Hero MotoCorp to increase the marketing spend

Plants in Columbia and Bangladesh which are expected to be operational this year will push Hero's international presence

In a bid to make a stronger push in markets outside India, Hero Motocorp, the country’s largest two-wheeler manufacturer, indicated a higher marketing spend in the next two years to make a fresh pitch to international buyers.

A plant each in Colombia and Bangladesh, which are expected to be operational this year, will push Hero's international presence. This is also in line with the company’s objective of being present in 50 countries by 2020.

Addressing shareholders in the latest annual report, Pawan Munjal, chairman and managing director, Hero Motocorp said: “A strong presence in new markets requires time and needs a serious brand-building effort and strategy. It is likely, therefore, for our marketing spends to trend a bit higher for the next couple of years. However, we will ensure it stays well within prudent limits.”

Hero, which has annual sales of 5.8 million units, is already the top marketing spender in India with Ranbir Kapoor and Alia Bhatt as it brand ambassadors. Hero's association with ace golfer Tiger Woods was seen as the company's attempt at building its brand outside India. The Delhi-based company had reportedly signed a record Rs 250-crore deal with Woods.

 

The firm is eyeing foreign markets to offset any possible slowdown in its Indian operations owing to an ever-increasing competition. Its market share in India has been under pressure since the time the company decided to go solo after breaking ties with Honda.

Last year, Hero sales rose five per cent to 6.4 million units, while the industry posted a growth of eight per cent to 16 million units. However, in the first quarter of the current financial year, its sales dropped five per cent to 1.6 million units, even as industry volumes grew one per cent to 3.97 million units in the same period.

 

Hero has been hit due to slowing demand in the rural areas. Forty to 50 per cent of Hero's volumes come from the rural areas. It is expecting the first six months of the year to be challenging with a revival expected only in the second half.

“The company expects the first half of 2015-16 to be challenging on account of slowing motorcycle sales in rural India. At the same time, the shift in the festival season from the second quarter to the third quarter (in FY15, the festive season was in the second quarter, leading to a spike in sales) could also show comparatively lower growth for the first half of FY16. However, higher government spending in infrastructure could propel a stronger recovery in the second half, in both urban and rural India,” the annual report notes.

“We are pumping in Rs 3,000 crore ($470 million) in different areas to catapult your company into its next stage of growth,” added Munjal.