‘Indian FMCG sector is stronger than in the rest of the world’

Indian FMCG sector is stronger than in the rest of the world and this is, in turn, led by advertising, according to Godrej Consumer Products’ CEO and MD, Sudhir Sitapati

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“FMCG is still the largest spender on advertising in India by a distance, and advertising is the lifeblood of the FMCG industry. I would say that the Indian FMCG sector is stronger than in the rest of the world, and this is, in turn, led by advertising. The top 5 listed FMCG companies. Their EBITDA is on average 20-25 per cent compared with their global peers at 15-20 per cent, and they list at 60X P/E multiples vs. 20X for their global peers,” Sitapati said speaking at the recently held Subhas Ghosal memorial lecture

With FMCG being the largest spender on advertising in India, Sitapati believes that companies are willing to pay advertising agencies if they see a phenomenon that will drive their share prices over the next 12 to 36 months.

Sitapati pointed out that the advertising agencies’ real customers are those who control profit and loss and not those who control advertising spending.

Ad spending

“When I joined GCPL two years ago, the very first thing I did was increase advertising spending dramatically, even if it came at the cost of profitability. My own beliefs about advertising were shaped by two epiphanies. As a brand manager on Surf Excel I noticed that whenever a measure on our Milward Brown brand tracker called ‘Proven ad recall’ rose, then a few weeks later our sales rates went up as well. In other words, all it took for a consumer to buy more was to be able to narrate the story of the ad impromptu. I call this principle “Be famous before you get persuasive.” Don’t sell; just be known for what you sell,” he said.

The second advertising principle for him, which is media-related, has been “It is better to whisper to many than to shout to a few.”

Brand penetration

Further, he pointed out that penetration drives growth and not consumption: “My favourite brand in India is Wipro’s Santoor. It has stuck to its big idea of ‘Mistaken Identity’ for years and bravely stuck to mass-scale wall paintings to reach very light consumers of TV in rural India. Penetration is driven by salience, not equity attributes (hence fame > persuasion), and salience is driven by making your brand mentally available to the maximum number of people. In media terms, it is reach and not impact that matters,” he said.

Sudhir mentioned that creating a database for a marketing and advertising agency is crucial as clients prefer to know numbers.

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“Agencies need an entire department on marketing effectiveness; you’ll have to invest in the databases and people, but I can assure you that whenever a consultant or an external advisor has proprietary data on my brand or company, I take her very seriously,” he added.

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