Enthused by expanding revenues, Indian FMCG players are hiking their advertising budgets to gain high visibility for their brands in an increasingly competitive market. According to figures from the BL Research Bureau, the country’s biggest consumer packaged goods manufacturer, Hindustan Unilever, boosted its advertising and promotional spend by 31 per cent year on year to US$241 million in the six months to September. Local rivals Dabur and Marico increased their ad budgets by 47 per cent and 40 per cent, respectively.
Given the economic environment, such increases are astounding, but analysts agree that they reflect considerable growth in the FMCG sector in India this year. According to Assocham, FMCG firms are likely to post revenue growth of 20 per cent in the July-September quarter.
According to Rahul Welde , vice-president of media at Unilever, FMCG stands out as a sector in India “due to the vast population and relatively low consumption and penetration”.
He adds: “The opportunity is huge. The market is complex with many layers of cities, regions, languages, and thus many nuances. India consequently requires much more intensive effort from an advertising point of view.”
Cadbury is another brand that has been looking at India as a source of future growth. “In India the per capita consumption of chocolate is 49 grams, while in other developed markets, like Switzerland, it is about 10kg,” explains Samrat Bedi, vice-president of client servicing at Ogilvy & Mather responsible for Cadbury in India. “There is a huge rural belt in India, which has a mithai, or sweetmeats, culture. The task is really to convert these consumers to chocolate.”
With this aim Bedi says Cadbury has been launching innovative products and increasing its budget to support the roll-outs.
Arvind Sharma, chairman of Leo Burnett for the Indian Subcontinent, points to “commodity cost reliefs” in the second half of 2009. These have allowed FMCGs to save money that they can spend on advertising. “Unilever has kept up its media spending in order to defend volumes in the first half of the year, and there is more activity expected towards the end of the year coming from the commodities cost relief.”
So what exactly are brands doing with the increased budgets? Welde points to growing spend on digital and outdoor. “Equally, traditional channels like TV are being leveraged differently through branded content, sponsorships and events.”
In September, Unilever booked large networks like Star and Zee for an entire day; the company’s ads were the only ads broadcast.
Competitor Procter & Gamble (P&G), meanwhile, is focusing on expanding its growth in the rural markets. “Excluding Vicks, most P&G products are perceived as premium and meant for urban areas,” says Sharma. “P&G is determined to explore rural India, which is virgin land for most of its products, and is heavily focusing spend there. In five years, the firm intends to reach out to 75 per cent of the population and increase per capita consumption to $20.”
But the success of FMCGs in India is not solely dependent on adspend. Companies are adopting a mix of strategies, such as lowering prices, strengthening distribution outside cities, launching product variants and increasing penetration in rural markets.
Welde argues that the right product at the right price, backed by wide distribution, forms the backbone. The proposition can then be promoted by advertising. In a large and diverse country like India the backbone has to be very strong for advertising to work. “The effectiveness of advertising is important. However, adspend alone does not result in success,” he says.
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This article was originally published in 3 December 2009 issue of Media.
