FMCG firms kept Q1 ad spends tight, plan to ramp up in coming quarters

Dabur, Britannia, and Marico cut or rationalised ad spends in Q1 to protect margins but plan higher investments ahead to boost brands, sales, and market presence

Fast-moving consumer goods (FMCG) companies kept their purse strings tight in the April–June quarter and didn’t splurge on advertising spends. However, companies will return to spending on advertising in the coming quarter, as they pointed out to investors on their earnings calls.

 

Compared to last year, many FMCG companies focused on arresting the fall in margins due to higher raw material costs witnessed during the quarter.

 

Companies also reiterated on their analyst calls that advertising spends were lower in the quarter.

 

Dabur India focused and invested more in trade schemes and less on media spends.

 

However, the company pointed out that, going forward, its advertising spends will move up.

 

“We have redirected the money from ATL (above the line) into BTL (below the line) and I have been telling you earlier also that depending on the competitive intensity, the trade inputs are given — consumer schemes and trade schemes. We invested more in consumer and trade, that’s why the netting is more, and less on media,” Mohit Malhotra, chief executive officer at Dabur India, told analysts after its earnings. He added, “But going forward, advertising investments will continue to be higher and we want to increase our gross margins and invest in advertising support… we will continuously endeavour to increase the overall advertising and promotion (A&P) expenditure, going forward also investing in brands and distribution.”

 

The maker of Good Day biscuits, Britannia Industries, told investors that it had rationalised its advertising spends in the quarter. “We did rationalise our A&P spends during this quarter. Digital has been quite an important agenda for us, and we just focused on Indian Premier League (IPL) because this was the IPL quarter, and that gave us the right kind of dividends,” Varun Berry, executive vice-chairman, managing director, and chief executive officer at Britannia Industries, told analysts. 

 

Berry also said that the company’s strategy worked and it didn’t advertise across all brands. “We just focused on our top four brands and advertised those brands,” he said.

 

While Marico’s advertising spends as a percentage of sales remained largely stable in the April–June quarter, Pawan Agrawal, chief financial officer at the company, said, “There has been some cut in India A&P, but let me just tell you two, three broad counters for that. No. 1, we have not cut in the focus categories of premium, value-added hair oils, foods, and premium personal care. These categories we have invested in adequately.”

 

He further explained that the company has ensured its share of voice is higher than its share of the market in the focus category.

 

Agrawal said that the company has also deferred some of the new film shoots, which were discretionary, and also extracted a lot of inefficiency out of media and non-media spends. “But going ahead, we believe that A&P will trend upwards in India business and, of course, at a consolidated level, we continue to invest behind all the focus categories and new parts of the business,” he added.