The Hindu Business Line : FMCG big spenders boost ad industry fortunes

WHEN the heads of three main international networks of advertising, Martin Sorrell (WPP), Tony Wright (Lowe Worldwide) and Michael Birkin (Omnicom), come calling in 2005, it can only herald a great year for the ad industry.

Estimating the growth rates for the year gone by, Mr Sam Balsara, Chairman & CMD, Madison Advertising, claims, "While growth in 2005 was projected at 13 per cent, it is likely to cross that and the year will end at a 15 per cent growth rate.''

The big spenders have been FMCG (tea, hair dyes and biscuits, aerated drinks and hairdressing) along with real estate, property and mutual funds. However, there are categories such as mobile phones and their services, which were expected to help increase ad spends but have remained constant this year. Surprisingly, ad spends have been dipping for categories such as two-wheelers, motorbikes and TV sets, according to Mr Balsara.

During the year, ad agencies did look at other areas of growth apart from mainline advertising.

While Rediffusion floated a design division, Madison got into the area of entertainment under the Mates brand. Lowe Lintas beefed up its strategic planning functions while FCB Ulka enhanced its consulting functions under Cogito by unleashing the Brand Relationship Style Monitor.

Second-rung agencies hitherto set up to avoid client conflicts also got a new lease of life. For instance, rmg david, (the O&M-owned agency) went in for a new avatar — David, while Contract (owned by JWT) unveiled its new creative vision and also unleashed a new proprietary tool: Unboxing.

The WPP Group also decided to merge Bates Enterprise during the year. The combined entity added to the strength of the already strong WPP roster of agencies.

Said Mr Subhash Kamath, CEO, Bates India, "We've done reasonably well keeping in line with overall market growth. 2006 is going to be a critical year for us in accelerating that momentum and increasing our margins. We're in the final stages of merging with Enterprise Nexus and that has given us a quantum growth in terms of revenue and client base. Managing this merger smoothly, from all (legal, structural and cultural) points of view, is going to be our single biggest challenge. It's a fantastic team and we're extremely optimistic about it. I'd say the industry has grown between 10-15 per cent. We've grown in line with that.''

Commenting on the year gone by, Mr Madhukar Kamath, MD and CEO, Mudra Group, added, "We've had a decent year. Given current industry growth and the opportunities that the market presents, we should have done better. Having said that, we have done well to capture a significant share of the marketing communications space through Mudra Marketing Services. The composition of our business is increasingly reflecting our clients' needs, and that's a good sign. Another important matter that will occupy us next year is our experiment in Delhi with a `total branding solutions' offering, involving significant changes in the agency structure; it's an idea we are very excited about. That's a major challenge going forward.''

Elaborates Mr M.G. Parameswaran, ED, FCB Ulka, "The year 2005 has been a good year for the ad industry, following up on the turnaround we saw in 2004. We saw several new brand building initiatives from large corporates and the growth drivers were who we have been seeing for the last few years: telecom, auto, BFSI (Banking and Financial Services and Insurance).''

Adds Mr Pranesh Misra, President & CEO, Lintas Group, "The year has been the second successive growth year for the industry. The media spend levels have grown dramatically, coinciding with a change of consumer and investment sentiment. Lowe Lintas has had a great year. We have seen not only growth in revenues, but also a significant improvement in the customer perception of our agency. We now handle the largest number of brands amongst the top 20 most respected brands, overtaking JWT. The challenges ahead will be to further consolidate strategy planning as a key value addition — make knowledge a long-term differentiator of the agency. Invest in talent. Invest in new knowledge. Embrace the global market and be ready to create advertising for the world.''

On the flip side, the industry cannot get complacent about its growth rates and there are other threatening issues plaguing the industry.

"While advertising is getting better, the ad industry continues to have a weakness for new business. There are more pitches happening and agencies are giving more work. At the same time, there is not adequate talent moving into the industry. Agencies should take a hard look at their business model and in the coming year should take a drastic step towards self-preservation,'' advises Mr Balsara.

Mr Colvyn Harris, CEO, JWT, summarises the year for the ad industry. Says he, "While it has been a great year from a business stand-point, there have been other challenging industry issues, especially in terms of getting the right talent and professional skills but we are gung ho about 2006. India has been doing well and will continue to do well in the coming year.''

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