FMCG Firms Hit The Pause Button On Advertising And Marketing As Ad Spends Have Plateaued

FMCG Firms Hit The Pause Button On Advertising And Marketing As Ad Spends Have Plateaued

From biscuits to chips to shampoo, the fast moving consumer goods (FMCG) category has always been the sector with the highest ad spend in the range of Rs 8,000-10,000. Interestingly, while companies like Hindustan Unilever, Dabur, ITC and others continue to spend on advertising, aggregated ad spend data (based on charts) of five to six large companies are increasing their spending. “FMCG companies are increasing advertising spend in an uncertain economic environment and with sales now recovering to pre-2019 levels for most brands – the Covid period has seen sales decline or plateau for many companies. The global economy is also experiencing increased inflation. Supply chain disruptions and war in Ukraine in recent years." It faces several challenges, including. This has led to consumer uncertainty and reduced spending across several categories," Rajat Wahi, partner, Deloitte Consulting, India.

Digital and traditional

Another reason for the increase in advertising costs is believed to be the shift to digital advertising. Digital advertising is still cheaper than traditional forms of advertising, such as television and print, as costs continue to increase. This means CPG companies can maintain or increase their advertising reach without spending more money. Interestingly, ITC, a leading FMCG company, says digital has become an integral part of its marketing mix. “One of the main objectives of our advertising interventions and therefore determining the right mix is ​​to strengthen our brand equity. A data-driven decision-making approach with digital marketing initiatives not only increases our ROI but also increases our brand. net capital. Digital is now at the heart of all marketing initiatives undertaken by ITC in an inclusive manner,” said head of digital marketing Shuvadeep Banerjee.

According to a report by Zenith Media, FMCG advertising spend in India is expected to grow by 5.5% in 2023. However, this growth is led by digital advertising, which is expected to grow by 15% in 2023. This shows that FMCG companies are focusing on digital advertising to drive conversions. According to Wahi, these companies are investing more in digital advertising, social media marketing and influencer marketing. “These companies use data analytics to better understand their customers and target their marketing campaigns more effectively,” he said. I agree, Banerjee, who said performance marketing wasn't that important half a decade ago, now plays a critical role in driving sales and capital. “One of the big changes we are seeing is the growing role of properties, communities and property creators in driving consumer engagement,” he said.

Consumers versus businesses

FMCG companies are also believed to see a correction as margins come under pressure from advertising spending. In addition to provisions that create data to create targeted communications, these large companies have shifted their focus to digital transformation. “Today, the number of times customers interact across channels and the total cost of customer acquisition and retention have become key metrics. So, in this new world, a fixed ad spend doesn't mean no ad spend. the focus. Instead, it means focusing on the channels for each product-customer mix. “This means better understanding what to spend,” explains Sreedhar Prasad, former head of consumer affairs at KPMG in India.

Digital transformation is certainly another area in which consumer goods companies have invested in recent years. What allows these companies to operate is creating strong systems and using digital technology to create new products and services. For example, some companies use artificial intelligence to create personalized beauty products, while others use blockchain to track the authenticity of food products. In general, FMCG companies are using digital transformation to improve their operations and provide a better customer experience. And that's why CPG companies don't increase ad spending.

Furthermore, consumer spending patterns are believed to have changed post-Covid-19. According to a report by Nielsen India, consumers are more likely to purchase small items during a crisis or economic slowdown. According to the report, consumers will increase from 29% in 2020 to 35% in 2022. According to ITC Banarjee, the pandemic has left some permanent changes in consumption patterns, such as the rise of snacking, and this is encouraging. Witnessing large-scale growth driven by rural towns and small towns in India.

Indian consumers are also believed to be more cost-conscious and more likely to shop around for the best deals. To Harish Bijur, Founder of Harish Bijur Consultants - Brand Consulting Company, We are coming out of the Covid holidays. “Brands and companies are evaluating customer sentiment and, more importantly, the need to adapt existing innovations to satisfy new consumers. “2023 and 2024 will be different,” he added.

Experts say that with evolving market conditions and increasing pressure to maintain profitability, FMCG companies may not increase advertising spending, but they will definitely spend money to maximize return on investment (ROI). “There appears to be a course correction in advertising spending as margins come under pressure in the FMCG sector. The ROI in advertising and marketing is more desirable and the distribution of allocated funds is better. I would not be surprised if the numbers remain stable or decline slightly in the next year,” said Sanjeev Kotnala, branding and marketing consultant at Intradia World.

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