HUL reduces Dec month ad spend by 50%; to release ROs in week-on-week basis

Mumbai: India’s top advertiser Hindustan Unilever (HUL) has decided to cut its advertising spends on TV in December due to the impact of demonetisation exercise that has forced the consumer to minimize his monthly spending because of the liquidity crunch and uncertainty in the functioning of ATMs and Banks.

Highly placed sources across media agencies and television channels revealed that the advertisers has held back the RO (Release Orders) for December month to many broadcasters that usually reaches them by beginning of the 4th week of the previous month.

The sources also reveal that HUL has decided to release the RO on week-on-week basis, moving away from the practice of sending it for the entire month in one-go. The estimated monthly spending of HUL is around Rs 300 crore and the advertiser has reduced it by half for this month.

“HUL people are saying that they might cut 50 per cent in December. For a company that spends close to Rs 300 crore on TV ads in a month, this amount to Rs 150 crore.” said a top sales executive of a TV network confirming the development.

“Yes, we have not received ROs for December. The feelers we are getting is that they are going to cut ad spends by 40-50 per cent,” he said.

On the other hand HUL’s spokesperson said, “As a policy we do not comment on market speculation. It is pertinent to clarify that we continue to invest behind our brands to drive business growth. Our advertising and promotion investments are always planned dynamically to ensure that they are relevant to the market and consumer context.”

Recently, HUL had said in an investor presentation on Monday that the market growth will be adversely impacted in the short term due to the ongoing demonetisation scheme of the government and GST. But, it also added that in the long term, it would be “win-win for everyone”. The presentation mentioned that consumers will likely suffer temporary pain in the near term due to “lower cash in hand” and will remain cautious with their spends focusing only on the necessities.

The presentation said that the trade will be down-stocking due to liquidity squeeze and that “media heat” will likely to be lower. However, the HUL presentation added that it will be maintaining “competitive ad spends” to drive offtake.

However, by succumbing to the demonetisation pressure, HUL has contradicted its own stand as stated in the presentations.

While it was estimated that the industry is facing a situation of mass cancellation of ROs from the advertisers to the tune of Rs 700 crore, HUL has just triggered the wave of tsunami that might follow in couple of days unless a miracle happens during the buying cycle of early part of December month.