Inflation woes: Agencies wary as advertisers get cautious with AdEx

The word in the industry is that brands are going for a nearly 15 per cent cut in ad budget

e4m by Kanchan Srivastava
Published: May 16, 2022 8:30 AM  | 6 min read
Budget cut

Indian advertising agencies are bracing for tough days ahead as advertisers have started tightening purse strings due to a steep rise in inflation.  

In April 2022, retail inflation surged to 7.79 per cent- 84 basis points higher than March (6.95 per cent) and the highest since May 2014, according to the latest statistics of the Ministry of Statistics and Programme Implementation.

The sharp rise in inflation has been driven by significant price pressures on fuel prices and Consumer Food Price Index. It has narrowed the profit margins of FMCG and auto advertisers, which have just started recovering from the blow of the pandemic. For instance, Maruti Suzuki (-11%), Nestle (-1.3%), Dabur (-22%) and Adani Wilmar (-26%) have reported a drop in profit in Q4 although they all have reported an increase in sales in the same period.

We spoke to industry experts to get a sense of how this was impacting the advertising industry.

According to Sam Balsara, Chairman of Madison World, it's an early trend. “It does look like ad spends of the start-ups in e-commerce, adtech, fintech and edutech sectors are going to get constrained because of tight money supply.”

Sharing similar sentiments, Shashi Sinha, CEO of IPG Mediabrands India, says, “Consumer Packaged Good (CPG) companies have started feeling the pressure of inflation. Their profit margins are narrowing due to higher input costs. The listed CPG companies have started cutting down on advertising. If inflation continues for some more time, advertising agencies will have to bear the brunt.”

With a decline in COVID cases followed by the economic rebound, ad agencies had expected growth in ad budgets this year. Industry reports released early this year also predicted an increase in ad spends in 2022. For instance, Pitch Madison Annual Report (PMAR) predicted a 20% growth for AdEx in 2022, taking the advertising expenditure of Indian companies to almost Rs 90,000 crore.

“Although big brands have not cut down on campaign development so far, inflation and decline in rural consumption have made them cautious on AdEx,” says Virat Tandon, CEO of MullenLowe Lintas Group.

Putting a figure on the impact, Vaishali Verma, CEO of Initiative, says: “Many advertisers are cutting ad budgets upwards of 15 per cent.”

On what changed after positive predictions, Verma says: “When industry predictions were released, inflation was under check. Moreover, a third wave of the pandemic also hit India in January-February. Although it was a weak wave compared to the two previous ones, it impacted the business scene.”

Sharing the marketers’ perspective, Shashank Srivastava, Executive Director (Marketing & Sales), Maruti Suzuki India, says the company has been cautious on ad spends. “We are cautious about the AdEx on existing brands. Inflation and high-interest rates are primarily responsible for it. There is no impact on ad budget for new launches though.” The company has so far not slashed its ad budget but is on ‘wait and watch’ mode, Srivastava added.

Affected categories

Auto, electronics and CPG brands have been the most affected, say leaders across the board.

According to Tandon, inflation returns to haunt India every few years. “In an inflationary economy, local and regional brands lose out and consumers either stay with big brands or switch to proxy habits."

Srivastava says, “Inflation forces consumers to curtail discretionary expenses. Since vehicle purchase is a discretionary expense, people are avoiding doing so. They can’t stop buying essentials though. However, lesser disposable income forces households to cut down on detergents, soaps, oils and groceries. They tend to buy cheaper brands.”

However, some sectors have managed to stay unaffected. “Digital brands in the Entertainment and Gaming sectors, and Aggregators have been fairly less impacted by inflation compared to categories like Auto, which have already hiked rates across,'' says Rahul Vengalil, Managing Partner of Isobar, a dentsu group company. Brands caught in discretionary spending like those in F&B will also have an adverse effect, he noted.

FMCG brands cut down expenses

In its filing to the Bombay Stock Exchange on April 21, Nestle cited rising inflation in India as the reason behind dwindling profits (-1.3% in Q4) although the company delivered double-digit domestic sales riding on its key brands Maggi Noodles, KitKat, Nestlé Munch, Nescafé Classic. The company reported a 20 per cent drop in profit in the December quarter.

“As highlighted in previous quarters, costs of key raw and packaging materials are witnessing 10-year highs, and costs continued to surge this quarter which has impacted profit from operations. Continued inflation is likely to be a key factor in the short to medium term,” Suresh Narayanan, chairman and MD of Nestlé India, said in an earnings call with investors.

