In India, FMCG ad spends will benefit from blossoming consumer demand as disposable incomes rise rapidly, coupled with the catch-up expansion of the underdeveloped ad market
NEW DELHI: Publicis Groupe-owned media agency, Zenith, has forecast that India will be the fastest-growing market by some distance over the next three years, with fast moving consumer goods (FMCG) food and drink brands ad spend rising 14% a year.
In its Business Intelligence – FMCG Food and Drink reports that tracked 12 global markets including the US and the UK, among others, the agency said that all markets are predicted to grow steadily between 2% and 5% a year.
In India, FMCG ad spends will benefit from blossoming consumer demand as disposable incomes rise rapidly, coupled with the catch-up expansion of the underdeveloped ad market: advertising accounts for only 0.3% of India’s GDP, less than half of the global average of 0.7%.
“FMCG growth will continue to be robust considering various reasons. Firstly, despite the pandemic, it is one category where the demand is constant, if not seen increasing. Secondly, with evolving consumer demand, FMCG continues to see a slate of new product launches and category expansion. Lastly, with the vast population being in Tier 2 and rural areas - it is one untapped potential market where the FMCG brands continue to increase penetration," said Jai Lala, CEO, Zenith India.
In terms of media platforms, Zenith forecasts that FMCG, as well as food and drink (F&B) brands, will increase their ad expenditure on digital channels by 7% a year to 2023. That’s well ahead of the 4% annual growth forecasts for FMCG ad spend as a whole in the 12 markets included in this report.
However, FMCG brands still rely heavily on traditional TV, spending 39% of their budgets on television advertising in 2020, compared to 24% for the average brand. Excluding China, where FMCG brands have already adopted digital advertising as their main form of commercial communication, FMCG brands spent 52% of their budgets on television, compared to an average of 26%. Their principal goal is to maximise brand awareness and reach so they are front of mind at the point of purchase for as many consumers as possible. This is something that TV has historically excelled at, but its declining reach – particularly among the young – is making it less effective.
FMCG brands are therefore following audiences to digital channels. Zenith forecasts that FMCG digital ad spend will increase from $12.3 billion in 2020 to $14.9 billion in 2023 and that its market share will rise from 46% to 49%.
After the pandemic gave FMCG e-commerce its urgent stimulus in 2020, brands will look to support and expand their e-commerce capabilities, channelling consumers to direct-to-consumer (DTC) operations or retail partnerships. But the big challenge will lie in using digital to replace television effectively – creating large-scale brand awareness while managing frequency. The rise of subscription video on demand (SVOD), which locks away high-value audiences from direct advertising, will make this even harder, as will the end of third-party cookies.
Out-of-home is the exception to the declining reach of traditional media. As traffic returns to normal after the covid-19 slump, the spread of digital displays will make it even more effective at reaching consumers with targeted and relevant ads near the point of sale. FMCG out-of-home advertising is forecasted to grow by 9% a year from 2020 to 2023, while its market share rises from 6.1% to 7.0%, slightly ahead of its pre-pandemic share of 6.8% in 2019.
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