BackConsumer goods firms increase spending on ads, promotions
Consumer goods firms increase spending on ads, promotions
PremiumExtra push: A fall in the prices of key commodities during the first quarter of the fiscal helped consumer goods makers boost margins, giving them more elbow room to expand spending on advertising and
New Delhi: Makers of home and personal care products have increased spending on advertising and promotions as they seek to boost sales volumes and attract consumers during the economic downturn.
The increases ranged from 18-50% in the three months ended 30 June.
The slot of the top 10 advertisers on TV by ad volumes during April-June was dominated by FMCG firms such as Hindustan Unilever Ltd, Coca-Cola India Ltd, Reckitt Benckiser India Ltd and Cadbury India Pvt. Ltd.
Across industry sectors, various FMCG categories such as food and beverages, personal care and household products accounted for about 40% of television ad volumes.
FMCG companies include makers of soaps, shampoos, toothpastes, detergents and cosmetics, packaged foods and beverages that need to be replaced regularly by consumers and depend on large volume sales.
Such companies are loosening their purse strings when it comes to advertising and new product launches, in an attempt to drive sales volumes and gain more market share as the economy recovers from its slowest growth pace in six years.
India’s gross domestic product expanded 6.7% in the year ended March after growing at an annual pace of almost 9% in the previous five years.
Consumer goods makers have also cut prices since January, offered smaller unit packs and more grammage at the same price to spur sales as households switch to cheaper products.
A fall in the prices of key commodities during the first quarter of the fiscal year helped consumer goods makers boost margins, giving them more elbow room to expand spending on advertising and promotions.
HUL, India’s biggest maker of home and consumer care products, increased advertising spending to 12.4 % of net sales during the quarter ended 30 June, indicating its resolve to attract consumers and arrest a slide in market share by value and volume.
“Advertising and promotional spends in first quarter recording growth of 25.7% year-on-year to Rs561 crore, 12.4% of revenues, are highest in last 16 quarters," said a report by brokerage firm Emkay Global Financial Services Ltd.
In the quarter ended June, HUL rolled out small pack sizes of various brands and relaunched Liril and Lifebuoy soaps.
It also saw a 6.0% improvement in sales volumes.
The quarter also saw a slew of new product launches. Dabur India Ltd, which increased its spending on advertising and promotions by about 40% this year from last, launched a new hair oil and Real Burst fruit drink.
“The company spent money on organizing talent hunt events and also partnered with a TV channel for the ongoing reality TV show Rakhi Ka Swayamvar," said a Dabur spokesperson. Rakhi Ka Swayamvar is a reality TV show on the channel NDTV Imagine that featured starlet Rakhi Sawant, who selected a future bridegroom from among three finalists in the last episode aired on Sunday.
Britannia Industries Ltd, which also marginally increased its ad spending, launched new offerings such as NutriChoice Nature Spice Cracker and a renovated MarieGold biscuit pack. GlaxoSmithKline Consumer Healthcare Ltd launched two new products—Junior Horlicks Toddler Biscuits and Chill Dood, an energy drink.
“In line with most FMCG companies, GSK also re-invested margin gains towards higher advertising spend to support brand launches," said a report by Angel Broking.
Similarly, Marico Industries Ltd reinvested some of the gains from higher gross margins in advertising spending to support its brands. The company expects advertising spending to remain at 12% of sales during the second quarter of the current fiscal.
ITC Ltd, which spends about 3.2% of its net sales on advertising annually, does not report quarterly ad expenditure. However, the company was one of the top 10 advertisers on TV, according to the TAM data, as it is very aggressive in plugging its personal care portfolio.
“Most companies pushed new brands and variants into the market besides low stock keeping units," said Vanmala Nagwekar, a research analyst at Mumbai-based India Infoline Ltd.
Unlike rivals, Colgate-Palmolive India Ltd cut its ad spending in terms of percentage of net sales. The company’s revenue expansion was driven by steady volume growth of 12% year on year. According to Nagvekar, Colgate being the market leader in toothpastes can afford to control its ad expenditure.
HUL, Marico, Nestle India Ltd and Emami Ltd did not respond to emails sent on Thursday evening.
Godrej Consumer Products Ltd increased spending to support the launch of “new innovations during the quarter such as Cinthol Fresh Aqua (soap), Godrej No. 1 lime (soap) and Aloe Vera soap, and also to push the range of hair colours launched last year," said V. Suresh, vice-president, marketing.
“Increase in spends have definitely helped us increase our market shares in these categories and establish the new products," he said.
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