Chapter 2 Overview of Advertising in FMCG sector 2.1 Definition of Advertising Advertising is defined by the American Marketing Association advertising as any paid form of non-personal presentation and promotion of ideas, goods and services by an identified sponsor. Advertising is non-personal as it is not directed to any single individual and the sponsor i.e. the manufacturer or producer is identified by its name. The sponsor also bears all the cost involved in the process and can promote an idea regarding quality, design, packing and pricing, etc. of any product or service. Thus, it can be said that advertising consists of all activities involved in presenting a sponsored message regarding a product, service or an idea. According to Mc Cann Erickson, Advertising is "Truth Well Told". Actually advertising is a paid publicity and silent salesmanship and it needs to be known what we have to sell or what we want to buy. According to Seldon, "Advertising is a business force, which through printed words, sells or helps sale, builds reputation and fosters goodwill". John V. W. expressed, "Advertising like salesmanship is an attempt to influence the thoughts and action of people". Canor and Wichart have given a definition in this form, "Advertising includes those visual or oral messages in magazines, newspapers, movies and letters, over radio and television and on transportation vehicles and outdoor signs which are paid by their sponsors and directed to consumers for purpose of influencing their purchases and attitudes". According to Britannica Dictionary, "A form of paid announcement interested to promote the sale of commodity or services, to advance an idea or to bring about other effect desired by the advertiser". Webster s New World Dictionary has mentioned that advertising is 1. to tell about or praise (a product etc.) as through print media, audio and visual, so as to promote sale; 2. to make known; and 3. to call public to things for sale, for rent etc., as by printed or presented notice. 13
Albert Lasker, the father of advertising expressed that "Advertising is salesmanship in print". But he offered this definition long before television and internet, at a time when the nature and scope of advertising were quite limited. The London Institute of Practitioners in Advertising has given a definition which very closely approximates the following points: "Advertising presents the most persuasive possible selling message to right prospect for the product or service at the lowest possible cost". These definitions include the element of payment for the sponsor. However, the sponsor of the advertisement should not only make the payment for it, but also should identify itself in the advertisement. One more prevalent definition of advertising is "paid, non-personal communication through various media by business firms, non profit organization and individuals who hope to inform or persuade members of a particular audience". Lastly, the definition given by Wright, Winter and Zeigler identifies advertising as "Controlled identified information and persuasion by means of mass communication media". 2.2 Objectives of Advertising Apart from communicating about the product, service or an idea to the consumer, advertising also fulfils the following objectives: i. To educate customers: For e.g. the advertisement of Dandi Namak on television says that Dandi Namak is good for health as it contains Iodine. This message educates the consumer that iodine is good for health and Dandi Namak contains iodine. ii. To create demand for new product: For e.g. a new type of pen called Gel pen is introduced in the market, which is very economical and convenient in writing. This motivates a student to buy the said pen. Similarly, many other students shall also buy gel pen after coming to know about it through advertisement. This will create a demand for the new product launched in the market. iii. To retain existing customers: Nirma washing powder was a very popular detergent. But, after Wheel powder came to the market the sale of Nirma suddenly decreased. Then the manufacturers of Nirma improved the product and advertised about the same in different media. After knowing this the 14
