Advertising and sales promotion expenditure of Hindustan Lever (HLL) soared to a record Rs 823.82 crore during the year ended December 2001.
In the previous fiscal, the company had spend Rs 696.58 crore. The spending on advertisement sales promotion, which is up 18.27 per cent in 2001 considered to be on a higher side as FMCG companies are facing acute demand recession.
The fierce competition among all personal care companies, particularly to maintain the market shares in shampoo, toothpaste, detergent bath-soaps and hair-dye, has compelled HLL to go for large ad spending.
The higher spending on advertisement has, however, not instrumental to increase the sales/ad spend ratio of HLL.
The company generated sales of Rs 13.32 on a rupee spend on advertisement and sales promotion. The current ratio has been the lowest last five years. In 1999, the company had net sales of Rs 13.75 on a rupee spending on advertisement and sales promotion.
The company had sales/advertisement ratio of 16.20 times in 1997. The ratio dropped to 14.17 times in 1998 and moved up to 15.22 times in 2000.
HLL’s spending on advertisement and sales promotion rose 141 per cent or Rs 341.87 crore since December 1997. The company’s sales during the period rose 40 per cent or by Rs 3,164 crore.
Though, HLL’s sales to advertisement rate drop considerably, the net profit advertisement ratio moved up considerably. In 2001, the spending on advertising accounted for 50.19 per cent of the net profit. In 2000, ad spend accounted for 53.17 per cent of the net profit and in 1998 it was 68.96 per cent of the net profit.
The company’s advertisement spend accounted for 83.06 per cent in 1997.
Source: Business Standard