As growth stagnates, GCPL looks out for new media agency after over 20 years

Godrej Consumer Products Limited (GCPL) is seeking a new media agency for the first time in nearly two decades, following a partnership of over 20 years with Madison, as its Rs 700-crore media account goes up for grabs.

A shift in strategy amid economic challenges?

Could this move signal a larger shift in GCPL’s approach to media strategy amid tightening economic conditions?

Industry insiders attribute this strategic shift to slowing growth within India’s FMCG sector and challenging macroeconomic conditions. However, according to Harshdeep Chhabra, Head of Global Media at GCPL, the company is focusing on optimising media spend.

GCPL reassesses media spend for greater efficiency

“It has always been a good practice for us to seek continual improvements that can drive cost efficiencies in our media strategy and spends. To this effect, we intend to run a transparent and objective media pitch process that will help us to select an appropriate media agency partner," said Chhabra said.

FMCG industry faces pressures from inflation and demand challenges

Once a reliably expanding sector, India’s FMCG industry has faced considerable challenges, prompting companies like GCPL to reassess their strategies. Over the past year, the sector has slowed, impacted by inflationary pressures, lower rural demand, and fluctuating consumer confidence post COVID.  

Financial performance and strategic adjustments

This slowdown is evident in recent earnings reports from key players:

Nestle India’s net profit for Q2 FY25 was Rs 899 crore, a slight decrease from Rs 908 crore in the same quarter last year. Hindustan Unilever Limited (HUL) reported its Q2 FY25 results for the July-September quarter, showing a four per cent decline in standalone net profit to Rs 2,612 crore, down from Rs 2,717 crore last year, largely due to higher expenses amid a slowdown in urban markets.

In Q2 2024, GCPL reported modest revenue growth, echoing the broader trend in FMCG as companies adapt to these challenges.

While the company is revisiting its agency partnership, it is not cutting down on advertising and promotional costs.

In the recent earnings call, GCPL’s Managing Director and CEO, Sudhir Sitapati, reaffirmed the company’s commitment to media investments despite economic headwinds.

“Despite the drop in margins, we have held our A&P (advertising & promotional) spend at 11.6%. In fact, if you include rural van operations, which get captured in overheads, we have increased our brand investment by 100 basis points,” Sitapati stated.

For Q2, GCPL’s advertising and publicity expenses were Rs 363.95 crore—a slight 0.5% decrease year-on-year but a 10% increase over the previous quarter. Revenue from operations reached Rs 3,666 crore, up 1.77% year-on-year, with total income rising by 2.29%, consolidated EBITDA up 8%, and consolidated net profit growing 12% YoY.

Sitapati also addressed the cost pressures impacting GCPL’s performance.

“GCPL has had a good quarter given the headwinds of oil costs and tough consumer demand in India. Our Standalone business grew 7% volume, 7% value and EBITDA was flat. Our Standalone EBITDA margin at 24.3% is at the lower end of our targeted band of mid-20s and is caused entirely by high inflation on palm oil. The already high prices were further exacerbated by the import duty on oil. We think this is a short-term hit, and we will recover the margin through judicious price increases and stabilising our costs over the next few quarters,” he said.

Against this backdrop, GCPL’s decision to invite pitches for its multimedia account marks a significant strategic pivot, signalling the company’s intent to explore fresh media perspectives.

As the FMCG sector braces for ongoing economic uncertainty, brands are rethinking how they allocate ad budgets, focusing more on high-impact and targeted campaigns.