Indian FMCG sector is better than the rest of the world

In a recent Subhas Ghosal memorial lecture, Sudhir Sitapati, CEO, and MD of Godrej Consumer Products, asserted that the Indian Fast-Moving Consumer Goods (FMCG) sector surpasses global counterparts in strength, largely attributed to advertising.

"FMCG is the predominant advertising spender in India, a key driver for the sector's strength globally. The top 5 listed FMCG companies exhibit higher EBITDA at 20-25% compared to the global average of 15-20%, listing at 60X P/E multiples versus 20X for global peers," Sitapati stated.

Speaking on the significance of advertising, Sitapati highlighted its role as the lifeblood of the FMCG industry, emphasizing that companies are willing to invest in advertising agencies if it leads to increased share prices over the next 12 to 36 months.

Sitapati shared insights on his approach at Godrej Consumer Products, where he prioritized increasing advertising spending even at the expense of short-term profitability. Citing his experiences on Surf Excel, he emphasized the impact of "Proven ad recall" on sales rates, supporting the principle of "Be famous before you get persuasive."

Additionally, Sitapati stressed the media-related principle, "It is better to whisper to many than to shout to a few," emphasizing the importance of reach over impact in building brand penetration.

Addressing the need for marketing and advertising agencies to focus on marketing effectiveness, Sitapati urged investment in databases and people, underscoring the significance of proprietary data for brand and company evaluation.