By Pritha Pahari
Big FMCG players are increasing advertisement and promotional (A&P) spends as they look to drive volume growth amid growing competition from smaller regional brands, analysts said.
While leading industry names such as Godrej and Dabur have increased marketing spends, the country’s largest FMCG player HUL noted in its latest post-earnings call that while the primary focus of the company remains competitiveness in pricing, it continues to invest heavily in advertising and promotion to keep its “share of voice” ahead of the share of the market.
Godrej Consumer Products Limited (GCPL) has increased spends approximately to 10 percent of the company’s turnover in Q2, which is approximately 200 bps more than the same quarter last year and 400 bps versus the same quarter two years ago. “This has led to value market share gains in five of our top six global cells and volume market share in six of six.” said Sudhir Sitapati, Managing Director and Chief Executive Officer, GCPL, in a post-earnings call. Similarly, Dabur increased its Q2 A&P investments by around 43 percent.
The Chyawanprash maker said that media investments are essential to drive long-term sustainable growth and maintain market leadership. Similarly, Tata Consumer Products Limited (TCPL) said that India A&P spends continued to be high at 6.7 percent for their India business.
The company said in its post-earnings call that it has started to put money back into A&P to strengthen brands so that they move from a push-based model to a pull-based model internationally.
According to market research firm Kantar Worldpanel, for the July-September 2023 quarter, the adoption of local brands in households has increased by 4-31 percent in categories such as detergent bars, washing powder, biscuits, and soaps. In comparison, larger players experienced growth ranging from 2-10 percent within households during the reviewed quarter.
“Most categories have seen upticks in terms of ad spends because commodity prices have come down and companies have money to spend on A&P.” said Vishal Gutka, analyst at Philips Capital.
Analysts noted that among the available options, brands are increasingly focusing on the digital medium for a higher return on investment (ROI) due to a higher rate of conversion.
For instance, Nestle increased its digital ad spend anywhere between 20 percent to 70 percent across brands. “It is easier to keep track of customer engagement in the digital medium,” said Gutka.
This trend will persist in the upcoming quarters as there is no other effective method for boosting volume growth in the current scenario. “Rising competition from regional players and a lack of volume growth is leading to higher spends,” said Gutka.