Improved market conditions to fuel adex growth for FMCG players in H2 FY23

With continual inflationary trends and upping of input costs dominating the first half of FY2023, the backbone of Indian advertising - FMCG- has in the third quarter of FY23 witnessed an increase in monies being spent on ads along with registering higher profits.

Since the beginning of the first quarter of FY23, industry players like Emami and Marico had reported a decline of 2.24% and 2.51%, respectively, in their ad spends on a YoY basis.

At this point, other FMCG players including Colgate Palmolive and Dabur reported an 11.04% and 4.57% rise in their spending on ads on a YoY basis in Q1FY23.

Moving on, the second quarter of the current fiscal also saw Dabur’s advertising expenses tanking by 24.91% and Colgate Palmolive by 14.60% on a YoY basis.

Therefore, when BestMediaInfo.com sat down with marketers from the FMCG space to understand the plans of industry majors, they shared that the quarterly decreasing ad spends of major players during the first two quarters had only been a preventive measure to remain profitable while the FMCG space tried to cope with the continual inflationary trend in the country.

But this time around, major FMCG players including Hindustan Unilever, Godrej Consumer Products, Colgate Palmolive, amongst others, have recorded an increase in their spending on advertisements and publicity.

During Q3 of FY23, HUL had increased its ad spends by 1.34%, Colgate Palmolive by 12.62% followed by GCPL upping its ad spends by 20.62% on a YoY basis.

Sanjiv Mehta

Commenting on the quarterly update for the three months ended December 31, 2022, Sanjiv Mehta, CEO and MD, Hindustan Unilever, stated that the company has sustained its strong momentum and recorded yet another quarter of solid all-round performance owing to the organisation’s strategic clarity, strength of brands, excellence in execution, and dynamic financial management.

“We are cautiously optimistic in the near term and believe that the worst of inflation is behind us. This should aid in a gradual recovery of consumer demand,” he added.

Sudhir Sitapati

Sudhir Sitapati, Managing Director and CEO, GCPL, also stated that the company has delivered an all-round performance in Q3 of FY23 as its overall sales grew by 9% and consolidated volume grew by 1%, accompanied by sharp sequential uplift in underlying volume growth.

Furthermore, he also went on to add that with commodity pressures abating, GCPL expects a gradual recovery in consumption, expansion in gross margins, upfront marketing investments with a significant focus on reducing controllable costs and improvement in profitability in the coming quarters.

He also went on to add that GCPL continues to have a healthy balance sheet, is net cash positive and is on track in its journey to reduce inventory and wasted cost to drive profitable and sustainable volume growth across the portfolio through category development.

However, some of the other players in the FMCG space including Dabur, Emami and Marico saw their ad spends declining by 24.2%, 3.16% and 1.34%, respectively, on a YoY basis in the third quarter of the current fiscal year.

Mohit Malhotra

As per Mohit Malhotra, CEO, Dabur India, the company has delivered steady results in what continues to be a difficult operating environment owing to the responsible yet continual adjustments in prices to reflect inflation.

“Our India business reported a growth of 3.3% with a 3-year CAGR of 9.5% and steady market share gains across the portfolio, despite most operating categories reporting a decline,” he stated. 

He also emphasised that the impact of inflationary pressures was more pronounced in the rural markets and it led to a lag in growth for the second quarter in a row for the FMCG player.

Furthermore, he also went on to state that in his belief the demand slump in rural areas has bottomed out which is why Dabur is now seeing a revival in demand in the hinterlands.

“We are hopeful of rural demand reporting a smart recovery on the back of a record farm output and increased government spending. The urban growth will be driven by softening of inflation and buoyancy in new-age channels like Modern Trade and e-commerce,” he added.

Taking a glance at the financials of FMCG players for Q3 FY23, the one positive feature that stands out for most majors is the positive Profit After Tax or Net Profit figures - indicating that the expenses of the company couldn’t subdue the revenue clocked in from the sale of products across ranges.

The third quarter of the current fiscal year saw the consolidated PAT of GCPL, Marico, Emami and HUL going up by 3.55%, 5%, 6% and 7.87%, respectively on a YoY basis.

On the contrary, it was Dabur and Colgate Palmolive that witnessed a loss in Q3 of FY23, wherein the former’s PAT stood at (-)5.4% and the latter at (-)3.60% on a YoY basis.

Harsha V Agarwal

Harsha V Agarwal, Vice-Chairman and Managing Director, Emami, also stated that the environment has been challenging due to high inflation, consumption slowdown, poor rural growth and a warmer winter.

“In the given circumstances, we have delivered a satisfactory performance with a 7% revenue growth on a 3-year CAGR basis in Q3FY23,” he said.

He also went on to add that Emami will continue to invest strongly behind its power brands, innovations, channel expansions and distribution optimisations as the company believes that these sustained efforts will help them achieve sustainable and profitable growth.

Mohan Goenka

Additionally, Mohan Goenka, Vice-Chairman and Whole-Time Director, Emami, also pointed out that notwithstanding the muted consumption patterns, the company’s focus on innovation remains strong.

“Our new launches and digital-first NPDs have contributed 4% to our Domestic net sales during the quarter and new age channels viz. modern trade, eCommerce and D2C continue to grow in excess of 20%,” he said.

Info@BestMediaInfo.com