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FMCG ad spend is inching up but mass media takes a backseat. Where’s the money going?

Based on the lessons learnt from the COVID times, FMCG companies are spending on innovative above the line (ATL) and below the line (BTL) mediums to raise the level of consumer-connect

February 27, 2023 / 06:04 PM IST

The battle for consumers' hearts and minds is one that fast-moving consumer goods (FMCG) companies are constantly waging. The weapons of choice? Advertising and promotion (A&P) spends. But as they launch their campaigns, FMCG companies must also navigate the fine balance of the need to promote products and maintain market share, with their obligation to maintain margins and return value to shareholders.

Going by the trend seen in the third quarter of financial year 2022-23 (Q3 FY23), FMCG companies have spent more on advertising compared to the previous quarter, but it is lower on year-on-year (YoY) basis as well as pre-COVID levels. In Q3, companies spent a little over 8 percent of their revenue on ads, compared to 9 percent in Q3 FY22 and 10.5 percent in Q3 FY20 (pre-COVID).


Market leader Hindustan Unilever, which is the biggest spender on ads, shelled out 8 percent of its revenue on A&P costs for the December quarter. This is higher than the 7 percent spend of the September quarter, but lower than the 11.5 percent outgo in the pre-COVID time.

"Ad spends by fast-moving consumer goods companies are inching back to pre-COVID levels. With learnings from the pandemic-phase marketing, companies are now employing newer and innovative ATL (above the line) and BTL (below the line) mediums to engage consumers,” Sameer Shah, Chief Financial Officer, Godrej Consumer Products, said.

ATL marketing is used when print, television or any other mass media is deployed, while BTL spends allow marketers to tailor their message in a personal manner.

For instance, Godrej Consumer had set up fragrance zones for Aer Matic in Durga Pujo pandals of Kolkata, Mumbai and Delhi. On the other hand, Emami made the direct consumer connect for its Vedic oil by samplings in fairs and festivals.

“It’s crucial to involve customers in on-ground activities like exhibitions, village fairs, food expos and RWA (Resident Welfare Association) activities,” said Rakhee Yadav, Senior Marketing Manager, Pansari Group – a New Delhi-based food products company.

Getting back volumes

According to the report released by data analytics firm NielsenIQ, in October-December, the FMCG industry grew 7.6 percent in terms of value but urban volumes grew 1.6 percent YoY while rural volumes declined 2.8 percent. Some consumers have downtraded to lower unit packs and others to unbranded regional alternatives, analysts said.

Historically, growth in rural markets has always outpaced growth in urban markets when it comes to staples. With rural India constituting about 36 percent of the sales pie for a typical consumer company, the industry is fighting to get back volumes, which has been on a downward trend for over a year now.

Also Read: FMCG stocks in for some more pain as El Niño may weigh on rural recovery, says Nuvama

“The expectation was that inflation will subside by the end of the year, demand pressures will ease, and FMCG companies will start seeing volume growth. Since that has not played out exactly, A&P spends will have to be done judiciously, with increased focus on BTL activities,” said Shirish Pardeshi of Centrum Broking.

Foreign brokerage firm Jefferies also noted that the focus has shifted to consumer/trade promotions versus ATL brand advertising, given a weak demand environment and high inflation.

As FMCG companies explore new and innovative ways to engage with consumers and win back volumes, only time will tell how effective their A&P spends will be.

Shailaja Mohapatra Senior sub-editor, Moneycontrol