FMCG, auto to drive ad spends this fiscal

Last two monetary policies have seen a rate cut by RBI to boost investment and growth, but there is a long way to go. For media and entertainment, the lifeline is advertising spends. We individually take look at each sector and try to decode which of them are likely to enhance their media spends for FY 2013-14, post the budget and rate cuts by RBI.

Cheerleaders
FMCG
The sector which could make the industry cheer the most would be FMCG. With the affluent and semi urban Indian waking up to the consumption of personal care, packed foods and beverage products, the cluttered FMCG market is likely to enhance its spends on advertising market. HUL, the leading FMCG player in India, recently announced that the digital ad spends of the company would surge by three times this year. HUL’s advertising and marketing expenditure in the fourth quarter of FY12 stood at Rs 6.77 billion, which grew to Rs 8.21 billion in the fourth quarter of FY13, ending March 31, 2013. The percentage of total income utilised in advertising also grew from 11.74 per cent in Q4 FY12 to 12.70 in Q4 FY13.

V Srinivasan, FMCG Analyst, Angel broking said, “There would be a probable increase in ad spends in the FMCG sector, but one should not expect a drastic increase. It would depend on the demand. Demand looks positive and if the scenario remains such, spends would definitely increase. In fact, the players would focus more on positioning rather than marketing of products.”

Automobile
Although struggling with low demand and high supply bottlenecks, the automobile sector is likely to not disappoint in terms of media spends. Market is aggressive and with various new launches in two wheeler, four wheeler and luxury, auto makers are likely to boost campaign initiatives. Players would be aggressive on advertising front as the market gets more crowded.

Yaresh Kothari, Auto Analyst shared, “The health of the sector is very good. The drop in sales and volume is temporary and the media spends would not be compromised; in fact, they are likely to increase. More product launches are expected in the next quarter and to increase visibility, marketers would rely heavily on advertising.”

Telecom
In spite of tax and spectrum issues, the ad spends of the telecom sector would see a surge. Market experts believe that there might be a cut in promotional offers such as free calls, messages, etc., but not in media spends. Bhavesh Gandhi, Telecom Analyst, IIFL stated, “There will only be a cut in promotional offers. As far as tax and spectrum issues are concerned, they are macro issues and are likely to have no impact on marketing budgets.”

It is also expected that the ad spends would be more likely on post paid consumers which are only five per cent of the telecom subscribers but account for almost 30 per cent of the revenues. Huge debts are offloaded by companies by selling stakes. Recently Bharti Airtel sold its five per cent stake to Qatar for $1.26 billion.

Consumer goods
Surge in demand and income has seen rural market vouch for consumer goods. Rural market has seen a catastrophic rise in demand of consumer goods in the past decade.  Shimit Anand, an independent auditor of consumer goods segment mentioned, “Every year, the sector sees an increased spend on marketing. Rural consumers are in fact more aggressive than their urban counterparts. Spends are likely to increase this year as the demand justifies the increased spend,”

Aviation
The Jet-Etihad deal is likely to change the infrastructure of the crippled aviation sector of the country. The deal is likely to infuse Rs 2000 crore into the system. In order to get more visibility, airlines would increase their media presence in the form of news, interviews and advertisements. A day after the deal, major newspapers across the country featured interview of Rohit Nandan, CMD of Air India highlighting the expansion plans of Air India.

Banking
A chief economist of one of the leading private sector banks of India shared, “The ad spends of the sector will increase in this fiscal.  Only 17 per cent Indians posses bank accounts. Also, the Saradha debacle would compel many people to go for authorised and credible system of returns. Banks play an important role here. Also, the rate cuts by RBI would see increased liquidity in the system and banks would like the consumers to know about their interest rates and schemes. Also, BTL activities like events, ATM marketing are likely to increase in the coming months.

The reluctant lot
Real estate marketing might be consistent and would seek higher RoI. “This year, we would be seeing a higher percentage spending on almost all media front. The availability versus sales is a reality, which is not a secret anymore. With location specific competition within developers, media presence and their branding will perhaps push sales a bit. However, a price correction is overdue and any media campaign with that corrected price will draw major attention and much needed results,” said Chetan Narain, President and CEO, Narains Corp.

Market experts also believe that there will be more focus on BTL activities and events rather than conventional media spends.

Education sector would also focus more on BTL activities in order to convince the students and their parents. Periodical advertisements would be visible but only on specific and online media. “We are not very bullish on media budgets as they have not yielded any significant result. We would be targeting youth magazines, career supplements and specific web portals only. RoI is a very high priority for us. No mass advertising for this year,” said a senior marketing officer of a leading university in India, on condition of anonymity.

Manufacturing, capital goods and allied sectors are primarily less active on the advertising front and are expected to convey their product messages through specific mediums only viz: personalised branding and BTL activities specifically for their sectors.

The media spends for different sectors in FY 2013-14 would therefore depend upon the kind of structural policy regimes and the market scenario. Some sectors which are demand driven would be heavy on advertising, while some not robust on demand side would like to make their presence felt; and few would curtail their ad spends owing to contemporary market situation.
 

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