million ($1.30 billion x 12%).

    RESEARCH STRATEGY

    The research team sought after the brands' annual company reports from their official websites to determine the amount each spends on advertising. We found that Lancome, Coach, and Fendi are subsidiaries of L'Oreal, Tapestry, Inc., and LVMH Group, respectively. Dolce & Gabbana is a privately held company with annual reports restricted to private access. None of the three parent companies break out advertising costs for individual brands. Therefore, we used each group advertising spends to triangulate the amount spent on marketing as a percentage of revenue for each brand (Lancome, Coach, and Fendi). We also searched MediaRader, an industry database, that keeps advertiser profiles for some of the world's luxury brands. MediaRadar "calculates estimated spend for the digital, print and national television campaigns identified using proprietary algorithms based on medium and advertisement type." Through this approach, we identified Dolce & Gabbana's estimated advertising spend in the last year.

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    Part
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    Luxury Brands Advertising Spend - Part 2

    For the FY2018/2019, Cartier, Burberry, and Rolex had annual sales worth $7.4 billion, $3.27 billion, and $5.1 billion, respectively. This information has been entered into the following spreadsheet.

    CARTIER

    • Cartier is a brand of Richemont Group.
    • The group does not separate the financials of its subsidiaries from the parent's nor the advertising costs from the selling and distribution expenses in the annual reports.
    • A 2016 publication by MediaPost, reiterated by a more current source, reveals that Richemont "spends an estimated $400 million on ads annually."
    • For the financial year (FY) March 2018 to March 2019, Richemont Group had annual sales worth €13.989 billion (equivalent to $15.53 billion).
    • Therefore, advertising expense for Richemont as a whole was approximately 2.58% of sales or (0.4bn/15.53bn).
    • As of March 2019, Cartier's sales were worth $7.4 billion.
    • Assuming the percentage of sales spent on advertising expenses are the same across all Richemont brands, we can estimate ($7.4 billion x 2.58%) that the total ad expenditure for Cartier is $190.92 million.

    BURBERRY

    • During the FY 2018/2019, Burberry recorded annual sales of £2.7 billion (equivalent to $3.27 billion). 
    • MediaRadar estimates that Burberry spends nearly $100 million on advertising in digital, TV, and print.
    • Following the assumption made by MediaRadar, we can estimate (0.1/3.27*100) that the advertising spend as a percentage of revenue for Burberry is 3.06%.

    ROLEX

    RESEARCH STRATEGY

    The research team sought after the brands' annual company reports from their official websites to determine the amount each spends on advertising. We found that Cartier and Rolex are subsidiaries of Richemont Group, a publicly held Swiss company, and Hans Wilsdorf Foundation, a private family trust, respectively. Burberry is also a public luxury brand with annual reports accessible. However, Richemont Group and Burberry do not disclose their marketing costs on their financial reports, and neither does Hans Wilsdorf Foundation (nor Rolex) disclose its financials to the public.

    Therefore, the team examined credible publications such as Media Post that discuss the brands marketing budgets. Through the approach, we obtained valuable metrics, such as the annual ads spend by Cartier, for example, that aided us with triangulating its advertising spend as a percentage of revenue. On the other side, Rolex spent $61.48 million on advertising in the U. S in 2013, the most recent year available. Unfortunately, this metric wasn't enough to enable us to calculate Rolex total advertising expenditure.

    Next, we searched industry databases like MediaRader that keep advertiser profiles for some of the world's high-end luxury brands. MediaRadar "calculates estimated spend for the digital, print and national television campaigns identified using proprietary algorithms based on medium and advertisement type." Through this approach, we identified Burberry's estimated advertising spend in the last year.

    Having tried the three distinct strategies above, and not obtaining the total amount (or the percentage share) spent on advertising by Rolex, the research team focused on establishing the average share of turnover allocated by luxury brands to funding their marketing budgets. On average, they divert 8% of their sales to advertising initiatives.
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    Part
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    Luxury Brands Advertising Spend - Part 3

    Porsche and Bentley divert approximately 2.80 percent of their turnover to advertising while Hermes diverts about 1.38%. This information has been entered into the following spreadsheet.

    PORSCHE AND BENTLEY

    • Porsche and Bentley are brands of Volkswagen Group.
    • Neither the group nor Porsche or Bentley separates their advertising costs from the operating expenses in the annual reports.
    • For the FY 2016, "the latest figures available from the Advertising Age Data Center," advertising expenses for Volkswagen as a whole were $6.74 billion.
    • Volkswagen generated €217.267 billion (equivalent to $240.92 billion) in revenues in 2016.
    • Therefore, we can assume that, based on the latest figures, Volkswagen diverts 2.80% of their sales (6.74/240.92*100) to advertising initiatives. 
    • Porsche and Bentley's sales were worth €25.8 billion ($28.62 billion) and €1.5 billion ($1.66 billion) in 2018, respectively.
    • Assuming the percentage of sales spent on advertising expenses are the same across all Volkswagen brands, we can calculate (28.62 x 2.80% and $1.66 x 2.80%) that the total amount spent on advertising for Porsche and Bentley is $801 million and $46.48 million, respectively.

