FMCG cos to amp up marketing this fiscal

With markets opening up and consumers venturing out, demand for packaged foods has rebounded, prompting companies to increase their advertising spending.
With markets opening up and consumers venturing out, demand for packaged foods has rebounded, prompting companies to increase their advertising spending.


Easing raw material prices are allowing consumer goods makers in India to allocate more funds for advertising and promotions, providing relief after years of high inflation

New Delhi: Easing raw material prices will provide consumer goods makers headroom to allocate more funds for advertising and promotions (A&P), according to industry insiders. This will be a welcome relief after record-high inflation ate into companies’ marketing budgets for several years.

“When inflation was high last year, A&P spending was reduced first. Since the scenario has reversed, we do not see why we will cut back our marketing budgets," said Manoj Verma, the chief operating officer of Bikaji Foods International Ltd.

The upcoming festive season is likely to be a big driver for the company’s volumes, as consumers tend to buy large gift packs of namkeens, snacks and sweets, he said. “We are coming up with ad films that will be aired. The festive season is big for us, and that’s where our marketing spend is primarily skewed towards. You will see us back on air big time."

In response to the challenges of higher inflation, companies had pared their A&P budgets to protect margins. For instance, Hindustan Unilever Ltd (HUL), one of the largest FMCG companies in India, reported a moderation in A&P spending in the September quarter to 7% of sales. This was in line with the inflationary pressures witnessed by the industry. Notably, HUL’s average A&P spending between FY19 and FY21 stood at 12%. However, this has risen sequentially. Analysts at BNP Paribas expect the company’s marketing expenses at 9.5% of June quarter sales.

With declining raw material costs, the brokerage also expects FMCG companies to partially reinvest gross margin gains to boost ad spending, and promotional offers to drive demand, BNP Paribas said in its India consumer report on 12 July.

In its FY23 annual report released last month, FMCG major Dabur India said it is witnessing a “reversal" in the commodity cycle, resulting in a fall in prices of most key commodities, barring food and beverages. “This allows us to expect an expansion in gross margins for the current year. This expanded gross margin will be allocated in two primary ways. A portion will be allocated for A&P investments, which had experienced some moderation due to high inflation. Two, the remaining part will be for gradual improvement of our operating margins," the maker of Vatika shampoo and Real drink said.

Beverage company Bisleri Ltd expects its marketing budget to increase 30-40% this financial year. “We will see a 30-40% increase in our marketing budgets, keeping in line with our vision of strengthening Bisleri’s packaged drinking water business, and accelerating growth of our new portfolio of carbonated soft drinks and Vedica Himalayan spring water," Tushar Malhotra, head, marketing, Bisleri International Pvt. Ltd, said. “While running prime time campaigns on TV for the reach, awareness and imagery creation will be an integral part of our overall spends, we are also focussing on a digital-first approach to connect with the Gen-Z. We will leverage sports associations, IPL, marathons, football, athletic events, among others, to create a 360-degree immersive consumer experience. A significant part of our marketing strategy is on accelerating our presence in trade."

With markets opening up and consumers venturing out, demand for packaged foods has rebounded, prompting companies to increase their advertising spends. “It has been a good year with markets reopening and rising consumer demand. To consolidate the favourable times, we are embarking on a diverse and aggressive marketing campaign for our brands," Manish Aggarwal, director, Bikano, Bikanervala Foods Pvt. Ltd, said. The FMCG sector comprises 30% of total advertising spends, followed by online retail at 18%, according to a 2023 report by Dentsu India.

Meanwhile, the latter half of the year is expected to be more consumption-driven, backed by lower commodity costs and a revival in rural areas. “To leverage this demand-led revival, companies are planning to enhance brand recall and visibility, which may result in increased advertising intensity, price cuts, and product quantity adjustments," he said.

“Raw material prices are definitely softer and that’s eased some pressure off of us. In FY24, A&P spends will be higher—we have new launches, our brands (Nirlep) are getting refreshed. FY23 brand spends were lower that we would have liked it to be. We do think they will go up," Anuj Poddar, managing director and chief executive, Bajaj Electricals Ltd, said.

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