TODAY´S NEWS

Pitch Madison Advertising Report 2017: FMCG category still remains a laggard in the digital area: Sam Balsara

Pitch Madison Advertising Report 2017: FMCG category still remains a laggard in the digital area: Sam Balsara

Author | exchange4media News Service | Thursday, Feb 16,2017 8:41 AM

A+
AA
A-
Pitch Madison Advertising Report 2017: FMCG category still remains a laggard in the digital area: Sam Balsara

The Pitch Madison Advertising Report 2017 found that the growth of the advertising market slowed down to 12.5 per cent in 2016 and predicts the growth in 2017 to be around 13.5 per cent. 

Even though the advertising market did not achieve the projected growth rate of 16.8 per cent, the Indian market remains the fastest growing market in the world, said Sam Balsara, Founder, Chairman and Managing Director of Madison World and Madison Communications as he presented Pitch Madison Advertising Report 2017, which was unveiled on Wednesday.

Demonetisation upsets adex

The Pitch Madison prediction for 2016 was very close but demonetisation in November rocked the advertising industry and upset the predictions of ad pundits. Balsara explained, “Last year we predicted boom time for media, and we were almost right because until October we were tracking a growth rate of 16 per cent. However, the Tsunami of demonetisation hit adex in November and December. Most advertisers and ad pundits did not anticipate the dramatic negative effect demonetisation would have on primary sales and consumer off take. Many advertisers had to postpone or cancel their campaigns like never before in recent history.” The first half of 2016 grew only by 13 per cent, registering a slow growth, Balsara commented.

In reality adex de-grew 8 per cent, Balsara noted, adding that this was the first time in many years that adex has actually de-grown. “Therefore, at the end of the year the growth rate was much lower than predicted - 12.5 per cent,” Balsara said. He added that adex did not meet the Rs 50,000 crore as predicted by the 2016 Report due to demonetisation. “In terms of absolute numbers, adex grew by about Rs 5,500 crore and narrowly missed crossing the Rs 50,000 crore mark, ending at Rs 49,480 crore,” he said.

If not for demonetisation, growth rate would have been as high as 16.2 per cent and adex would have crossed the Rs 50,000 crore, Balsara noted. He added that demonetisation knocked off as much as 1,650 crore from adex.

Digital boosts growth

Balsara said that the report found that television advertising de-grew in November and December by 21 per cent in comparison to last year and lost approximately Rs 850 crore. Print was also heavily impacted by demonetisation and lost almost Rs 580 crore, he said.

“The growth of 12.5 per cent came on the back of Digital Advertising, which grew by over 40 per cent. The share of digital stands at Rs 7,350 crore having added as much as Rs 2,200 crore in 2016. This growth was registered by Google, Facebook and other OTT players,” Balsara said. 

He went on to add that without the contribution of the digital medium, the advertising market would have grown only 8 per cent in 2016.

FMCG dominates

FMCG continued to be the most dominating sector of adex and increased its dominance from 28 percent last year to 32 per cent this year followed by automobile industry at 10 per cent and telecom at 8 per cent and education at 8.5 per cent.

Ecommerce contributed only 4 percent in 2016. Investment by e-commerce category decreased by almost Rs 500 crore over TV, print and radio last year.

Categories that contributed to overall growth were the evergreen FMCG sector, followed by telecom and auto.

Growth Forecast

In 2016, the ad industry was expected to witness a boom and instead it ended with a Tsunami, but this year “we are brave to describe 2017 as still buoyant,” Balsara said. “A bullish view of the Indian economy in general and adex in particular has to be tempered by the fact that the first four months of 2017 in our view are going to be in recovery phase. Therefore, we project that the growth in the first four months of the year is going to be no more than 8 per cent. But we see adex swing into action from May till October and project a growth rate of 14 per cent. Since adex de-grew in November and December 2016 we expect the growth rate for the same period in 2017 to be dramatically higher at 24 per cent,” he predicted. 

Balsara added that the report forecasts a 13.5 per cent growth rate which will take adex past the Rs 56,000 mark. “This should make India the fastest growing advertising market for the third consecutive year,” he noted. The other distinction India may earn in 2017 could be that “India will become the only country in the world to have doubled its adex in 5 years,” he said.

He justified that the bullish outlook from high government investment in infrastructure, lower corporate and personal taxes for small and medium companies and for the middle classes, government support for the poor and consequently high-scale expectation that India is going to have another good year of GDP growth.

Growth Contributors

He said that the busy Indian cricket calendar, elections in five states followed by state assembly elections in Gujarat later in the year, will also contribute significantly. “Quite a few categories will drive this growth, including Chinese mobile phone manufacturers like Oppo, Vivo and Gionee who are aggressive in their promotions, in addition to more who are expected to enter the market,” Balsara said. 

The coming 4G battle in the telecom sector which is likely to intensify, with the merger of Vodafone India and Idea Cellular will also contribute to this growth. Balsara added, “New launches in the auto industry and aggressive marketing by m-wallet players, will be the other contributing factors. We also see organic growth coming from print loyalists like FMCG sector, continued aggression by Patanjali and possibly the launch of Ayurveda lines by other companies. We continue to see a new stream of new advertisers, and therefore, launch of new channels that will absorb this additional demand.”

Compared to the 12.5 per cent growth of the Indian advertising market, the global market grew only by 4.5 per cent. The global advertising market is estimated at almost $500 billion, whereas the Indian market is worth only $7.3 billion. This year, India gained one per cent share of the global market and is not ranked in the top five advertising markets of the world. “This is frankly something that I had not anticipated even five years ago,” he said.

Advice for advertisers

Balsara finally wrapped up the presentation of the report with some advice for advertisers. He said that advertisers could use the slow growth between January and April to intensify their campaigns in this period to maximise impact in a relatively lower clutter environment. “It is also good to consider new product launches during this period,” he said. 

He also stressed on the use of the digital medium. “Traditional advertisers should recognise that digital can add substantially to the TV plans but the medium is less effective when the medium is used merely for awareness. It is more powerful and effective when used for building consideration, getting leads and for advocacy. We see that the real boy of advertising - the FMCG category - still being a laggard in the digital area,” he said.

He concluded by suggesting to advertisers to not over depend on media data to support media decisions. “We urge you to use your instincts, your common sense and use the data as a guide and not as a crutch. This is especially important in a large country like India with huge diversity, where because of limited resources available for media research, we have to make do with lower sample sizes, which invariably result in what many advertisers may find as unacceptable levels of sampling errors,” he said.

Write A Comment