Indian companies push marketing spend as sales hit slow lane, shows data

Amid muted revenue growth, companies ramped up spending on attracting customers in the previous quarter, marking the highest levels in four years.

 

Advertising and marketing expenses as a proportion of net sales rose to 0.39 per cent in the September 2024 quarter, up from 0.36 per cent in the year-ago quarter and 0.3 per cent in the corresponding period of 2022, according to data from tracker Centre for Monitoring Indian Economy.  The latest figure is the highest since the Covid-hit September 2020 quarter when it reached 0.4 per cent. 

 

In absolute terms, such spending trended higher, too. A sample of more than 3,000 companies that reported quarterly data showed an aggregate spend of Rs 9,286.6 crore in the September 2024 quarter, compared with Rs 8,479.3 crore a year earlier and Rs 7,242 crore in the September 2022 quarter. While sample sizes may vary slightly, the data broadly reflects the trend.

 

The surge comes amid a consumption slowdown that dragged economic growth to 5.4 per cent in the September quarter, the weakest in nearly two years. A number of companies, including FMCG majors Hindustan Unilever and Nestlé India, have reported sales slowdown as retail inflation picked up pace, pressuring consumer spending power. 

 

“Everybody is fighting for his/her share of the wallet,” said KV Sridhar, advertising veteran and global chief creative officer at consultancy Nihilent. He added that sales slowdowns often prompt advertising and marketing divisions to redouble efforts, aiming to shore up consumer sentiment and push demand.

 

Devangshu Dutta, founder of consumer and retail consultancy Third Eyesight, pointed to “strained” middle-class consumption as a key concern, even as rural demand appears “healthy”. The top tier of the Indian consumer is immune to slowdowns, while the lowest segment benefits from government support but has limited purchasing power, he explained, adding the middle class, which is a large consumption driver, is not seeing its wallet expand right now. 

 

"Right now the urban middle-class is under pressure. I don't see that changing over the next two-three quarters,” he said.

 

Dutta added that companies with strong balance sheets are more willing to ramp up spending to create more demand, “particularly if they can get media (slots) cheaper than in high demand times.”

 

Four of six key consumer players that disclosed data reported higher ad spends relative to operating revenues. Colgate-Palmolive (India), Dabur India, P&G Hygiene and Health Care, and Havells India all increased their spending. Godrej Consumer Products and Hindustan Unilever, meanwhile, spent less in the September 2024 quarter relative to sales compared to last year. Among the companies analysed, P&G registered the steepest increase.

 

Higher marketing spending has been partly driven by the need to inform customers about product innovations, a P&G spokesperson said during a September analyst call. “This spend is a function of the business need at hand and the right scale of consumer awareness needed to address it. It also considers the innovation pipeline and the awareness support it may require…”

 

The other companies mentioned in the analysis did not respond to requests for comment.