With the economy expanding at an annualized rate of about 7 percent over the past two decades, Cambodia has managed to attract more than $42 billion in foreign direct investment (FDI) between 2005 and the end of the first half of last year, even though it is one of the smallest countries in ASEAN.
With such swift economic expansion and massive investment, companies are spending millions of dollars every year to promote their services and products. Moun Ramady, general manager of CNC – one of the most popular TV channels in Cambodia – spoke to Khmer Times about advertising trends. He discussed how much money is being spent, where it is being spent, who is spending it, and what impact the ban of advertising alcohol during prime time has had. He also discusses shifts in viewing trends, which include rising demand for news. (CNC is one of three TV channels owned by Cambodia Broadcast Service, a wholly owned subsidiary of conglomerate Royal Group.)
KT: According to some advertising agencies, ad spending has surged well beyond $100 million per year over the past few years. Do you have the figures on how much is being spent?
Mr. Ramady: Well, TV advertising is growing because our rates are cheaper compared to those in Thailand or Vietnam. That’s why advertisers are willing to spend more on TV. If you look at the spending on media in 2014 and 2015, for the top 10 TV channels I think the ad spending is close to $100 million. That is just the top 10 channels, but we have more than 10 TV channels now. I think spending for the rest of the TV stations is small because there are many small channels. I don’t have the precise data for all ad spending, but for the top 10 TV channels spending is close to $100 million per year.
Now, if we break it down by sector, about 60 percent of advertising goes to TV, another 15 percent goes to outdoor advertising (like billboards), while print gets about 10 percent. Radio receives about 5 percent and there is about 10 percent that is channeled to other types of advertising.
KT: Who are the major advertisers by sector?
Mr. Ramady: Beverages, including alcohol, account for about 50 percent of all advertising spending. Number 2 is cosmetics and beauty products, which mostly target female consumers. This accounts for about 16 percent of the total. Food accounts for about 10 percent, pharmaceutical products about 7 percent, telecommunications and Internet service providers account for about 6 percent, construction materials about 5 percent, the financial services sector accounts for about 5 percent, and the rest is mostly for agriculture.
KT: Why are these sectors spending so much on advertising?
Mr. Ramady: Well, there are number of factors why companies spend money on advertising. Number one is that it helps push sales, second they want to increase their market share because Cambodia itself is a market not a production center. We don’t have a major manufacturing industry here, only garment factories which is very light industry.
The third reason is for long-term business. Companies need branding that conveys the image products. And, as I mentioned before, an important factor driving advertising here is that ad rates are still low. Rates for TV advertising are cheap, so you will see spending on TV keep increasing. The economy is doing very well so it will attract more products and services into the market and competition will intensify.
KT: Does most of the current spending coming from the foreign-owned companies or domestic ones?
Mr. Ramady: Ad revenue is coming from both domestic and foreign owned-companies and it is about a 50-50 ratio.
Among the international companies, the spending is mostly from large companies like Unilever and Coca-Cola, for example, as they have manufacturing factories facilities or related companies here, so they need to advertise for branding. Local companies that also import products and distribute them here also do their own branding of these products so they need to spend on advertising.
So, even local companies are spending a lot of money to do their own branding and to push their sales. We are also seeing local manufacturers increasing their advertising. Now, spending is about 50:50 between domestic and foreign-owned companies, but I think in the future domestic companies will spend more than foreign ones.
KT: About 80 percent of domestically-owned companies are family-owned, and I hear that they are very cautious about spending much on advertisement. Is this changing?
Mr. Ramady: The playing field has changed; those rules are out of date. You cannot remain a family-run business anymore if you want to compete with others.
As I said earlier, Cambodia is not a manufacturing base, we are a market. So, more products just flood the market. These products are from Vietnam, Thailand, China… everywhere… because the tax rate is low and the ASEAN Economic Community just took effect. So, there will be more products coming into the country, so companies here have to incorporate.
You cannot be a mom and pop shop anymore. You need branding.
If you don’t do branding, you will lose out to your competitor. Moreover, consumers don’t look around for products anymore – they wait for the products to come to them. So, if you don’t advertise you will be left out.
KT: There is a perception among some people that if a product is promoted a lot it is likely not very good. Is this mindset changing?
Mr. Ramady: There is a new generation of consumers entering the market. Now they go for branded products, for example let’s say Coca-Cola, which is an international brand that spends a lot to advertise its products. Now, when you want soft drink, Coca-Cola will come to your mind first. It is not the case that everything is being advertised because it cannot. Advertising now is about branding. It gets the brand into the mind of the consumer so that when they want something the product or brand springs to mind. And what springs to mind sells.
KT: What kinds of TV programs attract audiences and advertisers?
Mr. Ramady: Well, because in Cambodia the education of many viewers is still very limited entertainment programs are still number one. Viewers watch them the most. Then, we have news programs, which are popular because viewers want to see what is happening, where the trend in business or the political situation are going. Now all TV stations have news programs.
KT: Why don’t we see many advertisers spend their money on education programs?
Mr. Ramady: Actually, it is a tough to sell these programs because TV stations need to produce programs that get good ratings to generate more revenue in advertising. Educational programs do not get high ratings and when you don’t have good ratings you don’t get sponsors. So, these are tough programs to sell.
In order to make education programming work we have to look at how they are done in other countries. Education programs in other countries have variety, which means they have entertaining education not just mainstream education. So, I think this will change in the future, not just for adult but also children’s education programs. But, all and all these have not been very successful because the programming is also limited by production constraints. When you don’t have revenue you cannot produce very high quality programming.
KT: In 2013, the government issued a directive banning the advertisement of alcohol and cigarettes during prime time. Has this affected your revenue?
Mr. Ramady: I think the government had a very good foresight to restrict alcohol advertising during prime time. I fully respect that and I think it is really very good for the country. We can develop other content to service other sectors, not just alcohol.
Actually, I haven’t seen any changes in revenue for CNC itself. Rather, we increased our revenue because our advertisers changed their advertisement time slots from prime time to other time slots following the restrictions set by the government.
So, when we lost alcohol advertising during prime time, we got in other time slots. And we got other products to fill prime time slots and generated more revenue.