FMCG Giants Boost Ad Spending Amidst Improved Margins and Economic Positivity

In the December quarter, major fast-moving consumer goods (FMCG) players, including HUL, Marico, Godrej, and Dabur, experienced improved gross margins due to softened inflation and positive economic indicators. This resulted in a surge in advertising spending, even as rural demand remained somewhat stagnant.

HUL witnessed a 30% increase in advertisement and sales promotion expenses to Rs 1,626 Cr in the December quarter compared to the third quarter in FY23, though it has yet to match its Q1 spends of Rs 1,742 Cr. Similarly, Dabur India, Godrej Consumers Products Ltd, Colgate-Palmolive, and Marico increased their ad spend by 36%, 24%, 20%, and 12%, respectively, in the third quarter year-on-year.

Despite operational challenges caused by an uneven monsoon and lower agriculture yield, these companies plan to further increase their advertising expenditure in the coming quarters, anticipating a gradual recovery in rural demands and premiumization.

Businesses are optimistic about the recovery of consumption in both urban and rural markets, driven by increased disposable income following the interim budget's boost and positive consumer sentiment ahead of general elections.

The recent Ayodhya Ram Mandir consecration ceremony on January 22 saw extensive promotional activities by FMCG brands, indicating a proactive approach to ground-level marketing. With events like the Lok Sabha elections, Women Premier League, Indian Premier League (IPL), T20 World Cup, and Olympics lined up, advertisers expect a sustained boost in ad spends.

Major brands, including Parle Products, traditionally experiencing a lean period in the December quarter, have begun advertising. Mayank Shah, Category Head of Parle Products, stated that Q4 spending would likely increase, maintaining momentum during the upcoming major events.

A significant portion of this increased ad spend is expected to be allocated to TV media, particularly sports and news channels, along with a focus on digital platforms.

Shankar Prasad, Founder and CEO of Plum, highlighted their commitment to increased spending in both performance marketing and brand building. Notably, HUL has appointed a Chief Digital Officer to lead its digital transformation journey, emphasizing the brand's focus on enhancing consumer and customer experience through digitization.

While the FMCG sector commands nearly one-third share in the country’s total advertising expenditure, contributing nearly Rs 16,400 Cr, the industry aims for sustained growth in ad spends, recognizing the potential of digital platforms and upcoming major events.