consumers who were earlier using Nirma did not switch over to Wheel and continued using Nirma. In this manner Nirma sustained its existing demand. Thus, advertising helps the manufacturers not only to create a demand for a new product but also to retain the existing customers. iv. To increase sales: Advertising creates demands for new products and sustains the demand of old one. Thus, with increase in demand, the sale of the product also increases. v. To assist salesman: In most advertisements the salient features of a product, its qualities and its uses are expressed in detail. This assists a salesman to sell the product quickly without spending time in explaining and convincing the customer. vi. To promote research: Advertising stimulates research and development activities. Advertising has become a competitive marketing activity and every firm tries to differentiate its product from the substitutes available in the market through advertising. This compels every business firm to do more and more research to find new products and their new uses. If a firm does not engage in research and development activities, it will be out of the market in the near future. 2.3 Typology of Advertising The nature and purpose of advertising differs from one industry to another or across situations. Marketers advertise to the consumers market with national, local and direct-response advertising which involves stimulating primary or selective demand. They use industrial, professional and trade advertising for business and professional markets. To better understand the nature and purpose of advertising it can be classified by the following criteria: i. National Advertising: Advertising done by a company on a nationwide basis or in most regions of the country and targeted to the ultimate consumer market is known as national advertising. The companies that sponsor these ads are generally referred to as national advertisers. Most of the advertisements for well-known brands that are seen on TV or in other major media are examples 15
of national advertising. It informs or reminds consumers of the brand and its features, benefits, advantages and uses or reinforces its images. ii. Retail/Local Advertising: Another prevalent type of advertising directed at the consumer market is classified as retail/local advertising. This type of advertising is done by major retailers or small local merchants to encourage consumers to shop at a specific store or use a local service such as local financial companies, bank, hospitals, fitness club, restaurants, show rooms etc. While national advertisers sell their products at many locations, retail/local advertisers must give the consumer a reason to patronize their establishment. Retail advertising tends to emphasize specific customer benefits such as store house, credit policies, services, atmosphere, merchandise assortment and other distinguishable attributes. iii. Direct-Response Advertising: Direct-response advertising is a method of direct marketing whereby a product is promoted through an advertisement that lets the customer purchase directly from the manufacturer. Direct response advertising has gained pace in recent years owing primarily to changing lifestyles. The convenience of shopping through the mail or by telephone has led to the tremendous increase in direct-response advertising. iv. Primary and Selective Demand Advertising: Another way of viewing advertising to the ultimate customers is in terms of whether the message is designed to stimulate either primary or selective demand. Primary demand advertising is designed to stimulate demand for the general product class or entire industry whereas selective demand advertising focuses on creating demand for a particular manufacturer's brands. Primary demand advertising is often used as part of a promotional strategy to help a new product gain acceptance among customers. Sometimes products in the introductory or growth stages of their life cycles often have primary demand stimulation as a promotional objective because the challenge is to sell customers on the product as much as it is to sell a particular brand. v. Business to Business Advertising: Sometimes, the ultimate customer is not the mass consumer market, but rather another business, industry, or profession. Business-to Business advertising is used by one business to advertise its products/services to another business. It is categorized in three basic categories like industrial, professional, and trade advertising. 16
a) Industrial Advertising: Advertising which is targeted at individuals who buy or influence the purchase of industrial goods or other services is known as industrial advertising. Industrial goods are those products that either become a physical part of another product, or used in manufacturing other goods. Business service, such as insurance, financial services, and health care, can also be included in this category. Industrial advertising is usually found in general business publications or in trade publications targeted to the particular industry. b) Professional Advertising: Advertising that is targeted to professional groups like doctors, lawyers, dentists, or engineers to encourage using the advertiser s product or specifying it for other's use is known as professional advertising. Professional groups are important because they constitute a market for products and services they use in their businesses. Also, their recommendations influences, many consumer purchase decisions. c) Trade Advertising: Advertising done within a trade to attract the wholesalers and retailers and motivate them to purchase its products for resale is termed as trade advertising. Company sales representatives call on resellers to explain the product, discuss the firm's plans for building demand among ultimate consumers, and describe special programs being offered to the trade, such as introductory discounts, promotional allowances. Trade advertisements usually appear in publications that serve that particular industry. These classifications of the various types of advertising demonstrate that this promotional element is used in a variety of ways. Advertising is a very flexible promotional tool whose role in marketing program will varies depending on the situation faced by the organization and what information needs to be communicated. 