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Marketing and Growth

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Submitted By manikandanr8
Words 489
Pages 2
Calculus POWERED BY ETIG CONSUMER GOODS COS
Rise in Volume is now Critical to Growth

Interpreting Numbers & Trends Cos like GSK Consumer Health and Colgate kept up the pace of their ad spend in the last fiscal and will be reaping benefits in the coming quarters

JWALIT VYAS ET INTELLIGENCE GROUP

Consumer goods companies which have consistently invested in their brands in the past few years are likely to outperform their peers who curtailed their advertisement expenditure in a high inflationary environment.During the last fiscal,companies such as HUL,Dabur,Marico,Nestle and Jyothy Laboratories had significantly cut down their advertisement expenditure to protect their margins as high raw material prices were hurting.For instance,HUL brought down its advertisement to sales ratio in FY12 by 250 bps to 11.5%,the lowest in the last three years.Similarly,Dabur Indias domestic advertisement to sales ratio was at 10.6%,its lowest in the last four years.Jyothy Laboratories advertisement to sales ratio was only 6.5%.Compared to this,companies such as GSK Consumer Healthcare and Colgate have a higher advertisement to sales ratio and have been consistent in their brand investments.While GSK Consumer Healthcares advertisement to sales ratio has been consistently over 15% for the last few years,it has been around 13% for Colgate.This will allow these companies to sustain their sales growth and enjoy higher pricing power.Also,these companies will have flexibility with their spending in the coming quarters.Strong branding also allows these companies to have a better pricing power and,hence,higher profit margins.The PBIDT (profit before interest,depreciation and tax) margins of GSK Consumer and Colgate are the highest among the lot.In FY12,PBIDT margins of GSK and Colgate were above 22% and 24%,respectively,while that of others were below 20%.HUL,Dabur India and

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