Britannia also reported 8 per cent growth in the FY 2022, 15 per cent in Q4 alone, but noted that inflation in this period was something beyond their estimation forcing them to increase prices “judiciously”, and control ad and promotion spends.

“The commodities have witnessed inflation of 17% and 14% for the quarter and full-year…I must say we have not been able to keep pace with this inflation because we never estimated the kind of inflation that we've seen but we continue to take judicious price increases,” Varun Berry, MD of Britannia industries, said in an earnings call in May first week.

“We have focused on our advertising and sales promotion spends, we've controlled our overheads and we've leveraged our fixed costs as much as we could,” Berry noted.

Reporting 11% growth in the financial year 2022, Sanjiv Mehta, CEO and MD of HUL, said in the earnings call, “Net absolute inflation (NMI) in the March quarter of ‘22 was 4.5 times higher compared to the June quarter ‘20. In fact, the NMI in full-year ‘22 has been higher than the cumulative NMI we had seen in the last five years.”

Yet, HUL has been able to keep its margins almost flat versus last year's and got the highest YoY market share gain in more than a decade, Mehta says, adding that HUL has “calibrated” price increases.

“Due to unprecedented inflation, FMCG market value growth has significantly slowed down and volumes are declining in high single digits. The impact is more pronounced in rural areas, where even value growth has started declining. Consumers are tightening volumes and essentials are being prioritized over discretionary categories,” Ritesh Tiwari, Executive Director, and Vice President, Finance for Unilever, South Asia said in the earnings call.

He further said, “We expect to see more sequential inflation. Growth will be predominantly price led. We will continue to drive savings harder and take calibrated pricing actions whilst ensuring we protect and grow our consumer franchise. Our margins will decline in the short term as the price versus cost gap increases.”

Hopes for better H2

The industry hopes that H2 (the second half of 2022) would be better than H1.

“In India, H2 is always better due to festivals. The world cup (FIFA at the end of the year) also gives hope,” Verma says, although she doesn’t think it would cross the 2019 numbers.

As for Vengalil, he hopes “market leaders do not reduce ad spends, otherwise the challenger brands will use the opportunity to eat into their market share”.

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Asian Paints says ‘Shauq Ki No Limit’ in new campaign

The campaign has been conceptualised by Ogilvy India

By exchange4media Staff | Mar 21, 2023 1:04 PM   |   2 min read

Asian Paints

Asian Paints has launched “Budget mein fit. Shauq ki no limit.” campaign.  Conceptualized by Ogilvy India, in the campaign, the paints are shown to be an ideal solution for homeowners seeking good quality paint within their budget.

The campaign tells a humorous story of a colleague who can fulfil his wishes in his newly painted house, thanks to Tractor Sparc & Ace Sparc Emulsion.

As part of the TVC, the brand has also created a fun, snappy jingle that will stay in consumers' minds and help generate high recall. The jingle conveys Tractor Sparc and Ace Sparc Emulsion's value proposition as high-quality, cost-effective paints that will allow consumers to fulfill other desires through savings on these paints.

Speaking about the new Tractor Sparc & Ace Sparc campaign, Amit Syngle, Managing Director and CEO, of Asian Paints Ltd., commented, “In our endeavor to offer smart, value-for-money offers to the consumer and truly democratize the home décor market, we continue to innovate and launch solutions which offer customer strong propositions. This customer is willing to upgrade to branded solutions, accompanied by a strong quality and décor promise. The new campaign takes quite an entertaining route to communicate the value-for-money proposition of Tractor Sparc and Ace Sparc emulsions.”

Sukesh Nayak, Chief Creative Officer, Ogilvy India, said, “Asian Paints Tractor Sparc & Ace Sparc Emulsion are cost-effective paints that promise to offer a rich finish for interior and exterior walls at low cost. Our new campaign highlights the benefit of this feature with an enjoyable take. What the world thinks when they notice the amazing paint job, and also the things that are bought to fulfill the wishes, with the money saved from the cost-effective paint.”

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Edelweiss Mutual Funds TVC talks of visibility of returns

The ‘Kitna Milega’ campaign showcases Target Maturity Funds' unique investment approach

By exchange4media Staff | Mar 21, 2023 12:34 PM   |   1 min read

mutual fund

Edelweiss Mutual Funds has unveiled its TVC brand campaign ‘Kitna Milega’, which focuses on Mutual Fund products that are designed to provide visibility of returns.