2.4 History of Advertising The concept of advertising dates to early civilization. It had to undertake a long journey through the centuries before it attained its current form. Advertising in fact is directly related to the need of man to communicate his message and attract to each other. Our knowledge of advertising in ancient times certainly is fragmentary. Early advertising can be traced back to the archaeological evidences available in Greece and Rome. In 3000 B. C. Babylonia merchants hired parkers to hawk their 17
wares to perspective customers and placed signs over their doorways to indicate what they sold. Advertisements were put up on walls in the streets of the excavated Roman city of Pompeii. Another evidence of a piece of papyrus preserved in the British Museum provided the earliest and direct reference to a written advertisement. An Egyptian had advertised 3,000 years ago asking for the return of a runaway slave. The word of mouth or oral advertisement or spoken publicity was even older. The use of hand bills, posters and newspaper advertisements emerged after Gutenberg developed movable type in the 15th century. When Benjamin Franklin established the Philadelphia Gazette in 1729, it soon became a favourite medium of advertising and when the weekly Pennsylvania packet and General Advertiser became a daily in 1784, it featured an entire front page of advertisement. The history of advertising in India parallels the history of the Indian Press. The first issue of the first newspaper of the Indian subcontinent, was the Bengal Gazette or the Calcutta General Advertiser, started by James Augustus Hicky on January 29, 1780. During the early years the newspapers announced births, deaths, appointments, arrival and departure of ships and sale of furniture. By the beginning of the 19th century the pattern of advertising revealed a definite change. Even the daily newspapers announced themselves through advertisements in existing periodicals. The power of advertising increased rapidly with the growth in trade and commerce. By 1830, around three dozen newspapers and periodicals were being published on a regular basis from India. With the rise of new industries, advertising, even from British companies, increased. The growth of advertising in India can also be linked to the Swadeshi movement (1920-1922), which gave impetus to Indian industries. Mahatma Gandhi described Swadeshi as a call to the consumer to be aware of the violence he is causing by supporting those industries that result in poverty, harm to workers and to humans and other creatures. Swadeshi Movement was an attempt to take economic power from the British by the use of domestic made products. Spinning the Charkha and wearing Khadi became a very powerful tool to fight the British government. 18
Table 2.4.1: Advertising history in India 1780 Modern advertising history began with classified advertising. Ads appeared for the first time in print in Hickey s weekly newspaper, the Bengal Gazette. Newspaper studios trained the first generation of visualizers and illustrators to produce advertisements for the print media. 1905 B Dattaram & Co, one of the early companies making advertisements for newspapers was launched in Mumbai. 1920 1922 Years of the Swadeshi movement 1920 1929 The first foreign owned ad agencies were set up. 1931 The first ad agency, the National Advertising Service was established. 1951 The Indian Society of Advertisers was formed. Source: Self constructed The first Indian ad agency, the Indian Advertising Agency, was launched in the very early years of the 20th century. On the other hand, B Dattaram & Co, located in Girgaum in Mumbai and launched in 1905, also claims to be the oldest existing Indian agency. This was followed by the launch of the Calcutta Advertising Agency in 1909. By the 1920s a number of Indian agencies were working from the major Indian cities, the most important being the Modern Publicity Company in Madras, Central Publicity Service in Bombay and Calcutta and the Oriental Advertising Agency in Tiruchirapalli. In 1931, the first full-fledged Indian ad agency, the National Advertising Service, was established. During the post independence era, the advertising business was well on its way to growth and expansion. The Indian Society of Advertisers was formed in 1951 and in May 1958, the Society of Advertising Practitioners was established and advertising clubs came up in Bombay and Calcutta to promote higher standards of work. Market research and readership surveys led to further professionalization of the advertising industry. Television Rating Points, popularly known as TRP measurements, provided ad agencies with statistical data on consumer/ viewer likes and dislikes and helped them create effective media plans and 19
