As the demand for consumer goods picks up after a long lull, FMCG companies are stepping up their adspends to make sure their brands capture a bigger share of the consumer's wallet.
Advertising and promotion spends are up sharply for leading FMCG companies in the April-June 2005 quarter, continuing a trend that began last year.
Players have reported a hefty expansion of between 11 and 58 per cent in spends for the just-ended quarter. These numbers are significant because they are reckoned on a high base; adspends were already higher by between 11 and 50 per cent in the same quarter of 2004.
On one hand, expanding sales are leaving companies with a bigger cash chest to fund their brand-building activities. On the other, many companies are also ploughing back a larger proportion of their sales into brand-building activities (see table).
Multinationals have been very aggressive this quarter. Gillette India, which spent 10.7 per cent of its sales on advertising and promotion in the April-June quarter last year, has spent 15.1 per cent of its sales in the latest quarter. GlaxoSmithkline Consumer also reported a sharp hike in its adspend as percentage of sales.
Hindustan Lever reported a marginal increase in adspend as percentage of sales. But given the sales growth this quarter, this still translated into a 12-per cent hike in its ad budget from Rs 257 crore to Rs 287 crore.
In terms of absolute rupee spends, every FMCG company, except Nestle India, significantly stepped up its adspend this quarter.
Actual advertisements, rather than promotional activities such as distributing freebies, are likely to have pushed up spends this quarter.
This was a busy quarter for product launches, with companies once again innovating to grow market share. The last few months have seen Colgate-Palmolive India, Hindustan Lever and GlaxoSmithKline Consumer launch high-end products, putting more premium brands on the shelves for urban consumers.