In-depth: Brands allocating budgets judiciously after muted growth in H1 adex
Since the first half of the current fiscal year has come to an end and FMCG players have decreased their ad-spends to remain profitable, BestMediaInfo sat down with industry players to find out how the economic challenges have impacted the adex growth projections for 2022
By: Shreya Negi
Delhi, November 02, 2022
The FMCG industry, which is considered to be the backbone of the Indian adex, has cut down on their quarterly ad-spends in the second quarter of the current fiscal year.
Two quarters of the current fiscal year have passed, and the ad-ex projections of several agencies don’t seem to meet anytime soon.
According to Monaz Todywalla, CEO, PHD India, “Industry watchers and brand leaders would concur this decline has been on the cards for some time. The signs were evident as early as December 2021 with the slowdown of spends, postponement of launches in the months that followed, low innovation & low product development, shifting consumer behaviours, and an overall lower growth rate projection than the preceding years.”
“Most leaders and FMCG organisations have been quick to catch up to this and would have revised their growth projections to reflect this period of growth stagnation. Similarly, unless a major chunk of its business is dependent on the FMCG industry, agencies too would have taken cognizance of macroeconomics at play - to factor for this slowdown in their growth projections and adjust strategies accordingly for their clients and themselves,” she added.
According to the advertising growth projections made by IPG Mediabrands’ MAGNA for the current fiscal year, the overall ad-ex was forecasted to grow by nearly 15%, GroupM’s TYNY pegged it at nearly 22.25%, Madison at 21.62% and dentsu predicted it to be at 14.5%.
As per Saagar Sethi, President, Amplifi and Sujata Dwibedy, Chief Investment Officer, Amplifi, (Amplifi is the supply side management platform of dentsu International) “While FMCG as a category may have seen a decline, the household categories continue to maintain momentum so far. Hence, we do not foresee a de-growth in ad-spend from this sub-category.”
Furthermore, Sethi and Dwibedy also went on to state that within the FMCG category, food and related items have seen substantial growth. “The growth in Q1 was mainly due to IPL and some other marquee properties. What is noteworthy is the shift of spends from TV to Digital across all blocks of FMCG. That is mainly from niche and lesser-reach TV Channels to OTT,” they said.
“But in the absence of a single measurement system, these are not really showing up nor are the spends on Connected TV or other Video platforms getting reported. Thus, it appears to be a drop, but in reality, it is not,” they added.
They also went on to highlight that the purchases for segments like Cosmetics and Personal care within FMCG have moved to D2C platforms, now and that is where the promotions and advertising is also happening, but that too does not get captured yet.
Moreover, in the ad-ex growth projections for the current year, Madison and GroupM had projected that digital will emerge stronger with spending of Rs 33,070 crore and Rs 48,603 crore and television will slip down on the second slot with spendings of Rs 32,100 crore and Rs 42,338 crore, respectively.
In fact, dentsu had projected that the ad spends on the print medium will decline from Rs. 16,599 crores in 2021 to Rs. 15,000 crores in 2022.
Commenting on how reduced ad-spends have impacted the media mixes of several companies, Todywalla said, “By and large, the media mix hasn’t changed drastically. The mediums of communication pretty much remain the same, with TV and digital being the mainstay for most. Depending on the life cycle of the brand, its markets of operation and its intended demographic, various FMCG brands have different ways of investing in channel mixes.”
She also emphasised that since each brand’s strategy caters to its own purpose, it is difficult to put a finger on which mediums may be impacted.
“What we are seeing though is a redshift in digital spends to adjust to evolving brand objectives and consumer touchpoints of interaction. OTT, programmatic and search spends are all witnessing a heightened focus from brands - all of which uniquely cater to the organisation’s life cycle and the objectives it has set out for itself,” asserted Todywalla.
Similarly, Sethi and Dwibedy also touched upon a similar tone and said, “The mix of spends for FMCG remains mostly TV skewed as every brand vies for SOV since we have common metrics. Therefore, if there is a decline in FMCG as a category, it will lead to additional supply in the market and dynamic pricing.”
“While digital is making more inroads in tandem with the growth in audience base & targeting options, the other mediums are used for tactical/brand experience objectives. The spends are getting compromised from the niche genres on TV and are getting diverted to OTT and other video platforms. Whatever little was getting spent on Print has also got minimised, in lieu of advertising on video platforms,” they elaborated.
