In the quarter that was marred by rising inflation and dwindled demands in rural India, FMCG major Hindustan Unilever reported 11% growth in net profit at Rs 2,289 crore for the Q1. The company spent more than Rs 1,300 crore on ads and promotion in the quarter, up 29.64% from the corresponding quarter in the previous year. Riding on bumper growth, HUL is likely to increase its advertising expenditure further in Q2.
Not just HUL, but following good sales and growth in net profit during the Q1, many FMCG brands have plans for a big show during the festive season or Q2, when most of their sales happen.
Godrej Consumer Products Limited (GCPL) MD & CEO Sudhir Sitapati hinted about an increase in AdEx in Q2 during Q1 earning calls. “I think we should show some commitment to our business that regardless of gross margin, regardless of cost pressure, we feel that we will continue to invest. We are already seeing green shoots and as we see the return on investment of this media playing up, it will become more and more as time goes on,” he said
GCPL’s ad spends increased by 1.5 per cent in Q1 compared to the previous quarter, despite a dip in its gross margins. It is pertinent to note that the company’s advertisement expenses jumped 37% to Rs 201 crore in Q1 FY23 from Rs 147.19 crore in Q1 FY22.
Britannia and Dabur also plan to up their festive spend. “Although we have no major festive offerings, we plan to increase our ad budget for this quarter,” Rajiv Dubey, Senior General Manager-Head of Media, Dabur, told e4m.
Dabur India reduced its advertisement expenses by 16.5% to Rs 157 crore in Q1 FY23 against Rs 188 crore in Q1 FY22, but the company believes that a normal monsoon, good harvest, and MSP increases will lead to a rural recovery in the medium-term.
Britannia Industries MD Varun Berry told analysts during the Q1 earnings call, “As pricing and profitability normalises, we would like to spend some more money on supporting our brands, our innovations, and our new products. We would normalize our advertising and sales promotion spends as well which will give us some muscle on our brands, new products, and new categories.”
NielsenIQ’s latest survey has predicted that India’s fast-moving consumer goods industry will return to double-digit growth in 2022, driven by the festive season, consumer confidence and an expected recovery in rural demand. The survey estimates the FMCG sector’s value growth at 8-10% in the current fiscal despite inflationary pressures.
According to the PMAR 2022, FMCG, the most dominant sector with a 51% share in India's total advertising expenditure in 2020, lost as much as five percentage points and was down to 46% in 2021.
Festive period is traditionally the time when companies open up their purse strings to go all out on advertising, with the FMCG sector leading from the front. “This year will be no different, however, some companies may adopt a cautious approach due to ongoing inflation and weak demands for some brands”, ad sector experts say.
Talking about the positive market sentiment, Kevin Vaz, Head, Disney Star Network, shared, “After two years of subdued festivities, the overall sentiment amongst advertisers is extremely positive. In India, Onam always sets the tone for the festive season, and from what we have witnessed on our Malayalam channels, I can say the season is off to a great start. There is a rise in the local/retail sectors coming forward, aided by positive consumer sentiment.
Industries such as consumer durables, autos, home appliances, and retail have locked in their inventories well in advance. Some of our clients who are keen on advertising during Onam include Tata Motors, Linen Club, Kalyan Silks, Impex, and MyG.”
According to Sanjeev Jasani, Chief Operating Officer at Cheil India and SouthWest Asia, this year is India’s 75th year of Independence and brands are exuberant about it and this will set the tone for the on-going festive season. We have already started seeing the brands revving up their advertising spend and riding the wave of the festivity.
“In the next 3 months, FMCG companies are expecting a business growth in the range of 15% to 20%. It is obvious that brands will engage into capturing the attention of consumers and spending is bound to grow. FMCG companies have started going aggressive in advertising spend to increase sales in order to woo consumers and recover the shrinking sales of the last 2 Yrs. Brands have started evaluating and closing their budgets with publishers like Google, Flipkart, Amazon,” he added.
Rammohan Sundaram, Country Head & Managing Partner – Integrated Media, DDB Mudra Group, explains that advertising spends have seen an impact due to the new-age companies withdrawing from most live sports, largely cricket, which used to be a significant contributor to AdEx.
“Given that situation, it will be difficult for FMCG companies to compensate for the withdrawal by these new-age digital companies and so maintaining what it was in H1 as spending in itself will be a task. However, there will be a slight increase in spends from most of the FMCG companies.
“Festive season looks promising, and beginning at the end of August all the way through December, there will be high visibility, though some of the brands that have lost market share will not be pumping in on impact properties largely because of their deteriorated growth in Q1,” he said.
Added Sundaram, “Otherwise the sentiments are high and it will be visible. It also depends heavily on how India performs in cricket at the Asia Cup. That will decide the mood on how sponsorships pan out for the T20 World Cup, which is right in the middle of the festive season in India.”
Talking about the products and companies that have increased their ad spend compared to the previous quarter or Q1 of the previous year, he shared, “FMCG, auto and financial services are seeing increased spends and that will continue keeping in mind the buoyant economic situation in the country. Also, there is a massive slowdown in the US. While we are insulated well enough, inflation will be higher than normal, which will impact our economy in some manner if not this year then the next so it will be a wait and watch game on advertising spends going forward.”
Jolene Fernandes Solanki, COO, Madison Media Ultra, shares that festive season which is usually for almost three - four months starting mid- August and running till mid-November, contributes to almost 28-30% of the overall yearly Adex.
“Usually FMCG AdEx spikes by 8-9% during the core festive i.e is Oct / Nov. This year, due to a rise in product prices, companies are trying to balance between price and ad spends, however the festive will see a spike as this is the season where most brands monetize and maximize sales. Post November, if the input cost pressure continues to peak we might see a dip.
“Categories like ecom, gaming, consumer durables and seasonal brands have started investing heavily. Brands like Meesho and Shopsy have spiked their presence. There is no major growth coming for specific brands or companies in the FMCG category, however the spends are on par with the last year. Festive might bring in a higher spends across categories like consumer durables, automobiles, entertainment, gaming and more.”
Tanish Shah, Associate Director, Influencer Marketing & Video Production, White Rivers Media, said, “As we enter the peak festive period, brands' and agencies' preparations are already afoot to woo consumers with various promotional strategies. The mindset of consumers will always be associated with offers when they think about festivals. Despite the two years of Covid disruptions dampening the festive spirit, the recovery is evident, and sectors like automobiles, FMCG, CPG, BFSI, retail, and jewellery will see an uptick in sales. Thanks to the rally in demand, brands across all categories are geared to increase advertising budgets during the forthcoming festive season by 10% to 20%.”
“Moderation in inflation, good monsoon, and zero Covid restrictions have improved the average consumer's appetite for expenditure, leading to better brand sales. This will further entice brands to increase the ad budgets for all categories,” he added.