Top consumer companies ready to splurge on ads

India's leading consumer companies are readying to spend up to 12% more year-on-year on advertising and promotion in the rest of this financial year, driven by higher sales during the festive season and revival of discretionary and out-of-home consumption.

Companies such as Tata Consumer Products, LG, Parle Products, Marico, Dabur, Emami, Voltas and Haier have said in earnings calls or their executives have told ET that they will use the budget unutilised in the first half of the fiscal due to the second Covid-19 wave and step up spending to support new launches, increase sales and expand market share. This is despite record pressure on input costs.

"We were not spending as much as we would have liked or as much as we needed to spend to build competitive strengths for our brands because, ultimately, building brands gives you more pricing power and builds margins in the portfolio. And, therefore, you will see the spending going up," Sunil D'Souza, managing director at Tata Consumer Products, said on an analyst call.

India's largest biscuit maker Parle Products will increase the budget for the second half of the fiscal by 10-12% year-on-year, said senior category head B Krishna Rao. "Since last year's sales base was high, we need to increase the spend. Otherwise, we may lose revenue and market share," he said.

Marico is likely to increase its advertising spend at least one percentage point in the coming quarters given more media clutter and everything opening up, managing director Saugata Gupta said on an investor call.

Growth Across Categories
The maker of Parachute coconut oil and Saffola oil said it will also start spending on the discretionary part of the portfolio.

Consumption has picked up since August across categories such as daily necessities, food and grocery, electronics and white goods, apparel and lifestyle products, with brands and retailers saying sales touched or surpassed the pre-Covid period during the festive season. The decline in infection rate amid high vaccination, easing of Covid-induced restrictions and opening up of offices and educational institutions also triggered out-of-home consumption and improved the overall demand scenario.

Emami's director Mohan Goenka said the company has shifted some advertising and promotion budget to the second half of the fiscal since it could not spend in the June quarter due to the pandemic. It will spend "aggressively in the second half" compared to last year, he said.

Companies are planning to increase ad spend despite record surge in input costs forced them to cut costs, increase prices or reduce pack sizes.

"The increasing input cost pressure is more than compensated by strong market growth, which will mean we can increase advertising spends in double digits,” said RS Sodhi, managing director, Gujarat Cooperative Milk Marketing Federation Ltd, the maker of Amul dairy products.

Most companies expect strong sales by value following price hikes, even as volume growth could be challenging. Shashi Sinha, CEO, IPG Mediabrands India, said companies which are sales growth oriented will advertise more compared to those that are focused on profitability. “Also, we expect promotion will go down due to rising commodity costs, but advertising spends will be hiked,” he said.

Manufacturers and retailers in discretionary and high-value products are also increasing spending, after bumper sales during the Diwali period. India’s largest retailer, Reliance Retail, said in an investor presentation that physical fashion stores made a comeback, with regional promotions driving revenue. LG is increasing its advertising and promotion budget by 5-10%. Aditya Birla Fashion & Retail said on an earnings call that it is investing in targeted digital marketing campaigns for Pantaloons brand to accelerate its digital business.