ad campaigns. The introduction of multi-colour printing, improved printing machines and the development of commercial art gave the ad business a further boost. The advertising agencies expanded their services and this was due to the phenomenal growth in media. Besides selling space in newspapers and magazines, they began to offer art works, organization of fairs and exhibitions and market research. Some important years in the advertising history of India are as follows 2.5 Advertising in India Table 2.5.1: Advertising revenues in India Overall Industry size (INR billion) 2008 2009 2010 2011 2012 2013 2014 Growth in 2014 over 2013 TV 82.0 88.0 103.0 116.0 124.8 135.9 154.9 14.0% Print 108.0 110.4 126.0 139.4 149.6 162.6 176.4 8.5% Radio 8.4 8.4 10.0 11.5 12.7 14.6 17.2 17.6% OOH 16.1 13.7 16.5 17.8 18.2 19.3 22.0 14.0% Digital Advertising 6.0 8.0 10.0 15.4 21.7 30.1 43.5 44.5% Total 221 228 266 300 327 362.5 414.0 14.2% Source: FICCI-KPMG Indian Media and Entertainment Industry Report 2015 Table 2.5.2: Advertising revenue projections Overall Industry size (INR billion) 2015P 2016P 2017P 2018P 2019P CAGR (2014-2019P) TV 174.6 198.4 226.2 260.1 299.1 14.1% Print 192.6 211.8 232.9 255.2 280.0 9.7% Radio 19.6 22.3 27.0 32.7 39.5 18.1% OOH 24.4 27.1 29.6 32.2 35.1 9.8% Digital Advertising 62.5 84.0 115.3 138.2 162.5 30.2% 20
Total 474 544 631 718 816 14.5% Source: FICCI-KPMG Indian Media and Entertainment Industry Report 2015 The above tables show the advertising revenues and projections in the Indian market across different advertising media. Advertising revenues in 2014 grew at a growth rate of 14.2% over 2013, to reach INR 414 billion, of which print (43%) and television (37%) captured the lion s share. Reflecting the macroeconomic growth rate, the advertising industry witnessed a healthy growth largely on the back of heavy spending during the national and state elections in 2014, and a significant surge in spends by e-commerce companies. Highest growth in the advertising spends was seen in digital advertising followed by advertising on radio. On the contrary, print advertising saw the lowest growth over the last year. However, print advertising grew on a larger base of INR 163 billion. Television advertising in the year 2014 bounced back significantly on account of elections and improved macro-economic environment leading to companies increasing their spends. E-commerce emerged as a key sector driving growth, followed by mobile handset companies, while some of the traditionally large advertisers such as Fast Moving Consumer Goods (FMCG) and automobiles also saw renewed growth. The ecosystem for TV ad revenue growth is expected to remain strong in the near future on account of the rebound in the India growth story. The implementation of the viewership measurement system by Broadcast Audience Research Council (BARC) in 2015 will likely impact the way advertising spend is allocated among different genres and channels, due to inclusion of new markets and increase in sample size. 2.5.1 Overview of Print advertising in India Table 2.5.1.1: Print media market in India Overall 2010 2011 2012 2013 2014 Growth in Industry size 2014 over (INR billion) 2013 Advertising 126 139 150 163 176 8.5% 21
revenue Circulation revenue Total print market 67 69 75 81 87 7.9% 193 209 224 243 263 8.3% Source: FICCI-KPMG Indian Media and Entertainment Industry Report 2015 Table 2.5.1.2: Print media market projections Overall Industry size (INR billion) Advertising revenue Circulation revenue Total print market 2015P 2016P 2017P 2018P 2019P CAGR (2014-2019P) 193 212 233 255 280 9.7% 92 95 99 103 107 4.2% 284 307 332 358 387 8.0% Source: FICCI-KPMG Indian Media and Entertainment Industry Report 2015 The print sector s share in the overall advertisement revenue pie still remains higher than other forms of media, despite having declined from 49% in 2008 to 42% in 2014. Having grown by 8.5% in 2014, the print advertisement revenue crossed INR 176 billion. The advertisement revenues have grown at a CAGR of 8.8% whereas circulation revenues have displayed a CAGR of 6.8% between 2010 and 2014. The advertisement revenues continued be the main source of revenue for the print industry, contributing to 67% of industry s revenues. The growth in advertisement revenue was supported by product and distribution innovation and on-ground activations by various players. According to the report by FICCI-KPMG (2015), the percentage of revenues from regional advertisements has increased in the overall print advertising pie. With high growth among all language markets, Hindi markets continue to be the major driver of growth in the print industry. Advertisers from various sectors such as FMCG, electronics and electricals, education, healthcare, etc. are also increasingly focusing on print as a medium to reach out to their customers in 22
