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US restaurants slow down spending on advertisements

Restaurants have been slowing down on advertisement spending in the US. The reason behind the trend is that many US restaurants are offering fewer limited time offers (LTOs).

Pat Wellenbach/AP/File
A Wendy's restaurant sign is seen in Brunswick, Maine. Restaurants have been slowing down on advertisement spending in the US, because US restaurants haven't had as many limited time offers.

Restaurants reined in advertising spending in 2014’s first quarter after significantly exceeding the average throughout 2013. According to Kantar Media, total US advertising expenditures increased a surprisingly strong 5.7 percent to $34.9 billion in the first quarter.

However, restaurant spending in Q1 increased just 1.9 percent to $1.678 billion. That ended the industry’s year-old streak of topping the average in each of the last four quarters.

Full-year 2012, total US advertising rose 3 percent. Restaurants were roughly in line with a 4 percent increase. But once 2013 began and slowing sales by many restaurant chains fueled an overheated competitiveness that translated into heavier ad spending. In 2013’s Q1, total spending declined by 0.1 percent but restaurant ad spending jumped up by 8 percent.

Spending accelerated in Q2 with restaurant spending up 12.6 percent while overall ad spending rose 3.5 percent. Them restaurant industry calmed itself a bit in Q3 with a 5.5 percent increase (vs. 3.5 percent overall) and ended the year with a 5.2 percent increase. Total US ad spending was up just 0.9 percent for the year.

Now 2014 has begun fairly meekly with a 1.9 percent gain despite the presence of the ad-heavy Winter Olympics. The first quarter is traditionally fairly quiet in sales growth but last year’s 8 percent spike in Q1 spending shows that this year’s soft spending isn’t a seasonal phenomenon.

What I think the 1.9 percent ad spending increase represents is the impact of the this year’s slowdown in menu introductions that McDonald’s and Burger King and others have instituted. Fewer LTOs require fewer ad bursts to support them. Q1 did see some rollouts, including McDonald’s Bacon Clubhouse (introduced in March, it was the chain’s first significant new product of the year), Burger King’s quarter-pound Big King, Wendy’s Ciabatta Bacon Cheeseburger and Jack in the Box’s Bacon Insider. But there fewer “secondary” product introductions and a less frenzied marketplace overall. Worn out by 2013, chains aren’t as eager to one-up each other this year.

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