FMCG companies, retailers to spend big on ads despite subdued demand

Some of the country's largest consumer goods makers and retailers will spend more on advertising despite poor demand for certain categories such as daily essentials and in rural markets.

Chief executives of Hindustan Unilever (HUL), Aditya Birla Fashion & Retail, Tata Consumer Products, Titan Company and Dabur in their earnings call for the quarter ended September said they will significantly increase advertising and marketing spends this quarter and the next to improve growth.

Fashion retailer Aditya Birla Fashion & Retail's managing director Ashish Dikshit told analysts last week that in "the immediate term, advertising for next couple of quarters will continue to grow because it's a necessary nourishment that brands and businesses need when they want to be on such high level of growth trajectory that we are on".


Dikshit said the company is seeing a high pace of growth after over 2.5 years and wants to fully fuel and nourish them. It intends to increase spending on advertisements by one percentage point to 5% of sales for branded apparel and to 3% for departmental chain Pantaloons.

HUL said it plans to step up advertising and promotion investments to boost sales and maintain the "share of voice ahead of market share". Tata Consumer Products grew advertising and promotion as a percentage of sales from 6.1% to 6.4% between April-September and the company is "committed to continuing to increase spending on building strong brands", its managing director Sunil D'Souza said.

Godrej Consumer Products managing director Sudhir Sitapati said in the company's earnings release on Tuesday that with inflationary pressures abating, the company expects recovery in consumption and gross margins alongside continued higher marketing investments with a significant focus on reducing controllable costs. Companies indicated they will increase their advertising budgets to double-digit proportion of their sales, up from high single digit at present, as inflationary pressure reduces.

Dabur India CEO Mohit Malhotra said the intent is to go back to double-digit ad spends as the situation demands. He said while the company at present has optimised advertising due to high inflationary pressures, the long-term strategy is always to cut back on trade and consumer spending and put the money back into advertising.

Palm oil prices have come down but there is still volatility in prices of other raw materials.

HUL said its net material inflation will slightly come down in the ongoing quarter from September quarter's 22% even though it may stay higher on a year-on-year basis.