Encouraging FMCG ad spends indicate healthy growth for Adex in 2018

FMCG companies' quarterly results for the period ended June 30 show a 14-30% increase in ad spends over last year

e4m by Venkata Susmita Biswas
Published: Aug 7, 2018 8:59 AM  | 3 min read

The coming festive season, it seems, is all set to bring cheer for the advertising industry. FMCG ad spends have bounced back to pre-demonetisation levels ahead of the festive season that attracts almost 30-40% of the year’s ad spending. The added bonus of a good monsoon is also indicating that the advertising industry will rake in the festive moolah and is expected to grow at 10-11% CAGR in 2018. 

Quarterly results of FMCG companies for the period ended June 30 show a 14-30% increase in ad spends over last year. India’s biggest advertiser Hindustan Unilever Limited (HUL) recorded a 27% increase in ad spends over Q1 FY2018. HUL spent Rs 1,153 crore on advertising and promotions in comparison to Rs 905 crore for the same period last year. 
Both Dabur and Marico have also revived ad spends. Dabur’s ad spends are up by a whopping 32%. The market leader in honey has now bounced back to pre-demonetisation level of ad spending. The advertising spends by Marico are up 14% this quarter.

In the aftermath of demonetisation, companies had tightened purse strings, dropping ad spends by as much as 25-30%. Demonetisation cast a long shadow, and influenced ad spends right into the first quarter of FY2018, with the added burden of the implementation of the Goods and Services Tax (GST) reform.

HUL had recorded a meagre 2% increase in ad spends in Q1FY2018 as compared to Q1FY2017. Dabur’s advertising had dropped by 23% in Q1 2018 while Marico in its Q1 2018 earnings reporthad stated that its advertising and sales promotion spends were “held back amidst environmental uncertainty.” P&G India too had dropped spends on advertising by 16% last year during the first financial quarter.

Ashish Bhasin, Chairman and CEO, Dentsu Aegis Network South Asia, defined advertisers as being cautiously optimistic. He said, “Advertising is very susceptible to sentiment. At the moment, it does seem that business sentiment is positive.”

He added that a lot also depends on the monsoon and the festive season that sees nearly 40% of the year’s ad spending. “I am hopeful, and if everything goes well, we should see a double digit growth this year,” he said.

Anita Nayyar, CEO, India and South Asia, Havas Media, said, “Trends do show that the FMCG industry is springing back and that’s a good sign.” 

She said that while businesses were talking about a positive sentiment in the last quarter of the previous financial year (Q4 2018), none of that translated into the balance-sheets. Nayyar felt that brands are finally actioning the positive sentiment in Q12019. She added that current trends indicate that the upcoming festive season will see normal spends.

The Indian economy sways to the tune of the monsoon. Given that the monsoon has been on schedule and spread out, is already adding optimism to the industry. Bhasin felt that ad spends during the upcoming festive season will be healthy as well. “Rural demand is expected to pick up as we have had a good monsoon so far. If the monsoon ends right, we should have a good festive season,” he said.

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