Slowdown impact: Festive season to see muted growth in ad spend

“We don’t think the slowdown in auto and consumer categories is going to impact the total festive ad spends. The reason for this is because consumers are still going to spend on e-commerce and lifestyle categories. This year, however, we see that the festive adex category will remain constant at

Rs 25,000 crore or will have very marginal increase. Print will be the lead medium with more than 70 percent SOE (Share of Experience), followed by TV and radio,” said Saurabh Varma, CEO, Publicis Communications, South Asia.

“In the first half of the year, the general elections, the IPL and the World Cup gave advertisers plenty of opportunities to generate significant advertising revenues. During the festive period, we will see spends in line with last year .i.e, Rs 25,000 crore,” said Partha Ghosh, COO, West and South, Percept Media.  “While the slowdown in the consumption and automobile sectors has impacted ad spending, natural disasters such as floods have further catalysed the curb on ad spends. If nature’s fury continues into the festive period, it will further impact overall spends especially by the FMCG sector,” he added.

“This year the industry had projected a 14-15 percent growth for 2019 led by the 3 marque events – IPL, World Cup and Elections. While those events went off well, the current season has not witnessed a lot of ad spends by brands on the back of economic slowdown. The festival season is a very critical period for most advertisers for all categories in the country. Brands will not take the risk of cutting their media budgets during the festival quarter. They are expected to spend heavy media money to woo consumers. However, because of the current slowdown, the annual growth rate in media might go down to 10-12 percent,” said Navin Khemka, CEO, Mediacom South Asia.

Earlier this year, Madison World revised its advertising expenditure growth forecast, lowering it from 16.4 percent to 13.4 percent. The revised Pitch Madison Advertising Outlook Report 2019 states it expects Q3 to be “reasonably strong” on the back of the festive season. “It appears that the consumer is looking for reasons to not spend or delay his spending. At a time like this, advertisers should not lose faith in advertising, and use it aggressively but effectively to protect their share,” said Sam Balsara, chairman of Madison World in the report.

The festive period, which begins with Janmashtami, Ganesh Chaturthi and Onam and ends with Christmas, is an important time for advertisers, accounting for nearly 40 percent of the advertising expenditure for the year.

This year’s festive period comes at a time when the Indian economy stares at a weaker-than-expected demand outlook, with both the IMF and the Asian Development Bank lowering their growth forecast for 2019, citing domestic and global headwinds. The slowdown has been extremely pronounced in the automobile sector, with inventory piling up and thousands of lay-offs across the sector as consumers hold off big-ticket discretionary purchases.

The FMCG sector has witnessed a significant slump over the past four quarters, both by volume and value. The slowdown is particularly pronounced in the hinterland, with market researcher Neilsen stating that rural consumption is slowing down at double the rate of urban, in its latest quarterly report ‘India FMCG growth snapshot’.

The e-commerce sector is, however, bucking the trend with online spending on consumer durables and white goods sustained by heavy promotions and deep discounts through shopping festivals. This will continue in the festive period too.

While the FMCG, automobile, e-commerce and jewellery sectors will continue to be staple contributors to this year’s festive ad spends, media planners say they expect heightened activity by OTT platforms and entertainment channels, telecom, travel and tourism and real estate players. The automobile industry, which is reeling under the worst slowdown it has seen in nearly two decades, will use the festive period to aggressively push idle inventory, they added.

“One change we will see is in Chinese consumer goods, who will reduce their Above –The-Line (ATL) ad spends this year significantly, but will increase their spends on digital. This is because these products have created awareness through ATL campaigns. Now, they’ll take the tactical route, through spends in sponsorship and digital as their main medium,” said Varma of Publicis Communications.

Expenditure on digital advertising continues to grow at the fastest rate amongst all mediums. KPMG India’s latest report on the M&E sector, “India’s digital future: Masses of niche, states that the digital advertising segment grew 38 percent in FY19, even as TV advertising spends were impacted by consumption slowdown and the impact of the New Tariff Order. While advertising revenues continued to drive the print medium in FY19, the sector continued to witness a subdued growth of 4.5 percent.