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India's adex to get FMCG boost, companies to spend 20% more on advertising in Q2

With vaccination gathering pace and the number of Covid-19 cases stabilising, India's top FMCG companies are likely to spend 20% more in Q2 to cash in on the pre-festivity consumer spending

The country's top FMCG companies are hoping that the recovery from the second wave of the Covid-19 pandemic would be sooner than expected.

Ever since the unlock process started in June, consumers have been thronging markets and malls, and spending more on e-commerce.

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Industry leaders say that despite the deadly Covid wave, which started stabilising a few weeks ago, the consumer sentiment is higher even though there's a fear of a third wave hitting later this year.

The sector is also pinning its hopes on a good monsoon and higher consumption in Q2 (FY), and is likely to up its advertising spends by 15-20% for this quarter.

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Krishnarao Buddha

Krishnarao Buddha, Senior Category Head, Marketing, Parle Products, said this particular quarter will be high on ad spends for the FMCG category, at least to the tune of 15-20%, more than the April-June quarter and even for the company also.

For Parle Products, about 80% of the ad spends still go to TV, supported by digital.

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“While durables and other sectors will continue to bet on print and OOH for the festive season especially, for FMCG these two mediums are still doubtful. In terms of recovery, for print as a medium, the next two quarters could be good but not for OOH,” he said.

Rahul Gandhi

For iD Fresh Food, while there has certainly been an increase in its ad spends for this quarter, it is far more judicious in the choice of its advertising and marketing mediums, said Rahul Gandhi, CMO, iD Fresh Food, India.

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As he believes it’s practical to be responsive to the fast-evolving market situation, the brand has been exploring social commerce and e-commerce platforms for better returns. Currently, its focus is largely on OTT and other digital channels.

“What drives our spending on advertisements is innovative ideas and content that help strengthen brand awareness. Given that the company is currently in a growth stage, wherein we are strategically expanding to new markets – domestic and international – via different online and offline platforms, we have an adequate marketing budget chalked out for this quarter. The plan is to get more engaging content across formats, including TV, OTT, digital and other media,” he said.

Pavangopal A

The allotted marketing budget of Nandu's, one of the largest hyper-local and omni-channel meat retail brands, has not been impacted for this quarter, said Pavangopal A, CMO, Nandu’s. However, it has made a conscious decision not to spend on any frill activities that do not align with the current situation.

The fear of a third wave looms large

Rao expects things to be positive and a third wave may come much later, if at all.

He said, “The second wave definitely impacted April and May growth and subdued the otherwise expected fantastic growth of the FMCG sector. We now have been hovering in the mid-single digits and even for FMCG as a sector, the growth is much slower (it is in some early single digits). Just some categories have remained flat or marginally declined. Food as a category has been growing. However, considering the good vaccination drives, we are expecting things to be slightly controlled and as a result of which FMCG will be able to come to terms in at least the next two quarters. If the third wave hits by November, our current growth prospects will be protected to recover soon. But if the current quarter is hit by the third wave, there will be higher dependence on January-March next year for recovery and the likelihood of recovery will be difficult.”

As a strategy to keep abreast amid the pandemic, it is prioritising the employees, stakeholders and channel partners’ safety as a measure. It is also strengthening its digital channel for the ordering and delivering of goods.

According to Gandhi, it’s hard to predict how the third wave will impact the business, given the unprecedented nature of this crisis. Nevertheless, based on its experience so far, he believes that the fresh food category will continue to do well.

“I expect to see the iD portfolio move up, particularly in e-commerce channels. Consumer behaviour is evolving in numerous ways. In the coming months, we are likely to see a further surge in the demand for fresh, healthy and easy-to-cook foods. As stepping out or ordering food delivery gets muted, consumers will look for more variety and comfort in their home-cooked foods,” he said.

Pavangopal said no crisis comes with a warning. The pandemic has been a watershed moment for businesses and humanity alike around the world. But there are quite a few takeaways from the current situation for brands.

“The earliest manifestation was in disruptions in the logistics and supply chain. Manpower management was another challenge. And then, there were fears about the business impact of the outbreak, with companies folding up and consumer sentiment at an all-time low. But since we are a hyper-local brand with fully-integrated back-end operations and the only omni-channel farm-to-fork player, it was possible to respond swiftly to the disruptions in the supply chain and logistics. We were able to make prompt changes in our systems to ensure we can offer uninterrupted services to our customers,” he said.

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