Inflation not a damper: FMCG players won't cut down AdEx

Most big companies like HUL, Godrej Consumer, Britannia, Colgate-Palmolive and Dabur have asserted that they will continue to spend on marketing to ensure higher brand recall among consumers

e4m by Javed Farooqui
Published: Aug 18, 2022 8:54 AM  | 6 min read
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Leading Fast Moving Consumer Goods (FMCG) companies like Hindustan Unilever, Godrej Consumer, Britannia, Colgate-Palmolive India, and Dabur India don’t have any plans to cut back on ad spending despite the inflationary pressure which has impacted volume growth.

Scorching inflation and the rising input costs have forced FMCG companies to hike prices and reduce pack size. This move has impacted the volumes of FMCG companies in Q1 of FY23. Notwithstanding the negative impact on volumes, the FMCG companies have not cut down on ad spending.

In fact, most FMCG companies, if not all, have asserted that they will continue to spend on advertising and marketing to ensure higher brand recall among consumers.

FMCG giant Hindustan Unilever increased its ad spends by 30% to Rs 1334 crore against Rs 1029 crore in the corresponding quarter of the previous fiscal.

Speaking to analysts during the Q1 FY23 earnings call, HUL CFO & Executive Director, Finance and IT, Ritesh Tiwari said that the FMCG major is ensuring that its brands get adequate support to maintain a higher share of voice ahead of its market share.

"First ensuring that we adequately support our brands and maintain our share of voice ahead of our market shares. As you can see, our A&P expenditure has increased 70 bps year-on-year as we continue to invest at competitive levels and lapped a relatively weak base. This is a 30% absolute rupees crores increase year-on-year," he stated.

Godrej Consumer Products Limited (GCPL) MD & CEO Sudhir Sitapati said that the company’s ad spends increased despite a dip in its gross margins, which he feels is unorthodox.

“We are going to do this sensibly because there is no point just generally increasing media because there are a lot of other things that have to go with it; quality of communication, we have to see what the return on media investment is, etc. I think we should show some commitment to our business that regardless of gross margin, regardless of cost pressure, we feel that we will continue to invest. We are already seeing green shoots and as we see the return on investment of this media playing up, it will become more and more as time goes on,” he said.

Sitapati said that the ad spends will be increased QoQ by 150 bps which is a pretty significant jump. It is pertinent to note that GCPL’s advertisement expenses jumped 37% to Rs 201.39 crore in Q1 FY23 from Rs 147.19 crore in Q1 FY22.

“Bulk of this is in mass media which is largely on television and then on digital which is basically on YouTube and OTT and it is largely towards category development and focused on the core. So the other big difference is that this kind of media increase is not spread out over a huge number of small projects, they spread out over market development at the core of our business. So even qualitatively, the way we are spending big money is on a few big things,” he stated.

Britannia Industries MD Varun Berry said that the company would like to invest more in its brands as soon as the pricing and profitability normalised. “As pricing and profitability normalises, we would like to spend some more money on supporting our brands, our innovations, and our new products. We would normalise our advertising and sales promotion spends as well which will give us some muscle on our brands, new products, and new categories,” he told analysts during the Q1 earnings call.

Britannia Industries Chief Marketing Officer Amit Doshi noted that the company continued to invest in its brands despite a tough economic environment. “If you see across businesses, despite difficult weather, we've managed to invest in our brands, we've managed to keep them salient and we've tapped into a topical opportunity and built strong capabilities in using data and technology in doing more targeted marketing.”

In its post-earnings conference call, Colgate Palmolive India VP-Marketing Arvind Chintamani said that the company’s advertising continues to be at healthy levels. Colgate-Palmolive India’s advertising spends in Q1 stood at Rs 163 crore against 160.15 crore in Q1 FY22.

Chintamani said ‘brand health’ is the most important thing for the company as it focuses on building a sustainable business. “The first measure is top of mind ‘awareness’. This is a really critical measure for us.”

Speaking about the digital acceleration of the company, Chintamani said Colgate-Palmolive is not just building engagement on social media but is focusing on full-funnel marketing.

“It's not just what we're doing on social media with marketing brands, but also our partnerships with the large digital players on driving performance marketing through full- funnel marketing or driving incremental rural reach,” he said.

Dabur India, which reduced its advertisement expenses by 16.5% to Rs 157.2 crore in Q1 FY23 against Rs 188.4 crore in Q1 FY22, believes that a normal monsoon, good harvest, and MSP increases will lead to a rural recovery in the medium-term even as current demand trends remain weak.

During the company’s earnings call, Dabur India CEO Mohit Malhotra said the company will continue to focus on strengthening its power brands, distribution, expansion, innovation, cost optimisation, and efficiency enhancement.

He further stated that the company will focus on strengthening its Dabur Red toothpaste in North India by launching a big campaign featuring Amitabh Bachchan. “Dabur has tied up with Amitabh ji and we are in the process of making a shoot and doing TV commercials with him. So, there'll be a big campaign launch of Red with a brand new ambassador like Amitabh ji there who resonates in north India.”

Malhotra also said that the company’s power brand strategy remains intact. The company has eight power brands that it aims to scale up further. The eight power brands are Dabur Chyawanprash, Dabur Honey, Dabur Lal Tail, Dabur Honitus, Dabur Pudin Hara, Dabur Red Paste, Dabur Amla, and Real fruit juice.

“We are not planning to introduce any new brand because there are so many brands and we want to just focus our energies, effort and packaging, manufacturing, all efforts around these brands. So, that's what one is trying to do in terms of the power brand strategy,” he added.

Emami Director Mohan Goenka noted that the company will continue to maintain its advertising spends as a percentage of sales. Emami's ad spends increased 24% to Rs 136.3 crore in Q1 FY23 from Rs 109.8 crore in Q1 FY22. The company's ad spends grew by 90 Bps to 17.5% of total sales compared to 16.6% in Q1 FY22.

“A&P, we would try to be almost in the range of about 17% to 18%, not more than that,” he stated.

 

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