The ad campaign showcases Target Maturity Funds' unique investment approach, which offers investors visibility of returns* on their investments provided they stay invested till the maturity of the fund. This campaign will also have presence on print media, outdoor and digital and social media.

Speaking about the campaign, Radhika Gupta, MD & CEO, Edelweiss MF said, "Inherently we have heard investors always asking ‘How much return will I make in this product’ before they choose to invest in any financial product/ Mutual Funds. Investors want simple products that provide visibility of returns.

We have picked this insight of ‘Kitna Milega’ to build on the communication for Target Maturity Funds. These funds are structured and designed in a way to give visibility of returns to investors and are simple in a structure like traditional deposits. Investors will be able to understand and invest in this category banking on the growing popularity of Debt Passives and Target Maturity Funds," she adds.

The campaign aims to convey a clear message about returns on investment that investors have while investing in mutual funds.

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Tanishq’s Ugadi film celebrates women creating own narratives

The film is a celebration of the brand’s Ugadi collection ‘Vardhini’

By exchange4media Staff | Mar 21, 2023 12:28 PM   |   2 min read

Vardhini

Tanishq has launched a heart-warming digital film for the auspicious occasion of Ugadi.

Tanishq’s first-ever digital film for Andhra Pradesh and Telangana is a tribute to every woman who is not only unique in her thoughts and stance but also supports her decisions by being her voice.

The film is a celebration of brand’s beautiful Ugadi collection ‘Vardhini’, which is inspired by rich culture and crafted with precision for the women who prosper and thrive in all their might.

Conceptualised by Tanishq and Mind Your Language, the 75-second digital film showcases a powerful narrative of how a woman of today believes in carving her own path, takes a stand for herself and weaves a magic of her own new narratives. The film is an ode to the progressive women of today who want to create an identity for themselves, strongly believes in the importance of new beginnings and that life after marriage goes beyond motherhood.

Speaking on the launch of the film and the collection, Ranjani Krishnaswamy, General Manager – Marketing, Tanishq, Titan Company Limited said, “Today, women are yearning to carve an identity for themselves and are creators of their own narrative. The film is a tribute to the women who prosper and thrive in all their might and the Vardhini collection is truly a celebration of her extraordinary beauty and beliefs that make her stand apart.”

Deepan Ramachandran, Creative Director- Mind Your Language!, said “Tanishq, like the protagonist Swati in our Ugadi film, has always stood out with their progressive and new thoughts. Their brief to us was to straddle the conventional celebration of Ugadi with the new-age thinking of today’s woman. That’s when we asked ourselves - Why shouldn’t today’s woman dream differently? We found the answer in the story of Swati.”

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Mercedes-Benz talks of plans to go all-electric in digital campaign

The campaign ‘tells the story’ of the three-pointed star logo

By exchange4media Staff | Mar 21, 2023 10:50 AM   |   1 min read

Merc

Mercedes-Benz India has come up with an innovative social media campaign to "tell the story" of the three-pointed star logo and the company's plans to go all-electric by 2030.

Explaining the concept behind the logo, the campaign says that: "The upper blade stands for the air and by the air, we are inspired."

The carmaker has said going all-electric was part of its endeavours to slash its carbon footprint.

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Tanishq’s Ugadi film showcases how the woman of today believes in carving her own path

It is conceptualized by Tanishq and Mind Your Language

By exchange4media Staff | Mar 20, 2023 6:53 PM   |   2 min read

tanishq

Tanishq, the jewellery retail brand from the house of Tata, has launched a digital film to commemorate the auspicious occasion of Ugadi. Tanishq’s first-ever digital film for Andhra Pradesh & Telangana is a tribute to every woman who is not only unique in her thoughts and stance but also supports her decisions by being her voice. The film is a celebration of brand’s beautiful Ugadi collection ‘Vardhini’ which is inspired by rich culture and crafted with precision for the women who prosper and thrive in all their might.

Conceptualized by Tanishq and Mind Your Language, the 75-seconds digital film showcases a powerful narrative of how a woman of today believes in carving her own path, takes a stand for herself and weaves a magic of her own new narratives. The film is an ode to the progressive women of today who want to create an identity for themselves, strongly believes in the importance of new beginnings and that life after marriage goes beyond motherhood.

As the film unfolds, it features Swati; a young & enterprising woman who visits her home to celebrate her first Ugadi after marriage. Moments later after she enters the home, everyone notices the extra glow around her and is curious to know if she has any good news to announce to which she answered in the affirmative. Contrary to relative’s assumptions of Swati expecting her first child, the viewers are in for a surprise when she reveals the actual good news. The film is sure to leave the viewers awestruck and inspire every woman who wants to make a difference and stand out from the crowd.

