ITC marketing spend trends - FY-2014

BENGALURU: Indian fast moving consumer goods (FMCG), hotels, paperboards and specialty papers, packaging, agri-business, and information technology company ITC Limited (ITC) advertisement and sales promotion spend (ASP) in FY-2014 was 1 per cent lower at Rs 825.81 crore (2.28 per cent of Total Revenue or TR) as compared to the Rs 834.23 crore(2.57 per cent of TR) in FY-2013.

Note: 100,00,000 = 100 Lakhs = 10 million = 1 crore

The company has a huge brand and sub-brand portfolio and is one of the biggest player in the highly competative FMCG market, that is constantly adding newer and newer product categories and products. Some of the brands and sub-brands under the ITC umbrella across vertials include Sunfeast, Fiama Di Wills, Kitchens of India, ITC Hotels,  John Players, Bingo, Vivels, candyman, Mangaldeep, Aashirvaad, Classmate, Paperkraft, Wills, Aim, Engage and Mint-o.

ITC’s ASP in terms of percentage of TR in FY-2014 was the lowest at 2.28 per cent over the 11 year period beginning FY-2004 till FY-2014. However, in absolute value terms, FY-2014 ASP at Rs 825.81 crore was the second largest during this period, the largest being in FY-2013 at Rs 834.23 crore. The company’s highest ASP spend in terms of percentage of TR was in 2004 at 3.97 per cent (Rs. 265.72 crore).

The linear trend in Fig A below indicates that while in absolute rupee terms, the company’s  ASP will be higher in FY-2015 and beyond, ASP in terms of percentage of TR, ASP is likely to be lower or flat.

ITC’s annual reports indicate some interesting facts. Please refer to Fig B below. The company’s TR has increased by 5.42 times from the Rs 6695.32 crores in FY-2004 to Rs 36288.03 crore in FY-2014, correspondingly, its total expenditure has gone up 5.31 times from Rs 4376.26 crore (65.4 per cent of TR)  to Rs 23236.48 crore (64 per cent of TR); it corresponding PAT too has jumped 5.58 times from Rs 1592.85 crore (23.8 per cent of TR) to Rs 8891.38 crore (24.5 per cent of TR), while its ASP has gone up by only 3.11 times from Rs 265.72 crore (3.97 per cent of TR) to Rs 825.81 crore (2.28 per cent of TR). Even in FY-2013, ASP was just fractionally more at 3.14 times the ASP in 2004. This indicates that the improvement in expenditure has been at the cost of lowering of ASP in terms of percentage of TR.

Big players like HUL, Britannia and Parle in the foods and FMCG space are vying for the viewers attention and stomach space in the case of food, as ITC Foods division past CEO Ravi Navare once said. Over time, its ASP and specifically its ad spends should grow in absolute rupee terms, and maybe remain flat in terms of ASP as percentage of TR?

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