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Green Marketing Hits the Bottom Line

Don’t expect to see huge Calvin Klein Jeans billboards in Sao Paulo - or those from any other brand for that matter.

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RIO DE JANEIRO — Don’t expect to see huge Calvin Klein Jeans billboards in São Paulo — or those from any other brand for that matter.

Latin America’s largest city last year banned outdoor advertising in a bid to clean up the visual landscape, a move that’s caused fashion and other brands to significantly shift marketing strategies.

While many of the metropolitan area’s 18 million residents have applauded the cleanup, firms that sold outdoor space in São Paulo, including ad agencies and the owners of various outdoor locations, have lost about 300 million reals ($175 million) in annual revenue, according to Central de Outdoors, a nationwide group of companies selling ad space outdoors.

Before the law took effect 16 months ago, São Paulo, which accounts for 20 percent of Brazil’s gross national product, accounted for nearly half of the 650 million reals, or $380 million, spent in the country each year on outdoor ads.

“The law was good for the city, but it was bad for us,” admitted Gabriela Barcellos, marketing director at Calvin Klein Jeans in Brazil. “We lost a key component to our ad venue variety — the Calvin Klein Jeans billboard — which really helped spread our brand name.”

The so-called clean city law, which is the first of its kind in Brazil, was the initiative of maverick Mayor Gilberto Kassab, who wasted little time in proposing it after he took office in March 2006. The measure was passed by the state legislature in September 2006 and took effect Jan. 1, 2007. “São Paulo was among the most visually polluted cities in the world, and 70 percent of the outdoor media in the city was illegal,” Kassab said, referring to displays that exceeded size limits or evaded city permits and taxes.

“Ninety-nine percent of the outdoor advertising in the city has been taken down,” said Sérgio Rondino, head of the mayor’s press office. “Most of it was taken down voluntarily. In some cases [outdoor media owners] fought the law in court, some of them arguing it was unconstitutional,” Rondino noted. “The city won nearly all of those lawsuits and lost none. Some of those lawsuits are still in the courts, and while they are, the owners of the outdoor billboards and panels can still keep them up.”

Companies that once bought ad space in places like shopping malls, bus shelters, building panels and newsstands have been shifting about 10 percent of their former expenditures indoors, to wall-mounted plasma screens beside shopping mall elevators, signs in mall corridors and signs on escalator walls, among other places, according to Central de Outdoors president Raul Nogueira.

Responses to the city’s visual pollution law

include:

l Calvin Klein Jeans moving 10 percent of the budget once earmarked for outdoor ads to additional newspaper and magazine ads.

l Levi’s hiking its spending on ads in magazines and on commercials in movie theaters.

l Unilever’s Seda shampoo advertising in upscale fashion stores.

l The Coca-Cola Co. hawking its brand name on barroom pool tables in place of traditional green felt.

Estimates of how much former outdoor ad spending has been reallocated to print, broadcast and online media vary, with Nogueira characterizing it as “little,” and Michael Eberhardt, president of indoor media association Abramid, suggesting as much as “10 to 20 percent” of money formerly spent to buy ad space outdoors has shifted to newspapers and magazines, as well as indoor venues.

“Although indoor media can target a more specific public, its impact is much smaller” than the impact of outdoor media on the broader public, Nogueira contended. Central de Outdoors estimates companies lost annual sales of about 800 million reals to 1 billion reals ($470 million to $588 million) since the law forbade them from most outdoor advertising. The few exceptions include hot air balloons and aprons worn by gas station attendants.

Since the clean city law took effect, Eberhardt’s own media sales firm, New Ad, has been selling more ads in nontraditional locations, like beauty salon mirrors, toilet stall doors and napkins and coasters in bars and restaurants.

Equus, a local women’s sportswear brand with 12 of its 40 stores in São Paulo, had been advertising on six São Paulo billboards before the clean city law. Since then, it has upped its advertising in Brazilian magazines, and, through New Ad, placed ads on the doors of women’s toilet stalls in city restaurants. The toilet stall ads lasted just three months. “We decided that advertising our product in women’s bathrooms did not add value to the brand,” said Edison de Annuncio, commercial director at Equus.

The outdoor ad ban has cleaned up the Jardins neighborhood, São Paulo’s equivalent of Madison Avenue, as high-end local and foreign fashion boutiques had to remove their advertising on circular nameplates atop street signposts, media insiders observed. The shops also had to reduce the sizes of their nameplates — and the lettering on them — their new collection posters and sales signs in store windows, the latter based on the size of the window.

Since abandoning the three or so billboards and panels it mounted before the clean city law, Rosa Chá “is sending our product catalogues to our São Paulo mailing list customers every three months, as opposed to every six months,” said owner Amir Slama. One of Brazil’s best-known beachwear brands and a participant in New York Fashion Week, Rosa Chá still advertises on billboards in five Brazilian cities.

Streetwear brand Cavalera relocated to bigger panels on the outskirts of the metropolitan area and used about 6 percent of its ad budget to do so. The brand, which has nine of its 12 stores in São Paulo, is allocating the rest of its ad budget to newspapers and magazines, point-of-sale displays in its stores and fashion shows.

“Now we reach the part of our public as it is driving into or out of São Paulo as opposed to while it is driving or walking within the city,” said Renato De Cara, Cavalera’s marketing manager. “As a result, fewer São Paulo residents now see our outdoor ads, which is, for us, the downside of the clean city law.”

When advertising outside was permitted, complicated regulations and difficulties enforcing them enabled companies to erect billboards bigger than the legal limits and to place them closer together than allowed. Some companies advertised outdoors without permits and many didn’t pay city tax on those spaces, media insiders recalled. The annual city tax on billboards ranged between 1,500 reals ($882) and 4,000 reals ($2,335), depending on the size of the display. Inspection taxes each year ran from 500 reals ($294) for standard billboards up to 3,000 reals ($1,760) for electric panels.

“We had pushed indoor advertising to clients before the [clean city] law, but most wanted to keep their more traditional outdoor marketing strategies,” said Marcos Berger, media manager at J. Walter Thompson in Brazil. “It was only when the law forced them to go indoors that they did.”

As Cristiane Bretas, media director at Neo/BBH, recalled, indoor advertising had gained momentum in shopping malls, bus stations and subways by 2005 — and “increased even more after the clean city law” took effect.

Outdoor media association president Nogueira, for one, said he isn’t anticipating the spread of São Paulo’s clean city law to other state capitals and large municipalities in Brazil. “Other Brazilian cities don’t have the profusion of outdoor ads that São Paulo did before the new law,” Nogueira said. “To prevent an excessive buildup of outdoor ads in the future, these cities are better enforcing existing laws or passing new ones that limit the size of billboards and front-lit panels and the distance between them.”

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