Speaking on the launch of the film and the collection, Ranjani Krishnaswamy, General Manager – Marketing, Tanishq, Titan Company Limited said, “Today, women are yearning to carve an identity for themselves and are creators of their own narrative. The film is a tribute to the women who prosper and thrive in all their might and the Vardhini collection is truly a celebration of her extraordinary beauty and beliefs that make her stand apart.”

Deepan Ramachandran, Creative Director- Mind Your Language!, said “Tanishq, like the protagonist Swati in our Ugadi film, has always stood out with their progressive and new thoughts. Their brief to us was to straddle the conventional celebration of Ugadi with the new-age thinking of today’s woman. That’s when we asked ourselves - Why shouldn’t today’s woman dream differently? We found the answer in the story of Swati.”

 

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Havells urges consumers to #LookUp

Launches new fan campaign conceptualised and created by Mullen Lintas Delhi

By exchange4media Staff | Mar 20, 2023 4:14 PM   |   2 min read

havells

Extending its ‘Hawa Badlegi’ campaign thought, Havells India Limited has unveiled its latest ad campaign for its fan business urging consumers to #LookUp.

Conceptualised and created by Mullen Lintas Delhi, the campaign is a montage representing Havells legacy and stitches different situation where consumers look up to their fans – be it for wide air-throw, premium aesthetic designs, Smart Sense technology or energy saving.

The brand resonates with the thought that whenever the consumer felt the need to experience something new from their fans, they have looked up to Havells, a brand that has always delivered industry best experience.

Commenting on the campaign, Rohit Kapoor, EVP – Brand Marcom, Havells India said, “Over the years, we have come a long way in becoming the preferred brand for our customers. The campaign is another step towards creating remarkable storytelling of our brand journey to establish how Havells Fan has played a key role in responding and pre-empting changing needs of evolving customers. We are confident that this new campaign through powerful messaging around ‘Look Up’ will bring alive our brand legacy and reinforce the stature that Havells enjoys in the fan category.”

Talking about the campaign, Saurabh Sinha, Vice President, Havells India, said, “We are extremely excited and proud as we celebrate 20-year legacy of our fan business in India. Being a trusted name, Havells enjoys a strong presence in the fan category with its constant progression and focus on driving innovation. From smart sense technology to stunningly designed fans, or BLDC technology, Havells has introduced innovative offerings to enhance customer experience. This campaign gives a unique touch to our product story telling bringing alive the ‘technology and innovation’ narrative through its core message ‘Look up’.”

Commenting on the creative thought, Garima Khandelwal, Chief Creative Officer, Mullen Lintas said, “With this campaign, we create a dialogue that builds stature and brings forth the category first innovations the brand has fronted by speaking about its legacy. “Look up” very effortlessly sets Havells as the market leader, and how we have always set newer benchmarks for everyone else to catch up. While energy savings is the core proposition, we wanted to land that to build preference in the consumer’s mind on the back of the credentials we have in the last 2 decades.”

The 360-degree campaign is live and promoted across all mediums – Television, Digital, Print, Outdoor and BTL and retail visibility. It will be aired on major GEC, movie, news, and regional channels across the country.

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Bergner launches ‘feel the joy in cooking’ campaign with brand ambassador Vikas Khanna

The campaign video features Michelin star chKhanna showcasing his love language - cooking

By exchange4media Staff | Mar 20, 2023 3:06 PM   |   1 min read

bergener

Bergner, a brand in cookware and appliances, has announced the launch of its new campaign, "Feel the Joy in Cooking". This is Bergner’s first brand film, where it showcases its premium range of products. The campaign reveals the secret ingredient of cooking the best meals - cooking it with joy.

“The campaign video features Michelin star chef and Bergner's brand ambassador, Vikas Khanna, showcasing his love language - cooking. It’s this infectious passion of Khanna that is sure to motivate viewers to get into the kitchen and start creating their own culinary masterpieces, with joy!,” the company said.

Cooking becomes easier and convenient when it is accompanied by a range of good cookware, and Bergner does just that. The video highlights the premium and durable range of Bergner’s cookware – its Non-stick Bellini range, Argent Tri-ply stainless steel range, Cast Iron range, and Kitchen accessories to name a few. It beautifully embodies the message of ‘Feel the Joy in Cooking with Bergner’.

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