News Analysis: Boom or bust? 2008 under the spotlight

Marketers across the industry's key sectors can look forward to what promises to be an interesting, if challenging, year.


Food products that are deemed essential will be well placed to deal with an economic downturn, while more premium items face the prospect of being banished from shopping lists as consumers tighten their belts.

As the panic over obesity shows no sign of abating, food manufacturers will continue to roll out products appealing to consumers concerned with health and wellbeing. The looming spectre of tighter ad restrictions will have the industry holding its breath to see whether a 9pm watershed for foods high in fat, salt or sugar becomes a reality.

Under the EU Pledge, launched at the end of last year and involving food giants such as Mars, Nestle and Unilever, participants will implement voluntary measures on advertising to children by December 2008. This will help their case against stronger regulations, but it will be interesting to see the impact on marketing, as they may find themselves at a disadvantage compared with competitors that have not signed up.

The rising cost of raw materials poses another challenge. 'Food manufacturers have, in many cases, been able to absorb these price increases. However, if the 2007 trend continues, this will not be sustainable and inevitably carry implications for consumer prices,' says a Food and Drink Federation spokeswoman.


The expected slowdown in consumer spending is unlikely to affect the FMCG sector, according to Roisin Donnelly, corporate marketing director and head of marketing at Procter & Gamble, UK and Ireland. 'Recession leads to consumers being more value-conscious,' she says. 'Firms that innovate in this environment will thrive the best.'

According to marketing consultancy Billets, the most successful FMCG brands will be those that maintain their advertising presence during an economic slowdown.

This year will also bring an increased focus on the environmental impact of the FMCG sector. At the end of last year, both P&G and Unilever partnered with not-for-profit organisation Carbon Disclosure Project to form the Supply Chain Leadership Collaboration, a group that will put pressure on suppliers to disclose greenhouse-gas emissions and make plans to reduce them.


The next 12 months will play a crucial role in shaping the future of the UK travel industry. Heathrow's much- anticipated Terminal 5 opens its doors on 27 March, followed by the liberalisation of transatlantic air travel three days later thanks to an 'open skies' deal.

The treaty will end the exclusive rights granted to British Airways and Virgin Atlantic that made them the only UK carriers to fly out of Heathrow to the US. Business-class services will come under threat and could become a key battleground in the transatlantic market.

The implications of the merger of the four biggest tour operators in Europe to form two entities will be felt throughout 2008. Both Thomas Cook Group and TUI Travel predict a promising future for the package holiday.

Ethical travel will grow as more passengers choose the train for shorter trips, driven by the launch of cross-Channel rail link High Speed 1, and Eurostar's move to St Pancras last November.

The credit squeeze, meanwhile, is likely to cause a significant slowdown in air-traffic growth, particularly in business travel. It is expected to lead to a focus on short-haul sales, low-cost carrier fares and internet deals.

The volume of inbound tourism in 2008, particularly from the US, is also predicted to be lower than last year.


British retailers face a tough start to the year. A difficult Christmas trading period has led to heavy January discounting, and a recession is likely to cause a further slowdown in consumer spending. A sustained downturn in the housing market will put furniture, electrical and DIY retailers under particular pressure. Almost 1400 retail businesses are expected to go bust this year, a rise of 7% on 2007, according to accountants BDO Stoy Hayward. The credit pinch may also lead to merger and acquisition activity.

'Value for money will be the primary concern for consumers under financial pressure,' says a spokesman for the British Retail Consortium. Supermarkets are likely to suffer the least as they continue to take share from non-food rivals, who cannot compete on price. The web will also steal sales from the high street as consumers seek better deals.

There will be a continued focus on locally produced and organic food, as consumers become more environmentally aware. This includes the call by the RSPCA and celebrity chefs for a ban on battery chicken farming, which will put further pressure on grocers.

Other concerns for supermarkets this year will include supplier relationships, planning issues and plastic bags. Supermarkets may also face further backlash from lobby groups over food pricing.


The cola wars will intensify in 2008 with the launch of Pepsi's Raw, the first addition to its cola range for more than 10 years. The drink, which Pepsi claims is the first 'premium' cola, due to its use of cane sugar, launches in the on-trade before hitting the off-trade later in the year.

The success of Coca-Cola's October launch of Diet Coke Plus and relaunch of juice brand Minute Maid will also resonate across the year.

In the event of recession, Britvic's former marketing director Andrew Marsden believes that staple soft-drinks brands such as squash will triumph over more luxurious purchases. 'Retailers will afford shelf space to those brands with the best rate of sale,' he says.

Marsden adds that in premium soft-drinks categories, the second- and third-placed in the market may suffer most, with consumers either sticking to the market leader or opting for the cheapest product.

A slowdown in product launches is also expected this year as budgets are squeezed.


Pepsi Raw - Pepsi's premium addition to its cola range, made with cane sugar.

Picnic - Sky's pay-TV digital terrestrial TV service will launch this year, subject to Ofcom approval.

Banana Republic - Gap is bringing its US premium fashion brand to Europe.

'Project Lauren' - British Airways' yet-to-be-named premium brand will fly direct to the US from continental European cities from this summer.

