Looking For More

After seeing volumes growth crash in 2015/16 despite higher ad spends, 2016/17 is looking good for FMC companies.

- Niti Kiran

Despite being hammered by a slowdown in consumer demand, fast-moving consumer goods (FMCG) companies had stepped up their advertisement and sales promotion expenses in 2015/16. An aggregate analysis of 38 FMCG companies shows six percentage point growth in ad and promotional expenses to 12.4 per cent, from 6.0 per cent in 2014/15. Growth in sales turnover, however, fell seven percentage points to 3.3 per cent from 10.2 per cent during the same period. In fact, over a five-year period, the gap between growth in revenue and ad spends widened to 9.1 per cent from 5.9 per cent. “Advertising expenses are within range and this is a sustainable number for Indian companies,” says Debashish Mukherjee, Partner, A.T. Kearney, who also heads the Consumer Industries and Retail Products Practice for India and South East Asia. Reflecting the recovery in sentiments, ad and sales promotion expenses as a share of total expenses rose 1.5 per cent between 2012 and 2016.

For instance, while Godrej Consumer Products saw 11.8 per cent growth in advertisement and sales promotion expenses in 2015/16, compared to 10.2 per cent growth last fiscal, the sales turnover growth fell to 8.8 per cent from 9.4 per cent during the same period. Similarly, Hindustan Unilever’s ad and sales promotional expenses surged to 16.9 per cent from 7.2 per cent, but its sales turnover contracted to 5.2 per cent from 10.7 per cent. “This is a smart move and companies are spending judiciously,” says Mukherjee, adding: “Indian companies are growing their spends to create more information and awareness about their brands.”

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