FMCG and auto to drive media spends this festive season

Devalued Rupee, along with the weak Indian economy, is likely to affect media spends in the festive season. Except auto and FMCG, other sectors will be conservative

e4m by Abhinav Trivedi
Updated: Aug 27, 2013 8:40 AM
FMCG and auto to drive media spends this festive season

The Rupee has devalued by approximately 10 per cent in last two months. The economic condition is at an all time low with some market experts comparing it to 1991. In such a scenario, which sectors would be aggressive on media spends? 

Market experts and analysts perceive that except auto and FMCG, most of the other sectors would be either less aggressive or completely conservative in media spends.

Aggressive sectors

FMCG and consumer durables
The most money spinning sector for the media is likely to be consistent in media spends for the coming quarters. Critics argue that the sector and some of its categories are in recession and this might have an impact on some products or brands. But the overall outlook of the sector looks optimistic. “I don’t think that the recession is likely to affect the media spends. Considering that the festive season is around the corner, there is no reason to believe that spends could be curtailed. Although the budget would not increase,” said Gita Vashist, Senior FMCG Analyst, Retina Financial Services.

The consumer goods category will suffer from increase in prices by almost six per cent. This may cause a dip in sales for the category, but citing that the festive season is also the most sought after season for consumer durables, market experts believe that media spend from the sector should not be compromised. “The prices of goods would increase citing high import costs, but that would not affect media spend. They would remain as they were earlier,” said Vashist.

As reported by exchange4media yesterday, (What slowdown? 50 plus new launches to fuel auto sector media spends) Auto sector will be driven by new launches and this might surge the media spends. However, advertisers will be more demanding as there is huge pressure on the margins. Coupled with a bleak industry outlook, and low sales, the sector is depending on the festive season. So the upcoming quarter might witness a surge in spend.

Cautious sectors       

Experts believe that the banking sector will not be aggressive and would rely on conservative approach towards media spends. Many banks and financial institutions are grappled with NPAs and it has become tough for them to enhance their media spends in times of recession. “I recall seeing advertisements from Axis bank in major dailies. But now they have cut down the frequency. One cannot expect a sector which is in losses to continue advertising. Lots of banks are coping up with decline in the value of INR, the environment is that of cautiousness,” said a banking analyst from a leading brokerage firm in Mumbai.

“Aviation largely advertises on OOH medium. Aviation is a kind of sector which advertises only when a player comes up with an offer or a new announcement like addition of a new route. In an environment where major players are coping up with fuel cost which has been aggravated by decline of Rupee and operation charges, it is unlikely that the sector will splurge money on advertising. As far as the festive season is concerned, it is already a ripe season for the industry and they don’t need to advertise more on media platforms,” said Sharan Lilaney, Analyst, Aviation, Angel Broking. Market experts also believe that advertising might increase on travel portals such as yatra and makemytrip.

The sector, which has recently become the ad favourite with many media companies, might not cheer up the industry in the coming days. Amit Bajpai, CEO, Ixibo said, “The players which are dependent on more than 40 per cent paid traffic transactions are likely to be affected with ongoing slowdown. In short, companies relying on SEO might not be hugely affected, but the company dependent on SEM might have to worry. For E-commerce players, most of the Google spends are done not for branding but for transactions. So, in a scenario where payment cycles are getting delayed, it is certainly becoming difficult for certain e-commerce players to maintain margins, which might affect media spends as well.”

As per market experts, the subscriber acquisition cost for the telecom operators has come down and unless they don’t have any special tariff plans, they are unlikely to increase spends on media. “The ARPM for most of the telecom companies has come down in Q1. Coupled with the decrease in the number of telecom players and policy uncertainty, the situation is not ripe for any telecom company to enhance ad spend. So the budget would remain consistent as in previous quarters,” said Jignesh Mehta, an independent telecom analyst. Coupled with this, players are already struggling on the policy front from the Government. The sector therefore would keep conservative media spend budgets.

Other sectors
Although export-oriented sectors are burgeoning and they are likely to gain from the present devaluation, most of them are less keen on advertising. Sectors such as IT and textile are perceived to be gaining from the current scenario. But since the demand in Europe, which is a key market for India, is at an all time low and the US economy is slowly recovering, these sectors might not also be very aggrieve on media spends.

Sectors such as manufacturing, chemicals and pharmacy only believe in contextual advertising and are not regular advertisers.

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