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Competitive pressures increase HUL's ad spend

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MUMBAI: FMCG major Hindustan Unilever Ltd‘s (HUL) spend on advertising increased for the third consecutive quarter in the three months ended 30 September, on heightened competitive intensity which has taken the industry ad spend to a 15-quarter high.

HUL spent Rs 7.69 billion on advertising and promotion in the second quarter, 18.13 per cent more than Rs 6.51 billion a year earlier. "A&P was stepped up and maintained at competitive levels," the company said in its earnings release.

It started increasing its advertising spends from the fourth quarter ended 31 March 2012. For the fourth quarter it spent Rs 6.77 billion, up 8.67 per cent from a year earlier. For the whole of 2011-12, HUL‘s advertising spend was lower from a year earlier.

HUL said, "The operating context remained challenging during the quarter with a volatile cost environment and heightened competitive intensity. Overall industry media spend was up significantly to its highest levels in over 15 quarters."

As the company fought competition in the FMCG industry, it remained absent from the Star Network‘s bouquet of entertainment channels for about three months. Earlier this month, HUL returned to advertise on the Star Network.

HUL‘s ad spends in the second quarter accounted for 14.26 per cent of its total expenses of Rs 53.92 billion, against 13.45 per cent of total expenses of Rs 6.89 billion a year earlier. Its spend on advertising and promotion accounted for 12.18 per cent of total revenues in the second quarter against 11.6 per cent a year earlier.

The company‘s revenue for the second quarter ended 30 September was Rs 63.11 billion, 12.50 per cent more than Rs 56.1 billion a year earlier. Its net profit also saw a double digit spike of 17.13 per cent to Rs 8.07 billion from Rs 6.89 billion a year earlier.

On a half-yearly basis, HUL‘s ad spends increased by 28.77 per cent (first quarter‘s YoY increase was 30 per cent) to Rs 15.89 billion from Rs 12.34 billion a year earlier. For the half year, the ad spends constituted 12.52 per cent of the total revenues and 14.63 per cent of the total expenses.

The company‘s revenues for the first six months were at Rs 126.9 billion, up 13.31 per cent from Rs 111.99 billion a year earlier. Its net profit increased by 62.46 per cent to Rs 21.38 billion in the first half from Rs 13.16 billion a year earlier.

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