FMCG ad spends dip 5% in first quarter

FMCG companies have cut back on advertisement spends by nearly 5 per cent for the period April-June 2007, according to a study by the Business Standard Research Bureau.

Inconclusive negotiations with television media networks, coupled with a lull in new product launches appeared to be the main reasons for the dip.

As against spends of Rs 463.16 crore by companies like Hindustan Unilever, Colgate, Dabur and Marico in April-June last year, spends in April-June this year totalled Rs 442.72 crore.

Godrej Consumer Products reported the biggest reduction of 15.7 per cent in advertising and sales promotions expenditure from Rs 18.09 crore to Rs 15.25 crore.

Marico, which makes Parachute hair oil and Saffola cooking oil, cut spends by 10 per cent from Rs 43.23 crore to Rs 38.39 crore.

The country's largest consumer goods firm, Hindustan Unilever, also cut ad spends by 2.7 per cent from Rs 345.27 crore to Rs 336.04 crore.

Marico CEO, consumer products, Saugata Gupta, said the quarter should not be looked at in isolation as many factors were at play. Some of the ad expenditure was deferred as negotiations with media owners were not completed, company executives said.

It was a similar case with HUL. Industry sources said the company has been shifting ad spends from the Star network to others like Zee and its reverse auction "12 o'clock" for additional spends has been accepted by only some channels in the Zee bouquet.

HUL Chairman Harish Manwani said, "Although the ad expenditure is lesser in this quarter, it is not an indicator that we will be decreasing our ad spends next year."

Marico executives agreed. "Spends on promotions increase when a company is launching new products and such expenditure is not equally spread across all quarters.

However, in the coming quarters we will be aiming for roughly 12 per cent of the top line towards ad and marketing spends," Gupta of Marico said.

Analysts said the companies usually maintain 12-13 per cent of the top line as advertising expenditure. However, for this quarter, this expenditure did not touch the expected figures and stayed at an average 10.9 per cent of the sales figures.

For some companies, the completion of a product launch phase meant going slow on ad expenses.

Analysts say that in the quarter under review, the launch campaign of Colgate Maxfresh Gel was complete and the ad spends came down. Godrej had similar reasons.

Gupta explained, "Due to increasing segmentation in the media, the focus will be on efficiency.

"The sector will see high spends and movement of money in the mass media. The important factors would be accountability in the media buying process and efficiency. There may not be any substantial increase in the overall expenditure, but we will focus more on brand building."

An industry expert also pointed out that the decrease in ad spends is a phasing issue and the companies are expected to maintain investments in advertising and promotions.