    HERMES

    • During the FY 2018, Hermes recorded annual sales of £5.966 billion (equivalent to $7.24 billion). 
    • MediaRadar estimates that Hermes spends nearly $100 million on advertising in digital, TV, and print.
    • Following the assumption made by MediaRadar, we can estimate (0.1/7.24*100) that the advertising spends as a percentage of revenue for Hermes is 1.38%.

    RESEARCH STRATEGY

    The research team sought after the brands' annual company reports from their official websites to determine the amount each spends on advertising. We found that Porsche and Bentley are brands of Volkswagen Group, and Hermes is a public luxury brand with publicly available annual reports. Unfortunately, none of the brands discloses their marketing costs (or advertising expenditure) on their financial reports.

    Therefore, the team examined credible publications, such as Automotive News Europe, that discuss the brands' marketing budgets. Through the approach, we obtained valuable metrics, like Volkswagen's ads spend, for example, that presented us with key statistics for estimating Porsche and Bentley's advertising spend.

    Next, we searched industry databases like MediaRadar that keep advertiser profiles for some of the world's high-end luxury brands. MediaRadar "calculates estimated spend for the digital, print and national television campaigns identified using proprietary algorithms based on medium and advertisement type." Through this approach, we identified Hermes' estimated advertising spend in the last year.
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    Part
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    Luxury Brands Advertising Spend - Part 4

    BMW and Audi divert approximately 3.05 percent and 2.80 percent of their turnover to advertising while Prada diverts about 6.68%. This information has been entered into the following spreadsheet.

    PRADA

    • For the 12 months ended December 31, 2018, advertising and communications costs for Prada were €207.278 million (equivalent to $229.87 million).
    • In the same year, Prada had annual sales worth €3.098 billion ($3.44 billion).
    • Therefore, Prada's advertising spends as a percentage of revenue is roughly 6.68% (229.87/3440*100).

    BMW

    • BMW does not separate its advertising costs from the selling and administrative expenses, which mainly include expenditure for marketing, personnel, and IT, in the annual reports.
    • For FY 2016, the latest figures accessible from the Advertising Age Data Center, advertising expenses for BMW were $3.1 billion.
    • BMW generated $101.78 billion in revenues in 2016.
    • Therefore, we can assume that, based on the latest figures, BMW diverts 3.05% of their sales (3.1/101.78*100) to advertising initiatives. 
    • BMW's sales were worth $97.48 billion in 2018.
    • Assuming the percentage of sales spent on advertising expenses is 3.05% in 2018, we can calculate ($97.48 billion x 3.05%) that the total spent on advertising costs for BMW is $2.97 billion.

    AUDI

    • Audi is a brand of Volkswagen Group.
    • The group does not separate its advertising costs from the operating expenses in the annual reports.
    • For the FY 2016, "the latest figures available from the Advertising Age Data Center," advertising expenses for Volkswagen as a whole were $6.74 billion.
    • Volkswagen generated €217.267 billion (equivalent to $240.92 billion) in revenues in 2016.
    • Therefore, we can assume that, based on the latest figures, Volkswagen diverts 2.80% of their sales (6.74/240.92*100) to advertising initiatives. 
    • Audi sales were worth €59.2 billion ($65.62 billion) in 2018, respectively.
    • Assuming the percentage of sales spent on advertising expenses are the same across all Volkswagen brands, we can calculate ($65.62 x 2.80%) that the total amount spent on advertising for Audi is $1.84 billion.

    RESEARCH STRATEGY

    The research team sought after the brands' annual company reports from their official websites to determine the amount each spends on advertising. We found that Audi is a brand of Volkswagen Group, and Prada and BMW are public luxury brands with publicly available annual reports. Unfortunately, Audi and BMW do not disclose their marketing costs (or advertising expenditure) in their financial reports.

    Therefore, the team examined credible publications, such as Automotive News Europe, that discuss the brands' marketing budgets. Through the approach, we obtained valuable metrics, like Volkswagen's ads spend, for example, that presented us with key statistics for estimating Audi's advertising spend. On the other side, Automotive News provided us with BMW's advertising costs for 2016, the most recent year publicly accessible, as compiled by the Advertising Age Data Center. Ad Age publishes the top 100 largest advertisers annually. Unfortunately, details for 2017 and 2018 are behind a paywall.

    Next, we searched industry databases like MediaRadar that keep advertiser profiles for some of the world's luxury brands. MediaRadar "calculates estimated spend for the digital, print and national television campaigns identified using proprietary algorithms based on medium and advertisement type." Through this approach, we were unable to locate any statistic or metric regarding BMW's most recent advertising cost because MediaRadar does not manage the company's advertising profile.
    Sources
    Sources