Ad spend may get a boost as consumption picks up in rural
With spending in rural going up on the back of a prediction of good rainfall, higher minimum support prices for crops, various government welfare schemes and increased infrastructure spending, major brands are likely to loosen their purse strings on advertising and marketing
The period of lull for India's media sector may end soon as the adex of FMCG players, auto companies and mobile and electronics brands is likely to see an uptick in the coming months.
What may bring cheer to the country's top media houses is the increased consumption in rural India, which has grown at more than 13% in the last fiscal and is projected to grow even more in the current year on the back of expectations of a good rainfall, increased government spending on welfare schemes and infrastructure before the next general elections and also the festive season that will kick in from September onwards.
Sale of farm equipment such as tractors has already been in the fast lane for some time now. Urban is also witnessing a similar growth consumption, though not as high as in rural areas.
"There has been an increase in demand from rural. Rural is doing very well now. We saw an improvement in 2017 and in 2018, we are really gung-ho about rural. Rural is the economy that is going to grow pretty fast, said Parle Products Category head BK Rao.
Patanjali's spokesperson, SK Tijarawala said, "The rural market has picked up. Today, someone from the rural area is also looking to consume the same things as the urban consumer. The difference between urban living and rural living has been reduced. GST has also played a role in this as it has made the entire nation a single market."
Patanjali intends to spend 15% more towards rural marketing spend in the current fiscal.
The biggest gainer of this growth in consumption is likely to be FMCG and auto companies and they could be the first ones to put in more money towards advertising and marketing.
Several research and media agencies have predicted the adex to be around Rs 54,000 crore in the current financial year with TV and print getting a share of 38%-37% each.
"As far as Hamdard is concerned, we are increasing our spend in rural every year by 15-20%. We believe that there is a lot of growth potential in rural areas. So, we are investing more in direct distribution, activation in rural areas, and other marketing activities," Mansoor Ali, Chief Sales and Marketing Officer, Hamdard said.
Sandeep Verma, President, Bajaj Corp, said, "In FMCG, advertising spends increase because there has been increase in consumption in rural areas which depends on last year’s good monsoon and various steps taken by government such as better minimum support price for crops. Putting more money in the hands of farmers and the rural consumer increases their disposable and income boosts consumption. After a sluggish growth in the last two years, everyone is expecting robust growth from rural as the economy is coming back on track."
"Immediate impact of a good monsoon is always on consumer durables, automobiles or other categories for which people plan with the prediction. We expect rural market to grow at 1.5 times of urban growth. This year the growth is expected to be better than the previous year. Advertising spend across categories is expected to grow at 14-15% while our ad spend growth will be slightly higher at 15 to 18%," Verma added.
Talking about Parle's advertising and marketing plans, Rao said, "Yes, we are spending more on marketing in the rural markets. First and foremost, we are doing more leg work and trying to reach more outlets and more villages where there is no access. We are trying to reach as many retail footprints and retail outlets as possible. That itself is basically offering great service. Ensuring your product is distributed to the smallest of villages or outlets in the hinterlands is extremely challenging and it is expensive as well because there are lots of costs attached to it but by virtue of us having one of the robust distribution channels in the FMCG space we are at an advantage and we are further improving upon on our retail footprint in the retail market so that will continue as an initiative. Besides that, even on the media front we advertise on Doordarshan. It forms an important mix of our media which helps us reach the rural market. There are the free-to-air channels like Star Bharat or Anmol or Utsav and so we make use of all these platforms to reach the rural audience."
RS Sodhi, Managing Director of Gujarat Co-operative Milk Marketing Federation (GCMMF), said, "In the last 2-3 years, cost of raw materials has reduced considerably but MRPs has not reduced. So, when you get slightly more margin and register volume growth, you are likely to spend more to further accelerate the growth. Earlier, margins were under pressure because of several reasons such as demonetisation or GST. Now that the growth is back on track, ad spend is bound to increase. If I talk about our products, I have never seen such kind of volume growth across our entire range of products."
Brand and marketing experts feel digital will also drive demand in the rural and some companies could also consider spending more on digital to reach out to rural consumers. Ramanujam Sridhar, Founder CEO, Brand-comm, said, "Globally when you try to evaluate how an economy is doing, developed economies keep looking at things like automotive sales, etc. In our case, over the last few years, there has been a real boom in the automotive sector, whether it is two-wheelers or four-wheelers. So, the overall mood is quite positive."