FMCG cos rev up brand spends

FMCG cos rev up brand spends

Author | Source: The Economic Times | Wednesday, Jun 28,2006 6:50 AM

FMCG cos rev up brand spends

As the fight with durables for the consumer's share of wallet ebbs, FMCG companies are opening up their purse strings. The sectoral players that withdrew into a shell, forced by low price competition and a stagnant market, are now looking beyond just protecting their turf.

Almost all the FMCG companies are showing a perceptible shift in their focus - from price realignment to a proactive product innovation and channel augmentation strategy, with aggressive brand marketing thrown in.

To begin with, spends on advertising and sales promotion (ASP) of FMCG companies has surged by as much as 26% in '05-06, outpacing the sector growth (17%). As a percentage of revenue, spends on ASP have grown 14.6%, up from 11.8% in '03-04.

Analysts attribute much of this aggression and increased expenditure to the fact that many of these consumer companies have achieved fiscal savings by setting up manufacturing facilities in states that offer tax holidays and excise sops. These savings are being pumped into front-end investments. “Increased spends are also on account of rising media costs and higher fragmentation, which means you have to spend more to reach the same target audience,” says Hoshidar Press, ED and president, Godrej Consumer Products.

Besides pushing ASP, FMCG companies have turned to innovation, launching a slew of products as they enter newer categories. Dabur has set up a new Innovation Cell in the company with a clear mandate to analyse, evaluate and help develop products in new categories, in line with the company's existing brand architecture.

“We have been proactive on new product development in existing categories, evaluating new formats and variants to strengthen our existing portfolio,” says Sunil Duggal, CEO, Dabur India. The company has already entered the skincare and beauty soap segment through its brand, Vatika.

Nestle and HLL are also busy strengthening their innovation baskets. The former launched a series of new culinary initiatives under the proposition 'Taste Bhi, Health Bhi', such as Nestle Raita, Maggi Vegetable Atta Noodles and New Maggi Healthy Soups. It launched Maggie vegetable noodles early this year and more recently, introduced Nestle Ceremeal Daliya (porridge) and Maggie Sambhar Dal noodle.

Also on the cards is Everyday Sugar-free variant to kick-start the product's growth on the health platform. HLL, on the other hand, has been repositioning its key brands, including Lux, Lifebuoy, Lakme, Ponds and Taj Mahal. Similarly, GSK has launched Boost Choco Blast, while Colgate launched Advanced Whitening, Active Salt and Max Fresh this year.

Food companies are quiet bullish in the out-of-home (OOH) segment and are expanding their thrust in the segment. “Innovation is the key requirement today to leverage the changed consumer trends as everyone wants unique product,” a source said.

At a time when the personal care category is growing at 20%, global personal care brands like Garnier, Revlon and L'Oreal have upped the ante, galvanising Indian players like Emami, Dabur and Marico into action. Marico has extended its positioning from hair oils to beauty and wellness along with the launch of hair conditioner and hair gels.

Dabur is realigning its distribution machinery to tap three most important interfaces with the consumer - chemist, grocer and modern trade. Since the profile and expectations of customers from these three channels are different, the herbal major plans to develop and package its products and realign service levels to suit the respective needs.

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