FMCG firms try ad blitz to beat slowdown blues
Nov 04 2012 , Mumbai
India’s largest FMCG company Hindustan Unilever (HUL) has seen a 18 per cent increase in advertising and promotion spends to Rs 769 crore, while its sales grew 12 per cent to Rs 6,311 crore in the July-September quarter. Marico’s ad spends as a percentage of sales stood at 13 per cent during the September quarter, up nearly 400 basis points over the last year when ad spends accounted for 9.3 per cent of sales.
Analysts told Financial Chronicle that FMCG players would continue to increase their advertising and promotion spends over the next six months. Shirish Pardeshi, executive director and co-head of research at Mumbai-based brokerage Anand Rathi Securities, said: “Companies will have to increase their advertising and promotion spends to add premiums to products and stay relevant with the benchmarked company.”
While high inflation and lower disposable incomes may force customers to opt for less expensive products, companies have tried to beat slowdown in demand by focusing on newer products. During the quarter, HUL launched products such as TRESemme in its hair colour portfolio and relaunched Fair and Lovely sachets.
GCPL launched Cinthol in bath and fragrance segments, Godrej expert rich crème hair colour, AER air fresheners, HIT one push aerosol-Indonesia and Good Knight household insecticides -- Nigeria.
“Going forward, most FMCG companies will aim to raise Ebitda margins,” said an analyst with a Mumbai-based brokerage firm.
Anand Mour, vice-president and consumer analyst at ICICI Securities, said FMCG firms would continue to see expansion of their gross margins. “Therefore, companies would have no choice but to increase advertising and promotion spends,” added Mour.
“The operating context remained challenging during the quarter ended September 30, with a volatile cost environment and heightened intensity of competition. Overall, the industry’s media spend was significantly up to its highest levels in over 15 quarters. Advertising and promotion was stepped up and maintained at competitive levels,” the Mumbai-headquartered unit of Anglo-Dutch Unilever said during its earnings briefing.