Fast-moving consumer goods (FMCG) companies are gearing up to increase their advertising and promotion expenditure in the coming quarters. This move is supported by the improvement in gross margins over the past few quarters due to lower input costs. Several FMCG giants, including Dabur, Marico, and Godrej Consumer Products, have reported an uptick in advertising and promotion spending, with expectations of further increases in the near future.
FMCG companies have witnessed a positive trend in gross margin improvement due to reduced input costs. As a result, they are channelling a significant portion of the expanded gross margins into enhancing advertising and promotion spends. With improving margins and a strategic impetus to outperform local competition, FMCG companies are expected to maintain competitive advertising spends throughout 2024.
The year 2024 is filled with significant events such as the Ram Mandir, Lok Sabha elections, and major sports events like IPL, T20 World Cup, and Olympics. FMCG companies are capitalising on these opportunities by increasing their advertising spending to improve demand. Some FMCG companies have already surpassed their pre-pandemic advertising expenditure levels, indicating a strong recovery and growth in the sector.
FMCG firms often advertise during sports events, which can be costly. Despite the elevated ad costs, companies are willing to invest in these platforms to reach a wider audience. FMCG companies like Marico have ramped up advertising and promotion spends to strengthen the long-term equity of both their core and new franchises.
RTM Watch’s Take
FMCG companies’ decision to increase advertising expenditure after input cost subtractions reflects their confidence in the market and their commitment to maintaining a competitive edge. By leveraging major events and investing in strategic advertising, these companies aim to improve demand and strengthen their brand equity. As the FMCG industry continues to recover and grow, it is crucial for companies to strike a balance between cost-saving initiatives and advertising investments to drive revenue and enhance operating margins.
