News: India Inc ad spend keeps pace with profit growth

(BS 19/09/2006) Mumbai - India Inc spent more than Rs 10,000 crore on advertisement and sales promotion last year. The advertisement expenditure (ad-spend) of 959 listed companies increased by 18 per cent to Rs 10,007 crore in 2005-06 against Rs 8,470 crore in 2004-05.

The growth rate of ad spend of corporate India is in tune with the rise in net profit. The aggregate net profit of these companies increased by 18.3 per cent to Rs 89,626 crore (Rs 66,847 crore).

Data extracted from annual reports of over 1,000 companies, of which 959 firms spent money on advertisement and sales promotions, reveal that the share of advertising to sales has remain unchanged to around 1 per cent during last three financial years.

Twenty-eight firms had spent more than Rs 100 crore on advertisement accounted 55 per cent of the total ad spend by these 959 companies during the fiscal.

Personal care products firms are on top of the list on ad spend during the year. Ten companies from the sector had spent Rs 1,563 crore on advertisement and sales promotions, followed by automobiles (Rs 1,174 crore), pharmaceuticals (Rs 729 crore), banks (Rs 702 crore) and telecommunications (Rs 686 crore).

Hindustan Lever, the largest ad-spender, spent 20 per cent more on advertisement to Rs 1,006 crore in FY05-06 against Rs 836 crore spent in FY04-05.

The new product launches leads most of the fast moving consumer to spent more on the sales promotions.

Colgate-Palmolive spent 45 per cent extra on advertisement to Rs 198 crore against Rs 137 crore in previous year, while Marico spent 44 per cent more on ad-spend to Rs 124 crore (Rs 86 crore).

The stiff competition in banking sectors leads the total ad-spend of twenty-one banks increased by 40 per cent from Rs 485 crore in FY05. Bank of Baroda (Rs 25.6 crore), Allahabad Bank (Rs 22.8 crore) and Syndicate Bank (Rs 13.1 crore) spent more than doubled, while ICICI Bank Rs186 crore (Rs 116.30) and State Bank of India Rs 109 crore (Rs 67 crore) spent 60 per cent extra on advertisement during the year.

The advertisement expenditure of four tobacco companies increased merely two per cent in FY05-06. ITC spent just 2.4 per cent more to Rs 225.73 crore against Rs 220.53 crore while GTC spent Rs 47.7 crore (Rs 47.2), one per cent more on advertisement and sales promotions.

Most of the automobile companies except for Tata Motors cut their advertisement expenses heavily to maintained their net profit growth.

Bajaj Auto reduced advertisement and sales promotion expenses by 26 per cent to Rs 107 crore (Rs 144 crore), Mahindra and Mahindra by 5 per cent Rs 139 crore (Rs 147 crore) and Eicher Motors by 3 per cent to Rs 21 crore (Rs 22 crore).