Download Chapter 2 Overview of Advertising in FMCG sector

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
Modern advertising history began with classified advertising.
1780
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.
B Dattaram & Co, one of the early companies making
1905
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
2008
2009
2010
2011
2012
2013
2014
Growth
Industry size
in 2014
(INR billion)
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
6.0
8.0
10.0
15.4
21.7
30.1
43.5
44.5%
221
228
266
300
327
362.5
414.0 14.2%
Advertising
Total
Source: FICCI-KPMG Indian Media and Entertainment Industry Report 2015
Table 2.5.2: Advertising revenue projections
Overall Industry 2015P
2016P
2017P
2018P
2019P
size (INR billion)
CAGR
(20142019P)
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
62.5
84.0
115.3
138.2
162.5
30.2%
Advertising
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
Industry size
2014
(INR billion)
2013
Advertising
126
139
150
163
176
in
over
8.5%
21
revenue
Circulation
67
69
75
81
87
7.9%
193
209
224
243
263
8.3%
revenue
Total print
market
Source: FICCI-KPMG Indian Media and Entertainment Industry Report 2015
Table 2.5.1.2: Print media market projections
Overall Industry 2015P
2016P
2017P
2018P
2019P
size (INR billion)
CAGR
(20142019P)
Advertising
193
212
233
255
280
9.7%
92
95
99
103
107
4.2%
284
307
332
358
387
8.0%
revenue
Circulation
revenue
Total print
market
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%
1.0%
2.2%
Jewellery
E-commerce
Telecom/ Internet/
6.2%
5.4%
6.3%
4.7%
4.1%
3.6%
3.7%
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%
0.6%
1.7%
DTH
Election/ Political
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. Ecommerce 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
FMCG
Industry
Personal care
Food and
beverages
Fabric wash, Household
cleaners
Oral
care, haircare, skincare, cos
metics, hygiene & paper
products
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