Top FMCG companies during the first quarter of FY2016 saw a 16.1% growth in ad spends on an average. This included brands such as HUL, Dabur, Colgate-Palmolive, Marico, Britannia Industries, Emami and Tata Global Beverages Ltd. (TGBL) and accounted for ad spends of Rs.2,677 crore during the quarter. We take a consolidated look at overall spends of the FMCG sector.
FMCG ad spends grow by 16.1% to Rs.2,677 crore
Marico saw a 9% increase in ad spends since the same quarter last year. Ad spends during Q1FY2016 increased to Rs.150.86 crore from Rs.138.38 crore in the June ended quarter last year. The company however saw an even larger growth in ad spends since the last quarter (Q4FY2015) as it increased by 42.9% as it stood at Rs.105.59 crore. Marico saw its growth in operating profits rising by a good 22% during the quarter.
Britannia’s ad spends increased by 15.6% since the corresponding quarter last year. The ad spends in this June ended quarter increased to Rs.135.19 crore from Rs.117.58 crore last June quarter. However, ad spends had declined by 25.4% since Q4FY2015 as the ad spends during the March ended quarter stood higher at Rs.169.48 crore. The company had seen an increased growth during the year as its net profits surged by 66.9% to Rs.190 crore from Rs 114 crore in the corresponding quarter last year.
Emami saw a huge rise in its ad spends as it grew by 38.1% during the quarter. Emami’s ad spends increased to Rs.142 crore in Q1FY2016 from Rs.102.84 crore during the same quarter last year. It also saw an almost one third increase in spends since Q4FY2015 as it grew by 72.4% from Rs.82.47 crore. The company saw its net profits rise by a large 24% as it grew to Rs.87.75 crore from Rs.70.81 crore in the same quarter last year.
TGBL’s ad spends during the quarter also saw a double-digit growth of 14.1%. Ad and sales spends increased to Rs.326.09 crore this quarter from Rs.285.80 crore in Q1FY2015. It also grew by 5.9% since Q4FY2015 where the ad spends stood at Rs.307.91 crore. TGBL however reported a decline of 15.3% in its net profits as it stood at Rs.82.3 crore than Rs.97 crore reported in the same quarter last year.
Hindustan Unilever (HUL), announced its results a few weeks ago. The FMCG major’s advertising and promotion expenses in Q1FY2016 increased by a large 22.06% over the Q1FY2015. The ad and promotion spends of HUL grew to Rs.1,153.39 crore from Rs.944.88 crore during the corresponding quarter last year. The ad spends too saw an increase of 12.2% since Q4FY2015 which stood at Rs.1027.89 crore. However, the net sales during the quarter saw a very low growth as it increased by just 5.3% with domestic consumer business (FMCG + Water) growing by 5.4%.
Dabur India advertising and publicity expenses too saw a large increase of 15.5% in comparison to the corresponding quarter last year. Advertising and publicity expenses increased to Rs.330.6 crore in Q1FY2016 from Rs.286.3 crore in Q1FY2015. In terms of net sales, it grew by 10.7% in Q1FY2016 in comparison with Q1FY2015. Net sales during the quarter grew to Rs.2,064.1 crore from Rs.1,863.1 crore in Q1FY2015.
Colgate-Palmolive India’s advertising and sales promotion saw a double digit growth since the corresponding quarter last year. Its advertising and promotion expenses increased by 11.08%. The advertising and sales promotion expenses increased to Rs.200.5 crore in Q1FY2016 from Rs.180.5 crore in Q1FY2015. The net sales grew by 5.5% during the June ended quarter in comparison to same period last year, while the net sales grew to Rs.1,002.9 crore in Q1FY2016 from Rs.950.6 crore in Q1FY2015.
United Breweries (UBL) ad spends increased marginally in comparison to the corresponding quarter last year. The ad spends had increased by 3.8% to Rs.238.2 crore in Q1FY2016 from Rs.229.4 crore in Q1FY2015. While the net sales increased by 4.6% in comparison with Q1FY2015. It increased to Rs.1,337.88 crore in Q1FY2016 from Rs.1,278.85 crore in Q1FY2015.
Why the sector is booming…
One of the main reasons for this growth is that FMCG brands expect a revival in growth in the coming few months. Reserve Bank of India in its review recently said that they see a pick-up in the consumption demand especially in the urban areas in the coming months. Nielsen data also shows growth in the demand of FMCG and consumer goods during the April-June quarter and expects a revival in the coming few months. As a result of this, FMCG companies could have decided to give a push to their products and increased their ad spend.
Another reason for this increase in ad spends of FMCG brands could be the fact that raw material prices have lowered and have not been passed on to the consumers. This has left more room for them to spend on marketing and advertising of their goods.