India’s large FMCG companies are increasing advertising and promotional spending faster than sales growth in several cases, banking on an improvement in volumes to invest ahead of demand and strengthen their brands, particularly in premium products, new launches and emerging retail channels.
Nestle India, for instance, increased advertising spends by more than 40% year-on-year in the June quarter, while Colgate-Palmolive India raised advertising and promotional expenditure 33.7% to Rs 251.9 crore.
Marico increased advertising and sales-promotion investments 25.3% and Dabur India raised such spending 13.6% to Rs 229.5 crore. HUL, the largest spender in absolute terms, increased its outlay 3.7% to Rs 1,657 crore, its highest in nearly three years.
The spending spikes come as companies see improving volume momentum, giving them greater confidence to spend behind brands.
But management commentary indicates that the money is increasingly being directed towards specific growth opportunities, including premiumisation, innovation, rural penetration and newer distribution channels, rather than simply maintaining visibility.
Nestle’s strategy illustrates the approach. Its sales grew 25% year-on-year in the June quarter, led by volume, with all four product groups posting strong double-digit growth. Chairman and Managing Director Manish Tiwary said the company had accelerated operational cost savings while continuing to “step up investments behind our brands, with advertising spends rising more than 40%”.
At Colgate, the spending increase is closely linked to premiumisation. Its toothpaste portfolio recorded high-single-digit volume growth in the June quarter, led by its premium range, while net sales increased 12%. MD and CEO Prabha Narasimhan said stronger margins allowed the company to increase focused investments in brand building and category premiumisation. At an analyst meet in May, the company had said it was seeing “significant elasticity” from higher advertising investments, particularly for its premium portfolio.
Marico is taking a broader approach, increasing investments behind established brands while building foods, premium personal care and digital-first businesses. Its India business reported double-digit underlying volume growth in the quarter, with management saying higher advertising and sales-promotion investments were being directed towards brand building and portfolio diversification.
HUL provides a different picture. Although its advertising and promotion spend rose only 3.7%, the company spent Rs 1,657 crore, substantially more than its peers. Its sales grew 10% and underlying volume growth was 5%, with management pointing to stable rural and urban demand and strong growth in quick commerce, modern trade and e-commerce.
Dabur increased advertising and publicity spending 13.6%, faster than its 10.6% revenue growth. The company continued to invest in premium products and new launches, while its India FMCG business reported 5% underlying volume growth, with rural markets outperforming urban markets.
The spending trend suggests FMCG companies are using the recovery in volumes to invest ahead of demand. Analysts say that with premiumisation and new consumption channels expanding the addressable market, companies are willing to put more behind brands now in the expectation of stronger volumes and market-share gains as consumption improves.
“There are far more channels that are available today, and you have to be on all those channels because you’ve got to be where the customer is, and that is really what is leading to the spend,” said Archana Jahagirdar, founder and managing partner, Rukam Capital, adding that there is more competition now in the space and therefore to stand out it is important that how companies think about advertising and promotion.
Nikhil Sethi, partner and national leader, consumer goods, KPMG in India said that though advertising is an important enabler, it is not the primary driver for trade up. “Consumers are more likely to trade up when brands offer meaningful innovation, superior product benefits, the right price-pack architecture and broad availability. Advertising amplifies these advantages rather than replacing them,” he said, adding that the winners will be those that connect marketing investments with superior product delivery, repeat purchase and profitable growth rather than those that simply spend the most.