Tier II, Tier III cities and rural markets. Local advertising has gained a larger share compared to national advertising. Currently local advertising contributes close to 65% of the total advertising revenue, vis a vis 55% till a few years back. Print, however, is an expensive proposition for nation-wide advertisements in terms of cost per thousand. The medium has a better value proposition for local advertisers as it provides a degree of engagement that television finds hard to match. Table 2.5.1.3: Category wise spend in Print medium Categories 2008 2009 2010 2011 2012 2013 2014 FMCG 5.8% 7.2% 7.4% 8.9% 10.3% 12.3% 13.5% Auto 6.8% 7.8% 7.1% 9.8% 11.4% 11.7% 11.9% Education 17.1% 17.3% 14.6% 10.6% 10.6% 9.7% 9.4% Real Estate 6.4% 6.5% 8.0% 8.4% 8.6% 8.7% 8.0% Clothing/ Fashion/ 5.1% 5.5% 5.3% 6.5% 7.1% 6.1% 6.1% Jewellery E-commerce 1.0% 2.2% Telecom/ Internet/ 6.2% 5.4% 6.3% 4.7% 4.1% 3.6% 3.7% DTH Retail 5.5% 5.8% 5.8% 5.6% 5.8% 5.7% 5.3% BFSI 8.3% 7.9% 8.7% 6.7% 5.7% 6.0% 4.8% Election/ Political 0.6% 1.7% Ads HH Durables 6.5% 5.3% 5.3% 5.7% 4.9% 3.9% 4.2% Travel and Tourism 4.3% 3.5% 2.5% 2.8% 2.3% 1.9% 1.7% Corporate 3.6% 3.0% 3.0% 2.8% 2.2% 1.7% 1.4% Media 1.9% 2.2% 2.2% 1.5% 1.4% 1.4% 1.1% Alcoholic beverages 0.3% 0.3% 0.2% 0.2% 0.1% 0.1% 0.1% Others 22.2% 22.5% 23.6% 25.7% 25.3% 25.4% 24.9% Source: Pitch Madison Reports It can be seen from the above table that FMCG, with a contribution of 13.5% in 2014, continues to be the top spender in print medium for the second year in succession. Of the total FMCG spends in 2014, personal care category contributed 8.2% which is the highest, followed by household category at 4.8% and the remaining 23
0.5% was contributed by FMCG impulse category. Education, which was the leading contributor in print medium till 2011, lost its position to FMCG and auto in the last three years. In 2014, the sector witnessed a further drop in its contribution to the overall advertising pie. While many of the leading sectors such as education, real estate, retail reduced their advertising spend in print medium, political advertisements and e-commerce strongly came to the rescue of print medium advertising. E- commerce players with large format ads, especially during the festive season, garnered a bigger piece of print advertising revenue pie and this substantial growth in the Indian e-commerce sector is projected to further drive advertising spends. Ecommerce as a category invests heavily in print advertisements to showcase its product catalogues, and will therefore continue to be one of the major contributors to the print medium. 2.6 FMCG sector in India The Indian FMCG sector is highly fragmented, volume driven and characterized by low margins. The sector has a strong MNC presence, well established distribution network and high competition between organized and unorganized players. FMCG products are branded while players incur heavy advertising, marketing, packaging and distribution costs. The pricing of the final product also depends on the costs of raw material used. The growth of the sector has been driven by both the rural and urban segments. India is becoming one of the most attractive markets for foreign FMCG players due to easy availability of imported raw materials and cheaper labour costs. India s FMCG industry is massive. In 2013, 8.4 million outlets served 1.26 billion people and accounted for US$37 billion in sales. The last three years have been challenging for India s FMCG industry as the sales have been affected by a weak economy and high inflation. Consumer confidence which is found to have a strong correlation with FMCG sales, has also dipped in this period. In more recent months, however, confidence is rebounding and the sector appears to be one with perceptible signs of a sustained recovery. However, FMCG growth has slowing for some time now, sliding by 8.1% from 2010 to 2013. In a clear indication that sales drivers have played a part in this decline, a slowdown was seen in the rate of distribution expansion and the rate of sachet launches during the same period. Admittedly, weakening macroeconomic 24
