P&G Pullout: The Start of a Stampede?

A week after its COO asserted that Procter & Gamble would continue to maintain its marketing spend, the nation’s top advertiser is quietly pulling back on its second-quarter upfront options, a move TV sales bosses are characterizing as “comprehensive.”

According to one top-tier cable network executive, P&G has begun “canceling all second-quarter options, across the board,” a development that appears to contradict what A.G. Lafley told investors on Jan. 30, when he said the CPG giant would “absolutely not” cut into its ad spend. “We have held our marketing spending and advertising spending,” Lafley said in P&G’s latest earnings call. “In fact, what is really going on is the advertising markets are softening and for the same dollar we are buying more delivery.”

One media consultant said P&G was pulling out of national broadcast and cable in favor of spot TV, which is selling at distressed rates. As with other marketers who have exercised upfront options, P&G may be pulling out with an eye toward scatter inventory. Sales execs fear P&G’s cancellations presage a general retreat from national TV. “We’re keeping an eye on Unilever,” one network higher-up said. “They can either look at this as an opportunity to grab market share, or they can fall in lock-step behind P&G.”

It’s worth noting that Q2 marks the final quarter of P&G’s fiscal year. As such, rather than an acknowledgment of certain marketplace economics, the company’s decision to pull out of some of its media commitments simply may reflect P&G’s desire to divert cash to the bottom line.

On Feb. 5, Scripps Networks Interactive president John Lansing said that while options were accelerating, “a fair number of those advertisers are coming back into scatter looking to negotiate on price.” SNI reported that cancellations are now running “in the low teens,” a significant increase over Q1 pullbacks, which came in at around 6 percent. On the broadcast side, Fox anticipates options to reach 11 percent.

In 2004, P&G yanked some $35 million in upfront commitments out of the market, followed by a number of retail and pharma clients. A P&G representative said the company “doesn’t comment on talks with media suppliers or the amount spent on media.”

In the first 11 months of 2008, P&G reduced its ad spend by 8 percent to $2.99 billion, per Nielsen Monitor-Plus.