CPG smacking its lips over Internet Advertising.

After getting a taste of online advertising, many consumer packaged goods marketers seem to like it.

Food and beverage advertisers cut spending in nearly every major media last year – except the Internet.

This year, eMarketer estimates this category will spend $288 million advertising online, a 36.6% increase over 2006.

US Online Advertising Spending by Food and Beverage Companies, 2006-2011 (millions).

Why has Internet advertising become a meat-and-potatoes buy for food and drink marketers?

“Because food and drink is becoming an online staple for consumers who are searching the Internet for healthy eating tips and recipes, as well as for products they see advertised in other media,” says Lisa Phillips, eMarketer Senior Analyst and the author of the new CPG Online: Food & Beverages Party On report.

“Eat, drink and go online” is the message food and beverage companies are sending to US consumers, and they are following their own advice.

In fact, according to TNS Media Intelligence, the Internet was the only medium to see more than a small increase in food and beverage ad spending last year. While spending in newspapers tanked almost 25% and outdoor spending fell 9.5%, online advertising gained nearly 27%, to reach $183.4 million (and TNS does not include search advertising in its calculations).

US Advertising Spending by Food and Beverage Companies, by Media, 2005 & 2006 (millions and % change)

CPG companies, however, do not spend as heavily on paid search advertising as many other categories do, preferring to focus their Internet campaigns on branding, sponsorships and direct response such as e-mail.

“In the CPG segment, purchase consideration hinges more on in-store sales and discount coupons,” says Ms. Phillips, “so paid search is not as paramount as in other industries, such as automotive or financial services.”

eMarketer estimates CPG companies devote only 15% to 20% of their online spending to paid search.

“The shifts in food and beverage marketers’ media mix in 2006 mirror what is taking place in other industries,” says Ms. Phillips. “Last year, traditional media such as television, newspapers, radio and outdoor all lost share of spending within food and beverage budgets, while magazines and the Internet gained share. Even as total spending in other media fell 1.8%, Internet advertising rose, from 1.6% of the total in 2005 to 2.1% last year.”

Media Distribution of US Advertising Spending by Food and Beverage Companies, 2005 & 2006 (% share)

As a category, however, food and beverage advertising did not make the list of the top 10 advertising categories in 2006. Data from TNS show that the personal care segment was the only CPG category to break into the top 10, ranked eighth in overall spending last year, up 1.1% to $5.7 billion.

For more information at http://www.emarketer.com