variables also contributed to the overall FMCG slowdown. Some of the drivers affecting FMCG sales have been explained in the report by Nielsen India. The factors are as follows: Availability: The slowdown in distribution expansion has held up growth. The distribution expansion in 2013 has slowed down to 1.1% from a healthy 2.3% in 2010. Awareness: While the extent of the impact is smaller, yet, the effect of lower television gross rating points (GRP) has affected sales. Macro factors: Declining FMCG growth seems to reflect the Indian economy as a whole. The key macroeconomic indicators have weakened; GDP has slowed down from 7.9% in 2009 to 5.7% as of 2013. The Index of Industrial Production (IIP) has also plunged from 5.8% in 2009 to 1.7% in 2013. This has affected the economy and the consumers purchasing power. Sachet (Low volume packs): New product launches through sachets have fuelled growth over the years. The growth in the number of low- volume packs hit 31.1% from 2009 to 2010. The rate then dropped to 10.5% from 2012 to 2013. This drop in sachet innovations has impacted FMCG growth. Figure 2.6.1: Major segments in FMCG sector Household care Fabric wash, Household cleaners FMCG Industry Personal care Oral care, haircare, skincare, cos metics, hygiene & paper products Food and beverages Health beverages, staples/cereals, snacks, chocolates, icecrea m, tea/coffee/soft drinks, processes fruits & vegetables, dairy products & branded flour Source: Research report: Indian FMCG Industry, 2013 25
The FMCG sector in India is essentially classified into three major segments which are mentioned below: Household care: The fabric wash market size is estimated to be USD 1 billion, household cleaners to be USD 239 million, with the production of synthetic detergents at 2.6 million tonnes. The demand for detergents has been growing steadily at an annual growth rate of 10 to 11% during the past five years. On account of convenience of usage, increased purchasing power, aggressive advertising and increased penetration of washing machines, the urban market prefers washing powder and detergents to washing bars. The regional and small unorganized players account for a major share of the total detergent market in volumes. Household Care category has recorded robust volume and value growth during the past few years through focused innovation in the portfolio to provide greater consumer value. Personal Care: The personal care products market in India is estimated to be worth USD 4 billion. Personal hygiene products (including bath and shower products, deodorants etc.), hair care, skin care, colour cosmetics and fragrances are the key categories of the personal care market. Each of these segments exhibits its unique trends and growth patterns. For example, the largest segment of personal hygiene products, largely dominated by bar soaps, has grown at 5% p.a. over the last five years. In comparison, the second largest segment, hair care products has seen a much higher growth of 9-10% p.a. during the same period. o The hair care market can be segmented into hair oils, shampoos, hair colorants & conditioners, and hair gels. The coconut oil market accounts for 72% share in the entire hair oil market. o The skin care market is at a nascent stage in India. With the change in life styles, increase in disposable incomes, greater product choice and availability, people are becoming more alert about personal grooming and thus the segment is expected to take off in the coming years. o The oral care market can be segmented into toothpaste-60%; toothpowder-23%; toothbrushes 17%. Food & Beverages: Food processing industry is one of the largest industries in India, ranking fifth in terms of production, growth, consumption, and export. 26
According to Indian Council of Agricultural Research (ICAR) the total value of Indian food processing industry is expected to touch USD 194 billion by 2015 from a value of USD 121 billion in 2012. The packaged food segment is expected to grow 9% annually to become a whopping 6 lakh crore industry by 2030, dominated by milk, sweet and savoury snacks and processed poultry, among other products, according to the report by CII-McKinsey. The ready-todrink tea and coffee market in India is expected to touch 2,200 crore in next four years, according to estimates arrived at the World Tea and Coffee Expo 2013. Branding could drive the next growth wave in the country s food processing sector. The total soft drink (carbonated beverages and juices) market is estimated at USD 1 billion and the market is highly seasonal in nature with consumption varying from 25 million crates per month during peak season to 15 million during offseason. The market is predominantly urban with more than 25% contribution from rural areas. 2.6.1 Latest consumer trends in Indian FMCG sector Urban consumers today account for $25 billion in FMCG spending out of the overall $37 billion Indian FMCG market. The Indian consumer psyche is evolving at breakneck speed and the Indian marketer better keep up with the high stakes. Some of the latest consumer trends in Indian FMCG sector are as follows: Consumers shop more FMCG in chemist stores: The chemist channel has been an outperformer for the FMCG market. For the year ended June 2014, FMCG value growth in chemist shops was 12% versus growth ranges of 7%- 9% for the other store types. Chemists not only attract a more upmarket consumer profile but have also become increasingly FMCG friendly. Consumers increasingly prefer private-label brands: Private labels or store brands are becoming a big deal to shoppers. About 5% of all modern trade sales in India are store branded. Of late, private-label sales have consistently outgrown sales in modern trade, and these store brands are now spreading to unconventional categories like confectionary and dairy. Consumers reward brands that empathize with them during tough times: Indian consumers tend to keep their business with brands that stand by them 27
