Letter From Paris: Changing Times

Like many blessings, it’s mixed.
The good news is that Europe is enjoying an economic recovery–and that’s music to advertisers’ ears. After a mid-’90s recession, large chunks “of the Continent, Italy, Spain and the U.K. are booming,” reports Jean de Yturbe, Bates chief executive for Europe/Middle East/Africa. In fact, a Europeanwide 5.5 percent increase in above- and below-the-line media spending this year is proof that marketers sense consumers are eager to buy.
That belief is backed by a study prepared by the French research company Ipsos Opinion, in conjunction with Banque Sofinco, which found an increase in confidence levels in many European countries. The big question is: Why aren’t France and Germany hip to the economic program?
The bad news is that unemployment is killing the spending spree in Europe’s two largest markets, despite equally depressing jobless figures in Italy and Spain. It’s also prompting clients to move media dollars to sunnier European climes. Vincent Negre, Europe/Middle East/Africa CEO for Ammirati Puris Lintas, thinks he knows the reason why. “Italy and Spain have gotten rid of the bureaucratic constraints on the economy and consumer spending,” he notes, “whereas France and Germany are blocked.”
And it’s a sizable obstacle.
Comprising more than one-third of Western Europe’s population– 140 million people–France and Germany pose a challenge for marketers and advertisers alike. Each country is unique in its problems–though both may be lumped together in advertisers’ minds. “Clients will not spend as much in Germany and France this year,” frets Negre, “two markets where consumers have a guilt complex regarding unemployment and as such, don’t want to consume.”
Given each country’s distinct culture, it’s important to consider each in turn.
In France, for example, Pierre Giacometti, managing director for Ipsos, believes there “is a strong desire and impatience to consume, but the French don’t believe they possess the means to do so.” At present, the country is wrestling with bouts of guilt and anxiety.
Much of France’s malaise is related to the protests organized by its three million-plus unemployed last December–which continue to this day. Extensive news coverage prompted popular support for the largely nonviolent takeovers of hotels and restaurants by the unemployed. Unfortunately, the Socialist/Communist/Green ruling coalition met their demands with an austere awkwardness, while Prime Minster Lionel Jospin was too involved in plans for monetary convergence to listen.
“People are not sure the country is governed by politicians capable of bringing France out of this crisis,” says Daniel Cole, chief executive officer of J. Walter Thompson France. “The means for consumption exist, but there’s no confidence in the future. Investment is a reflection of confidence in the future.” The repercussions for the ad industry are obvious–and Cole isn’t optimistic.
“We need vision to break this vicious cycle; it can’t be done by advertising,” Cole admits. “Most of the advertising messages here are a mixture of conservative ideas and wishful thinking. People have the impression that the ads they see are for the other guy, not them.”
Interestingly enough, Havas Media Communication, a subsidiary of media group Havas SA, recently absorbed by the French conglomerate Compagnie Gƒnƒrale des Eaux, takes a more upbeat, albeit minority view. Havas predicts total French media spending growth to reach 4.5 percent this year, up from 3.8 percent in 1997–an assumption Negre challenges. “I don’t believe this figure for France,” he says bluntly. “It’s completely out of touch with what I’m seeing.”
His sentiments are echoed in Germany.
“The overall view is negative due to near-record 11.5 percent unemployment and upcoming national elections,” says Bernd M. Michael, managing partner at Grey Gruppe Middle Europe in D†sseldorf, Germany. “The Social Democrats [laboring to unseat Chancellor Helmut Kohl] are trying to polarize the country by telling everyone how bad things are.”
The Sofinco-Ipsos study reflects this grim reality. When it was launched in January 1997, consumer confidence in Europe’s most important market was measured at a dismal 98. (The survey’s base is 100.) More alarming, in a year’s time, Germans overall propensity to consume had risen by just one point, to 99.
Pessimism in Germany is further exacerbated by the impending introduction of the Euro. Germany will be in the first wave of an anticipated 11-country alliance to adopt the common currency Jan. 1.
“Germans hate to walk away from the only security they’ve known for 50 years–the deutsche mark,” adds Michael. In addition, when the study asked what effect the Euro presents for consumers, an overwhelming 61 percent of German respondents said it would create more disadvantages than advantages. Only 22 percent took an opposing view, predicting the Euro will offer more advantages than drawbacks.
Not surprisingly, negative sentiment toward the Euro increases as the date for replacing the D-mark approaches. Again, psychological unease is linked to economic doldrums. In essence, the German appetite for consumption has been thwarted. The uncertainty and stress of unemployment, coupled with upcoming elections and fears about the Euro, are dampening consumer enthusiasm.
The effect on advertisers is telling. Negre says discussions with various clients, such as Nestlƒ, have confirmed the views expressed in the study. “Clients are putting their dollars in Spain and Italy, as well as in Northern and Eastern European countries.” Michael predicts overall client media spending for Germany will rise only 3 percent this year, following a flat 1997.
The big losers will be French and German marketers confined to their own countries. For multinationals, the picture is a bit brighter. De Yturbe says that few advertisers appear overly worried that either country’s problems will drag the Continent into another economic black hole. “They won’t derail the recovery,” he claims confidently. “Europe’s economies have become too globalized for that.”
What is most threatening to European marketers and consumers is the threat of a total Asian economic meltdown, warns Denis Deschamps, a financial analyst with Refco Grel Brokerage in Paris. “The recovery has been driven by exports rather than by consumer demand. Europe is much more exposed to Asia’s current problems than the United States,” he says.
Still, when asked whether Europe’s economic engine, despite its inability to fire on all cylinders, offers fair expectations for healthy consumer demand, Deschamps demurs. “The consensus is that Asia’s current woes might clip between 0.3 percent and 0.5 percent off European growth this year,” he concludes. “Pessimists, on the other hand, fear a full 1 percent could be lost.”
The challenge for advertisers will be to capitalize on rising consumer confidence in the U.K., Italy, Holland and Spain, while finding creative ways to attract wary customers in France and Germany.

Recommended articles