Moreover, Todywalla also ascertained that marketers have grown cautious and will be spending judiciously on advertising this year to make room for the ill-effects of the brimming economic slowdown.
“With the economic slowdown cloud looming on the horizon, we’re seeing a cautionary approach across industries. Marketers are staying wary of concerns that may come snapping at their heels sooner or later and are staying agile to adapt to winds of change. While some industries are seeing an increase in ad spends, overall, the sentiment is one of judicious spending across most quarters,” she stated.
Striking a different chord, Sethi and Dwibedy went on to express hope and said, “This year we have two major impacts happening in Q3 – ICC T20 WC & FIFA WC and as a result, the overall ad-spend should not decline.”
“The macroeconomic conditions viz. inflation and policy decisions - online gaming etc.- may dictate advertising and marketing spends not only for the FMCG category but also for the overall industry in the coming months/quarters. We do see double-digit growth in Adex, owing to multiple big tent poles and sporting events throughout the year,” they ascertained.
While October was a good month, the spends in November and December would be mainly due to ICC World Cup and FIFA and since, the response to these has been lukewarm so far, these two months may not be at the same level as October, as per Amplifi’s Sethi and Dwibedy.
“Both the big festivals Dussehra and Diwali closed down in October, leaving the other two months a little low. But, categories like e-commerce, BFSI, Telecom and Technology are likely to see an upswing this year,” they said.
In one of its earlier reports, BestMediaInfo spoke to Shashi Sinha, CEO, IPG Mediabrands and found out that this year’s ad-spends growth projections of several agencies will be defied as the registered growth would not surpass single digit numbers.
Sinha stated, “The overall ad-ex for January-December period this year, is most likely to witness a muted growth as compared to last year. It’ll be a single-digit growth and will not be very dramatic as forecasted by major agency players.”
He also revealed that the tanking of FMCG ad-spends in Q2 of FY23 isn’t going to impact the ad-ex adversely as they have only curtailed their spending on ads for a short duration and will increase them in the coming quarters and continue to be one of the major spenders in advertising.
“The FMCG ad-spends have been facing a slight-hit due to inflation, but it is the digital companies in the fin-tech, ed-tech and gaming segment amongst others, who are in their start-up phase that have impacted the ad-ex and have created a vacuum in the advertising growth as they have been stripped-off of their fundings and have thus muted advertising,” stated Sinha.
FMCG ad-ex growth analysis for FY23:
The first quarter of the current fiscal year saw Hindustan Unilever’s ad-spends heightened by 29.64%, Emami’s by 10.96%, Marico’s by 13.71%, Godrej Consumer Product Limited by 36.82% and a mere 1.78% for Colgate-Palmolive on a year-on-year basis.
But Dabur had reduced its ad spends in Q1 of FY23 by 16.55% as compared to the corresponding quarter of the previous year.
Industry players in the FMCG industry had increased their spendings on advertising on a year-on-year basis, but on a quarter-on-quarter basis, the story seemed contrasting.
Since the beginning of the first quarter of FY23, industry players like Emami’s Q1FY23 ad spends witnessed a decline of 2.24% as compared to the spends of Q4 FY22 which stood at Rs 10,835 lakh. Marico saw a decline of 2.51% as the ad-ex for the last quarter of FY22 which stood at Rs 204 crores.
Amongst all other FMCG players, it was Colgate Palmolive and Dabur who denoted a 11.04% and 4.57% rise in the ad-ex and spent Rs 16,300 lakh and Rs 157.20 crore in Q1 FY23, juxtaposed to the fourth quarter of FY22.
Additionally, Q2 of FY23 also saw the tanking of Dabur’s advertising expenses by 24.91% as its ad-spends declined to Rs 151.80 crores on a year-on-year basis, wherein the advertising expenditure during Q2 of FY22 stood at Rs 202.17 crores.
Similarly, the second quarter also witnessed the ad-spends of Colgate Palmolive declining by 14.60% in Q2 of FY23 on a YoY basis.
As per industry sources, this quarterly decreasing ad-ex of FMCG players has only been a preventive measure for the players to remain profitable in terms of business as they cope up with the continual inflationary trend in the country.
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