when the chips are down. Challenger brands that would like to switch consumer loyalties should particularly keep consumer circumstances in mind. Consumers want to be entertained first and educated second: Indian urban consumers have access to over 800 TV channels and are inundated by over 3000 messages a day across online and offline media. Indian consumers now want to be entertained before educated. The first seven seconds in an ad have become more crucial than ever before. Therefore, content is key, and marketers should think long and hard about what content to take to which screen (across TV, online, and mobile). Consumers are willing to switch stores for the right promotion: Promotion sensitivity has increased meaningfully for FMCG in India. Consumers are actively looking for them, and promotions have the ability to influence 27% of consumer purchases in stores for FMCG categories. In 2011, 18% of all shoppers said they switch stores for better promotions; this number has increased year on year and in 2014, it surged to 32%. Consumers are more willing to experiment and try new products: 49% of consumers who shop in traditional trade and 59% who shop in modern trade say that they love to try new things. Modern trade outlets, specifically, have emerged as innovation laboratories for consumers who use such stores to experiment with new launches across categories. Consumers are willing to spend a disproportionate part of their monthly budget on health, hygiene and wellness: In 2013, among the fastest growing categories were health and wellness focused categories like olive oils (36% value growth), milk foods (19%), sugar substitutes (19%) and breakfast cereals (14%). Personal and home hygiene-focused categories followed similar trends and saw high value growths: diapers (29%), and sanitary napkins (19%), air fresheners (16%), and liquid toilet soaps (24%). 2.7 Personal care FMCG segment The use of beauty and personal care products is no longer limited to urban India. Awareness of such products has strongly increased due to television commercials, celebrity endorsements, social media campaigns and print media. This helped to drive the growth of beauty and personal care in India during 2014. India s 28
personal care industry is composed of hair care, bath products, skin care and cosmetics, and oral care. The sector is driven by rising income, rapid urbanization, and celebrity promotions. This industry accounts for 22% of the country s fastmoving consumer goods (FMCG), which is the term for Consumer Packaged Goods in India. Foreign direct investment in this sector totaled $691 million in 2014. Hair care is a main category of this industry. A study by Nielsen, a market research firm, determined that shampoo is the most popular FMCG product in India. The $818 million shampoo segment is dominated by Hindustan Unilever Ltd., owned by U.K.- based Unilever. Its most popular brands are Sunsilk, Clear, and Clinic Plus. Hair oil is another important product, valued at $1.3 billion annually. India-based Marico's Parachute and Dabur are leaders in the production of branded coconut hair oil. Estimated at $1 billion, the soap and bath category is significant. Soap is a prevalent product found in more than 90% of Indian households. The most common brands include Godrej s Cinthol, Reckitt Benckiser s Dettol, Wipro s Santoor, and Unilever s Lux, Dove, Hamam, and Lifebuoy. For men, shaving cream and razors are important personal care items. Procter & Gamble s Gillette is the most popular shaving cream and razor brand in India. Within the cosmetics category, India s most prevalent products are skin creams, lotions, whitening creams, and makeup. Hindustan Unilever has three brands that are popular among Indian women Fair & Lovely, Lakmé, and Ponds. Fair & Lovely was the world s first skin lightening cream and is the company s leading skin care brand. Colgate Palmolive s Charmis moisturizer is also prominent. The majority of the demand for cosmetics comes from working men and women. L Oreal Paris develops both skin care and cosmetic products for India. New York-based Revlon expanded further to smaller cities in India, generating $40 million in revenues in 2014. The organic skin care category grows at over 20 percent annually and is expected to total $157 million in 2020, according to Azafran Innovacion, an organic skincare group. Large Indian organic skin care companies include Himalaya Herbals and Biotique. Both specialize in Ayurveda-based products. The oral care category is the smallest category; less than half of Indian consumers utilize western-style products such as toothpaste. Colgate Palmolive dominates more than half of this industry and was named India s most trusted brand four years in a row by a brand 29