Fiat 500 - the much-anticipated retro re-skin of Fiat's original 'big little car', which launched in 1957, will arrive in June.

Twitter - the free text-based social-networking site has been touted as a potential buy-out target for 2008.

FruitaBu - Kellogg's healthy-snacking brand will be one of the firm's biggest launches of 2008.

Alli - Launching in Europe this year GlaxoSmithKline's 'wonder drug' is the only FDA-approved over-the-counter weight-loss product.

Kit Kat Senses - Nestle is launching a cream-filled Kit Kat variant this year to rival Ferrero's Kinder Bueno bar.

Monster - the multimillion-pound US energy drink is being launched in the UK.


The financial world will be hoping for a better 2008, but this is unlikely. The effect of the credit crunch will take its toll and there may be cause for some early gloom next week (14 January) when the long-awaited Office of Fair Trading test case in the High Court to determine the legality of bank charges kicks off. Seven of the UK's biggest banking brands, including Abbey, Barclays and HSBC, will fight to keep their right to slap hefty charges on customers who exceed their authorised overdraft limit.

The wider roll out of 'tap & go' systems which allow consumers to purchase inexpensive items without having to enter a PIN or provide a signature, is set to be big this year. Barclays' system, which launched last autumn, was followed by MasterCard's PayPass, and by the end of 2008, MasterCard predicts 5m consumers will have these cards and 100,000 UK retailers will be signed up, signalling another nail in the coffin for cash.


Although, as a discretionary spend, alcohol has proved resilient during recessions, the sector is entering 2008 with a certain amount of trepidation.

David Brown, on-trade sales director of Whyte & Mackay, says: 'The on-trade is first in and first out of a recession. We are already feeling the effect of a downturn.'

Beer is in a sorry state and with England out of football's Euro 2008 competition there is not much to look forward to. The price of a pint is also set to rise due to soaring costs of raw materials.

'2007 was hard and given the prospects for the economy, no one is expecting it to get easier,' says Rob Hayward, chief executive of the British Beer & Pub Association. There has been a downturn in beer consumption, particularly associated with the smoking ban,'

Meanwhile, the findings of a Home Office inquiry into supermarkets' pricing and promotion of alcohol and the link to alcohol abuse are due to be unveiled in the first half of the year.

But there is some good news, as a government consultation on new rules to protect Scotch whisky's reputation have opened. These could help producers as the drink's global popularity increases.

As consumers continue to turn their backs on alcopops, the beneficiaries look set to be cider and spirits.


With the threat of recession looming, marketers look set to continue shifting spend away from TV, radio and press into more accountable forms of advertising. Facebook is expected to benefit as internet adspend passes the £3bn mark during 2008, with web 2.0 sites such as Digg, LinkedIn and Twitter also making their mark.

The mobile marketing sector is liable to flourish, thanks to the increasing number of consumers surfing the web while on the move. Brand-owners will be able to take advantage of fresh services that allow consumers to access web applications without an always-on internet connection.

Web TV has been slow to emerge as a viable option for marketers, but rising broadband speeds will prompt the launch of more internet protocol TV (IPTV) services. This year O2 and Orange roll out their own offerings, alongside those already available from BT, Tiscali and Virgin Media.

Meanwhile, mobile VoIP technology that allows mobile users to make cheap phone calls over the web is expected to take off, following the launch of the UK's first Skype phone from 3.


If there was ever a year when the trade associations needed to flex their muscles, 2008 is likely to be it. Renewed threats of restrictions on marketing activities abound from ever-more active and influential lobby groups.

Plans for a 'big tent' approach, spearheaded by the Advertising Association, which would see marketing communications bodies unite to fend off such attacks may take shape during the year.

Meanwhile, marketers will need to get their heads around a number of fresh regulations. Former Britvic marketer Andrew Marsden is in the process of reviewing the Committee for Advertising Practice's codes, with the fruits of his labour due for consultation at the end of the year.

On 1 January, foods high in fat, salt or sugar were barred from advertising during shows watched by a high proportion of under-16s, in accordance with the Ofcom rules laid out at the end of 2006. A fresh Portman Group code also came into force on the first day of the year banning the sponsorship of child-sized replica shirts by alcohol brands and outlawing activity that encourages the swift downing of drinks.

The Office of Fair Trading's review of Contract Rights Renewal will also conclude this year and could result in the system's demise in 2009.


With the European Commission planning to force car firms to cut CO2 emissions by 2012, environmental issues will remain at the top of the agenda this year. Automotive marketers will focus on boosting their green credentials, as consumers become more concerned about their carbon footprint.

The revamped Honda Accord looks set to be one of the greenest launches of the year when it goes on sale in the summer. The Hyundai i10 city car will hit the forecourts in March, with low-CO2 emissions making it congestion-charge exempt and putting it into one of the lowest vehicle exemption duty brackets. Meanwhile, Hyundai will bring its Infiniti brand to the UK to take on Toyota's Lexus range.

However, fears of a recession already appear to be denting car sales, with 2.34m vehicles expected to be sold during 2008, down slightly on last year, according to the Society of Motor Manufacturers and Traders.


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