In-depth: Can sluggish economic growth dampen festive season ad spend?

India Inc has had a nightmarish Q1 as profitability of all top auto, FMCG, real estate and telco companies is under stress. Experts say the sluggish economic growth may hurt the festive season's ad spends. However, a good monsoon could turn the tide and rural demand may come as a silver lining

Swagata Panjari
New Update
In-depth: Can sluggish economic growth dampen festive season ad spend?

The slowdown in the economy could dash the hopes of India's leading media houses who were hoping to rake in moolah during the upcoming festive season.

The dull results of Q1 of India's top auto, FMCG, real estate and telecom companies signal that the adex during the upcoming festive season would be less than expected.

India Inc has reported its most disappointing quarterly numbers in the last three years. More than 60% of 125 firms that have reported so far have missed profit forecasts for Q1.

The first quarter of the current fiscal has already spelt bad news for India's print industry that has seen its revenue and profitability shrinking.

The other mediums such as TV, digital, OOH and radio, which have shown some growth on the back of general elections, IPL and Cricket World Cup, are also slowing down.

Madison has already cut the prediction of TV adex growth from the earlier figure of 18% to 11%. Madison has also brought down its total adex prediction for current year from Rs 70,800 crore to Rs 69,000 crore.

The festive season in India starts from September and lasts throughout December. The demand for products tends to increase during Diwali and Christmas.

An industry expert stated that the advertisers will start spending from August as every year June-July is the low period. The expert stated that while the regular activation will continue, it will be more focussed on performance, and the budgets on brand metrics will be muted for the season.

Sujata Dwibedy

Sujata Dwibedy, EVP & Head of Buying & Trading, Amplifi India, further said a lot of advertisers were holding their money as the first quarter of the calendar year had TRAI’s regulation getting implemented because of which data was unstable from January to May; they may decide to come now.

“There were three marquee events when viewership was growing during this period and some rode on those, the others held onto the spend due to an uncertain environment and viewership getting skewed. Now, come August advertisers will start spending. However, yes, the market is slow but it hasn’t sunk. You will see that the brands that don’t belong to the expensive category will move faster than the premium brands and categories. So, the mentality will be — ‘people will buy a product, which is more a need to have and not buy which is good to have’,” she added.

RS Sodhi

RS Sodhi, Managing Director of Gujarat co-operative Milk Marketing Federation (GCMMF), which runs the popular dairy brand Amul, said the slowdown is mainly for the automobiles and durable goods but as far as food products are concerned, they are doing good. “For us, the festival season looks good and even our media spend is more during the festival. I don't see any impact on food products,” he said

When asked about the automobile sector, Sandeep Verma, President, Bajaj Corp, replied that it will still take some time to shore up but with the better than expected monsoon, they think there will be an increase in demand in the second half of the year.

“Basis on the good rainfall, I feel that the overall consumer demand will pick up in the second half. Currently, we are not seeing any demand or activity in the market because generally companies line up their new product launches during the second half. When it comes to the automobile industry, the demands for automobile doesn’t pick up immediately, it takes a little bit of time. If there is a good monsoon, then the demand for automobiles will pick up in the fourth quarter of the financial year or at the beginning of the next financial year. So I think the suffering in automobiles is going to persist for some more time. But in the consumer goods or consumer durables sector, demand may pick up,” he said.

In the automobile sector, Dwibedy stated, “We will see smaller cars being launched. Some launches are coming soon. We may see demand from first car buyers and may not see from those who want to upgrade; they may delay it. Same with products that have a higher price than which are impulse and affordable.”

The uncertainty has mainly been pointed to factors such as sales shrinking in the auto and real estate, FMCG not picking up, high rate of unemployment and liquidity crisis in the shadow banking sector.

Rishi Sharma

Speaking about the slowdown in the retail market, Rishi Sharma, AVP, Head Digital Marketing, LIVA, Grasim Industries, P&F Business, said there are multiple reasons one, of which is that there’s a considerable shift in buying behaviour.

“This year the retailers are a little conservative compared to 2017-18 due to poor off-take in other major industries like auto, banking, etc., resulting in lesser increments and bonuses as key indicators. However, the reasons for fashion retailers could be multiple. One of the reasons is that there’s a considerable shift in buying behaviour. Consumers prefer e-commerce sales, which are before the season. And ever since Liva has had a shop-in-shop on Myntra, we have been observing this year-on-year basis that the sales spike during such sales. There is a 70% rise in July-August (EORS) sales compared to a regular period. We have seen a spike in sales on holidays when people usually go on leisure trips,” Sharma commented.

Not all hope lost

Sai Sangeeta Israni

On the other hand, Sai Sangeeta Israni, GM Marketing, Spykar Lifestyles, said, “India is a country that loves to celebrate. Year-round there are multiple festivals, hence across brands, there is a spurt. For Spykar, casual denim wears brand, festivities are not the only purchase trigger. Customer flow is observed all year round with a spurt during the festive season. So overall, the balancing is well and there is no absolute banking on the pre-festival response.”

Verma also said that this year, spend for consumer goods and durables might be a bit higher as the first half was a bit poor, and a lot of companies are looking up to make up for the drop in the first half. “We will probably see more of spends or effort in the second half from the industry side and hopefully it will revive some amount of consumer demand due to the positive sentiments due to a good monsoon. So there is hope for rural revival,” he added.

Jai Krishnan

Jai Krishnan, Chief Executive Officer, Samsonite India, added, “Our June quarter was very good and we started this quarter very well. We are bullish for Diwali, I can’t speak about others because I know some of the consumer brands are going through tough times but in our case, things are good. We have been fortunate to have a good quarter and in my opinion, the branded luggage market has done well.”

In-depth Can sluggish economic growth dampen festive season ad spend?