New Game Plan for to Reduce Input Cost

FMCG companies are tightening their purse strings by controlling advertising spends and other marketing expenses to maintain their margins, as high raw material prices continue to pose serious challenge, according to analysts.

Experts said these companies were likely to be cautious on their advertising expenses if they had to remain profitable despite high input costs. “Most of the FMCG companies are focusing on volume growth without hurting their operating margins. While they are resorting to price increases, they also have to reduce their operating cost, including their ad spend, staff cost and other expenses, to maintain their margins,” India Infoline Research Analyst Vanmala Nagwekar said.

 Two of the biggest spenders on advertising, Hindustan Uniliver (HUL) and Procter & Gamble (P&G) marginally reduced their advertising and promotional expenses in the fourth quarter last financial year. In the last quarter of 2010-11, HUL’s advertising and promotional expenses were down marginally to Rs 623.29 crore, from Rs 626.52 crore in the period a year ago.

Similarly, P&G reduced its ad spend to Rs 37.96 crore, from Rs 44.13 crore in the corresponding period last financial year.

 In an investor conference recently, Dabur Ltd Chief Executive Officer Sunil Duggal had said the company would not obviously go overboard in terms of advertising and promotion as long as inflation remained the way it was.