equity survey. Hindustan Unilever is another significant player with toothpaste brands Pepsodent and Close Up. 2.7.1 Development of Personal Care segment in India An analysis of the market drivers explains the factors for growth of the market and includes increase in disposable income; growth in men s grooming segment, increase in awareness, and growth in rural segment and rise in organized retail. Personal care products do not really fall within the purview of necessities barring a few. Due to international products making a beeline in the Indian market, some are more often being termed as luxury products. Intensive research and development has allowed players to improvise on existing products towards catering to customized needs of consumers. An increase in disposable income at the hands of people acts as the primary driving force in this sector as people have the capacity to spend on such products. Another reason for growth is the emergence of the male grooming sector. Women category has always been a driving force, but the added percentage in terms of male segment has only furthered growth in this sector. As men pay more attention to their appearance and image, this category has attracted a host of products represented strictly for their needs. Media penetration acts a chief stimulant in this aspect as it results in heightened awareness among the masses. Players continue to advertise and look to provide promotional offers in order to create visibility and awareness regarding products to further offtakes. The rural segment has also played an imperative role in the markets growth story. Majority of India s population resides in rural areas and the means to tap this segment assures higher margins. Indian Government has enforced certain regulations that contribute to growth in rural income. Growth in rural income, affecting this market, has been noticed in the usage of toothpaste from that of toothpowders. Rise in agricultural outputs aided with non-agricultural income is only to support success for personal care sector. Further, organized retail poses as a chief driver especially in the urban segment. An organized retail presents with it an opportunity to showcase 30
products, both domestic and international, on a larger platform. Availability and penetration of products determine a brand s success which is aptly sourced through retail outlets. However, the sector is also facing certain challenges. Factors such as harmful effects of chemicals, depreciation of rupee and rise in packaging cost pose as impediments for this sector. The development of the small functional segment of personal care products helps penetration to the smaller and low income group customers. The gradual breaking of the earlier concept of home- made concept of personal grooming up products has transformed to the readily available variety of such need. The increased level of education, increased health and hygiene awareness and media penetration to the remotest part even helps building health and hygiene awareness that leads to the use of personal care products. Development of the organized retail sectors and participation of foreign companies excel the development further. Women participation in the large work force necessitates personal care products more for better socialization are the prime drivers of the development. Government participation in this sector covers Drugs and Cosmetics Act 1940, Bureau of Indian Standards and Drugs and Cosmetics Rules 2010. The major trends identified include innovation, personal care appliance, improved marketing strategies, products with dual benefits, rise in organic products and teens market. 2.8 Summary of Advertising in personal care FMCG segment It can be inferred from the above discussion that advertising plays a major role in the buying behaviour of consumers in FMCG sector in India. Advertising revenue across all media is found to be increasing by the year. Advertising in personal care segment holds a special importance as the products included in this category are mainly hygiene related as well as aspirational. Thus, it remains an important task to persuade consumers for buying products of a particular company. However, not much data is available on how does advertising impact consumer s response towards advertisements and ultimately the brands in personal care FMCG segment. Therefore, 31
this study focuses on finding out various factors which play an important role in forming consumers response towards advertisements in personal care FMCG segment. 32