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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.

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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

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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

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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 life-

styles. 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.

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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

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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.

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Table 2.4.1: Advertising history in India

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

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.

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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%

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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

Industry size

(INR billion)

2010 2011 2012 2013 2014 Growth in

2014 over

2013

Advertising 126 139 150 163 176 8.5%

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revenue

Circulation

revenue

67 69 75 81 87 7.9%

Total print

market

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)

2015P 2016P 2017P 2018P 2019P CAGR

(2014-

2019P)

Advertising

revenue

193 212 233 255 280 9.7%

Circulation

revenue

92 95 99 103 107 4.2%

Total print

market

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

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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/

Jewellery

5.1% 5.5% 5.3% 6.5% 7.1% 6.1% 6.1%

E-commerce 1.0% 2.2%

Telecom/ Internet/

DTH

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%

Election/ Political

Ads

0.6% 1.7%

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

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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

25

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

Source: Research report: Indian FMCG Industry, 2013

FMCG Industry

Household careFabric wash, Household

cleaners

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

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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.

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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-to-

drink 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

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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

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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 fast-

moving 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

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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 off-

takes.

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

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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,

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this study focuses on finding out various factors which play an important role in

forming consumers‘ response towards advertisements in personal care FMCG

segment.