In the December quarter, advertising expenses as a proportion of sales at leading fast-moving consumer goods (FMCG) companies exceeded pre-Covid levels for the first time, reflecting a push to spur demand amid a booming economy.
According to a study by ET, Dabur, Colgate-Palmolive, Emami, Godrej Consumer Products, United Spirits, and Jyothy Labs have surpassed their FY19 levels. Hindustan Unilever (HUL), India’s largest consumer goods company, and Marico have seen increases in advertising and promotion (A&P) spending, but it has not yet reached pre-Covid levels.
The study encompassed eight companies that have consistently provided A&P data since fiscal year 2018.
Advertising expenditure experienced a widespread decline during the pandemic and was further constrained by inflation.
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India’s economy saw a significant surge, reaching a six-quarter high of 8.4% in the period of October to December, as per data released on February 29th.
According to industry executives, the A&P recovery suggests that companies are gearing up to intensify their advertising efforts in response to heightened competition from regional brands. This move comes amidst a decrease in input prices, as they aim to stimulate demand recovery.
In the December quarter, Colgate-Palmolive’s A&P expenditure accounted for 14.64% of sales, compared to 12.65% in FY19. Similarly, for Jyothy Labs, the A&P expenditure was 8.97%, as opposed to 6.18% in FY19.
Recently, Hindustan Unilever‘s chief financial officer, Ritesh Tiwari, informed investors that the A&P spend in the December quarter stood at 10.7%, marking a 270 basis points increase compared to the previous year.
One hundred basis points is equivalent to one percentage point.
“Our absolute A&P investments were almost INR 400 crore higher than last year as we continue to invest competitively behind our brands,” he said.
In the nine months leading up to December, HUL recorded a 33% increase in advertising and promotion spending compared to the previous year.
FMCG companies are among the largest advertisers in the country, benchmarking their ad budget as a percentage of sales.
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