As businesses struggle to meet demand amid economy-wide supply chain bottlenecks, many are cutting their advertising budgets.
Shipping vessels from abroad are currently idling outside the Los Angeles and Long Beach ports — which handle 40% of all shipping traffic entering the United States — as they wait to enter and unload. The bottlenecks — caused by COVID-19 lockdowns in Asia and labor shortages in the United States — are leading to shortages in consumer goods.
Many firms are therefore slashing their advertising spend as they struggle to fulfill existing orders. Based on recent earnings calls, The Wall Street Journal explained:
Chocolate giant Hershey Co. and household-goods manufacturers Kimberly-Clark Corp. and Church & Dwight Co. in recent days said they cut back on ad and marketing spending in the third quarter because of supply-chain issues.
“The supply-chain challenges just wouldn’t enable us to be able to meet further demand that we would create through our very impactful advertising,” Hershey Co. Chief Executive Michele Buck said on an investor call. “It just didn’t make sense.”
Kimberly-Clark Chief Financial Officer Maria Henry said her company, which makes Kleenex facial tissues and Huggies diapers, had more demand than it could meet at the moment. “We have challenges getting the product to our customers,” she said on an investor call.
As The Daily Wire previously reported, Kimberly-Clark’s year-over-year revenue growth in the third quarter was 7%, while net income dipped by 1%. As a result, they were forced to hike prices for the second time this year.
“Our earnings were negatively impacted by significant inflation and supply chain disruptions that increased our costs beyond what we anticipated,” explained Kimberly-Clark chief executive Mike Hsu. “We are taking further action, including additional pricing and enhanced cost management, to mitigate these headwinds as it is becoming clear they are not likely to be resolved quickly.”
In response to the logistics crisis, Rep. Chip Roy (R-TX) introduced the “BEAT CHINA Act” — legislation that would “bolster domestic manufacturing and reduce America’s overdependence on global supply chains.”
“As long as we depend on China and the rest of the world to keep our shelves stocked, our economic prosperity, our political liberty, and our national security are all in grave danger,” read a statement from the lawmaker’s office. “Relying too heavily on supply chains based in other countries is a recipe for disaster — especially when the governments of those countries wish to destroy our way of life, as does the Chinese Communist Party.”
“We must take bold action, consistent with the spirit of free enterprise, to reduce our dependence on foreign supply chains. The American people deserve an economy that can provide for itself; that’s why I am proud to reintroduce the BEAT CHINA Act, which would extend tax advantages to any foreign manufacturer that moves its production to the U.S.”