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Advertising growth takes a break amid slowdown

Viveat Susan Pinto  |  Mumbai 

Growth in ad slots bought on TV, radio falls by half; print also feels the heat.

Harsh Mariwala, chairman & managing director of consumer products major Marico Industries, is keeping his advertising budget on a tight leash. “Given the inflationary environment and moderation in demand, there will be some cut in advertising spends, but it will not be huge. Competitive intensity is high and to protect market share you have to spend,” he says.

Pradeep Bakshi, chief operating officer, unitary products business group, Voltas India, which makes room air-conditioners and water coolers, says his company is scaling down its advertising spend. “While we will be visible during the festival season, the burst will not be as loud as last year.”

With demand for consumer and fast moving consumer goods (FMCG) moderating, there are clear signs that are holding back spending. As a result, advertising revenues have grown at a much slower pace in the first six months of this year compared to the previous year.(Click here for graphics)

While exact figures are hard to collate, one way to catch the trend is to see the amount of time advertisers are booking on television or the space they are buying in newspapers and magazines.

According to data compiled by media research agency TAM, the rate of growth of advertising on television in terms of the number of hours was half during the January-June period this year in comparison with the corresponding period last year (see chart).

In 2010, the advertising hours on TV had grown 36 per cent in comparison to the previous year.

In print, the rate of growth of space bought in terms of column centimetres was down to about 16 per cent in the January-June period as compared to the same period a year ago. In 2010, the growth was 28 per cent compared to the previous year.

In radio, advertising spots in terms of hours grew 19 per cent in the January-June period. Last year, the rate of growth was 46 per cent.

While TAM doesn’t track the outdoor medium, industry sources say the slump there is to the tune of about 30 per cent. The only exception was the digital medium, which grew 60-70 per cent — double the growth rate in the corresponding period last year, according to Arnab Mitra, national director, digital, Starcom MediaVest Group. The share of digital medium is just 3 per cent of the total advertising pie of Rs 26,0000 crore. Print and television dominate with 46 per cent and 42 per cent share, respectively. The share of outdoor is about 5 per cent, while radio’s is 4 per cent, say industry experts.

Most people in the advertising industry are not sure how long the slowdown will last given that inflation continues to be sticky and advertisers are wary of spending too much on mainline media at a time consumer sentiment is weak and they have to manage expenses prudently.

Advertising agencies admit the revenue growth is slowing. Arvind Sharma, chairman, Leo Burnett India, said, “Client spends grew 20 per cent last year. This year, we are expecting 14-15 per cent growth.” Mahesh Chauhan, former group chief executive officer, Rediffusion Y&R, who now has his own agency, Salt Brand Solutions, says, “There is tension in the air. No denying that. Nobody knows how long this will last.” According to industry sources, Hindustan Unilever (HUL), the largest spender, has cut its advertising budget for the year by Rs 200-300 crore. In the 2010-11 financial year, HUL’s advertising & sales budget was Rs 2,764 crore.

Of this, the advertising budget alone was Rs 2,200 crore, said industry sources. This meant the scale-back for the current year was over 9 per cent, they said. A mail to HUL elicited no response till the time of going to press. Sources at Mindshare, which manages the HUL account, said the company chose to give cricket a miss this year to prune its advertising budget. Amin Lakhani, principal partner, Mindshare, while declining to confirm or deny this, indicated that advertisers had been cautious over the last few months. “Commodity cost pressures have been severe. dependent on them have had to prune expenditure. This is bound to result in a scale-back in advertising,” he said. According to FMCG analysts, are likely to report lower advertising spends as a percentage of net sales for the first quarter of the financial year.

“It is likely to be down by about 200-300 basis points for the first quarter,” said Shirish Pardeshi, senior FMCG analyst, Anand Rathi.

Companies admit they are careful when opening purse strings. Manish Sharma, director, marketing, Panasonic India, says, “We have rescheduled our advertising this year. We used to be active in April and May. That was trend over the last two years, when we had two big summer campaigns. This year, we have seen no such splurge. Our mainline advertising activities will start at the end of July to coincide with the festival season, which begins with Onam in Kerala.”

A similar sentiment is expressed by FMCG major Dabur India. Chief Executive Officer Sunil Duggal said, “Regular brand investments are key to business delivery. While we will continue to spend, the intensity will not be that high. In other words, we will avoid going over the top.” Surely everyone will.

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First Published: Mon, July 18 2011. 00:31 IST