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What do fast-moving consumer companies do when faced with stingy consumers? Bombard them with more advertisements for products they’re missing out on. Advertising expenditure for FMCG companies was up 16 per cent for the nine months to December 2013, even as their sales grew only by 12 per cent.
The sector, the largest spender on advertising, was an exception though. Other big advertising spenders such as consumer durable and automobile makers dealt with the downturn by shrinking their ad budgets in 2013.
Spending spreeThe FMCG sector became the top advertiser in both television and print media last calendar, according to the KPMG FICCI Frames Report for 2014. With many players crowding the market and consumers trading down to cheaper unbranded products, FMCG companies re-launched their brands, offered discounts and rolled out new products, all of which call for higher promotional spending.
From eating up around 12 per cent of sales in the December 2012 quarter, their adspend rose above 13 per cent by the December 2013 quarter.
A big share of spends went to fiercely competed personal care products. Other competitive categories seeing a push include laundry and hair care.
While FMCG companies hiked adspends in response to rising competition and slowing sales, telecom companies did the opposite. Idea Cellular spent 5 per cent less on advertising in the April-December 2013 period than the previous year. Bharti Airtel hardly changed the amount it spent.
Who’s spendingHindustan Unilever (HUL), with its enormous product portfolio, is the largest advertiser in the listed space, forking out ₹3,232 crore towards promotions for 2012-13. That’s more than the annual sales number for GSK Consumer Healthcare or Colgate-Palmolive.
HUL is followed by Godrej Consumer and Dabur India, which are expanding their international footprint while also protecting their leadership positions in niche categories (household insecticides and health foods) in domestic markets.
Bharti Airtel is the next biggest spender, and ranks among the top ten spenders on television advertising, according to the KPMG report.
But even as the amount spent is high, it accounts for less than 2 per cent of sales, unlike FMCG companies, where the adspend to sales ratio is upwards of 4 per cent for even small companies.
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