India’s top FMCG (fast-moving consumer goods) companies are pulling up their socks and ramping up investments, betting on a slow albiet gradual recovery in urban demand, which contributes a sizable share of revenue across their portfolio.
Companies like Hindustan Unilever, Dabur and Tata Consumer, are looking to raise their spends on advertising and discounting activities to stay agile and increase market share, amid optimisim that a good monsoon, lower inflation, and easing tax pressures will boost demand.
During the first quarter of FY26, companies turned to aggressive pricing to remain competitive while fluctuating commmodity prices hurt gross margins.
Hindustan Unilever and Tata Consumer absorbed most of the price inflation in tea, keeping the product affordable and thereby supporting volume gains. While the quarter reflected volume-led expansion of companies to safeguard market share, going forward, they will be seen increasing their advertising budgets on the hope that the improving volumes will cushion margins.
Rising spends
India's largest packaged consumer goods maker, Hindustan Unilever, spent Rs 150 crore more YoY for advertising and promotion (A&P) in Q1. The market leader also pivoted from traditional media, moving towards digital media to attain greater visibility.
"If I look at the last 12 months now, we have crossed more than 50 percent of media investment goals into digital, compared to traditional. In fact, in the latest quarter, the number was even higher. For us, driving competitive volume-led growth is first priority, and we will invest as required," HUL chief financial officer Ritesh Tiwari told analysts in a post-earnings call on July 31.
The comments come as the FMCG major reported gross margins at at 49.5 percent lower year on year in Q1FY26, while the underlying volume growth in the quarter stood at 4 percent.
"Hindustan Unilever focuses on volume-driven earnings growth, for which the company is ready to compromise on near-term margins. The strategy looks outcome-oriented. Q1 performance hints at the beginning of a much better volume print delivery in the coming quarters. We believe the new CEO can further capitalise on the volume drive with her understanding of Indian consumers and the company’s execution playbook," brokerage Motilal Oswal said in its August 1 note.
Meanwhile, Tata Consumer, which owns mass brands like Tata Tea and Tata Salt, also flagged that it "will not compromise on A&P spends". We've maintained our A&P-to-sales in the 7 percent range. Albeit in the short to medium term, we would like to go closer to 7.58 percent," said managing director Sunil D'Souza said in a post earnings call last month.
In Q1FY26, its India business profit dipped 10 percent YoY to Rs 291 crore but core categories recorded double-digit sales growth. Amid inflation in tea prices, the company absorbed 30 percent of the costs while passing 70 percent to consumers.
Rival Dabur said it has redirected money to BTL (Below The Line) initiatives, which includes consumer promotions, trade discounts and schemes given to retailers or distributors to push sales, instead of traditional media or ATL (Above The Line) activities, which include television or print.
"Going forward, ad investments will continue to be higher and we want to increase our gross margins and invest in advertising support. We will continuously endeavour to increase the overall A&P expenditure, going forward, and also invest in brands and distribution," Dabur's chief executive officer Manish Malhotra told analysts last month.
Focus on core business
Besides chasing volumes, companies have made plans to revamp their core portfolio, modernising existing brands to suit evolving consumer preferences. For instance, HUL relaunched iconic soap brand Lifebuoy, known for its anti-germ properties for nearly a century. In March, HUL announced its expansion from germ shield to comprehensive skin expertise and skin health benefits.
"We have very exciting plans on modernising the brand, expanding its range, and getting into other formats too. So we're quite certain that Lifebuoy will improve, but it's going to take a few more quarters," HUL's former managing director Rohit Jawa told analysts.
Similarly, Dabur plans to flag its toothpaste brand Dabur Red to other benefit gaps, Malhotra said. "We invested on Dabur Amla to gain market share. Now, we want to contemporarise and premiumise the brand, going forward," he added. Dabur plans to double down on its core brand which contribute around 60- 70 percent to the business, translating to revenues of more than Rs 700 crore.
Meanwhile, Emami is charting plans to relaunch hair oil brand Kesh King in the second quarter to arrest the decline in sales amid increased competition from Direct-to-consumer (D2C) players and challenges in the sector.
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