Adspend by the fast-moving consumer goods (FMCG) industry is on the rise again after a decline of two years.
In spite of a squeeze in profit margins, FMCG majors such as Hindustan Lever, Nestle, Dabur and Gillette have spent an additional Rs 200 crore on advertising during the July-September 2004 quarter compared with the same quarter of the previous year.
This could mean a revival in the fortunes of the advertising agencies as FMCG spending accounts for a third of the Rs 9,000 crore industry. Reeling under a severe downtrading, most FMCG companies had slashed their advertising budgets.
Hindustan Lever, the country's largest FMCG company, increased its advertising spend in the home and personal care category by 27 per cent in the second quarter of 2004 compared with the same period last year, amounting to an additional spending of Rs 35 crore.
According to a company spokesperson, the launch of several power brand variants such as Lux Orchid, Lux body wash and Rin Advanced pushed up spending on advertising.
Also, Hindustan Lever initiated a unique campaign last month where it aired its ads for Pepsodent toothpaste during primetime across all the popular entertainment channels in the country. Last quarter, too, the company had upped its ad budget by Rs 60 crore or 30 per cent.
Nestle's outgoing Chairman and Managing Director Carlo Donati, in his statement on the company's quarterly results announced yesterday, attributed the dip in profits to the company's sustained investments in brand building.
“This year there has been higher spending across categories but the FMCG sector has emerged from a three-year long slump,” said CVL Srinivas, managing director, Maxus, a WPP group media buying outfit.
Male personal grooming products major Gillette was among the biggest spenders in the category as the company more than doubled its expenditure in the last quarter to Rs 19.4 crore from Rs 7.9 crore last year. For the first nine months of this year, the company spent Rs 37 crore compared with Rs 20 crore during the same period last year.
“There is growing realisation among the FMCG companies that they need to constantly invest in above-the-line advertising to maintain their brands' health,” said Sam Balsara, chairman and managing director, Madison Communications.
According to Srinivas, after the slump the FMCG firms are going back to tried and tested conventional advertising. Dabur India, which signed up Bollywood icon Amitabh Bachchan as its brand ambassador in 2003, increased its advertising and promotional spend by more than 26 per cent in the first half of the current financial year. The company spent Rs 95 crore on brand building in the first six months, compared with Rs 75 crore last year.