Cautious Optimism: Covid surge unlikely to impact AdEx growth in 2022, asserts industry

Advertisers and media agencies are cautiously optimistic about the growth in Advertising Expenditure (AdEx) in 2022 despite the surge in Covid-19 cases in the last few weeks. According to experts, the third wave will not have a huge impact, like the first and second waves, as a large chunk of the population is vaccinated and the number of people who had to undergo hospitalisation is lower than the previous waves.

The market and consumer sentiments are still intact, which means that there will be very little impact on consumption. Ad spends, they say, are directly proportional to consumption. 

Maruti Suzuki India Executive Director Marketing & Sales Shashank Srivastava said that the situation is very fluid right now, and it's too premature to talk about the impact of rising Covid-19 cases on AdEx. He believes that the country is better prepared this time unlike the first two waves. He also said that Maruti Suzuki will increase its ad spending by at least 10%.

"As of now, all our plans are on track as far as advertising is concerned. We plan to increase our ad budgets by 10%. Our advertising is divided into four parts - new product launches, sustaining existing brands, corporate advertising, and lower end of the funnel campaigns," Srivastava said.

Elaborating further, he stated, "New product launches require marketing investments since we have to build awareness about the product. Since our new product launches are on track we don't foresee any reduction in that area. The second part is advertising to sustain the recall for our existing brands. While these products are established, they need to be kept alive in the consumer's mind through frequent advertising. That spend might go up rather than going down. The third is corporate advertising to highlight a common feature across all our products like fuel efficiency or technology. The lower end of the funnel campaigns is mostly about final conversion of enquiries to retail and thus involves sales promotional offers."

During the calendar year 2021, the passenger car manufacturing industry achieved a landmark of 3 million car sales despite the twin shocks of the second Covid-19 wave and the semiconductor shortage. This, Srivastava said, has happened only thrice during the history of this industry. "That gives us optimism for 2022 as well," he added.

Dabur India Senior General Manager and Head of Media Rajiv Dubey said that the overall AdEx should see high single-digit growth. "Since a large part of the population is vaccinated the fear factor that was visible in 2020 is not there in 2022. The stock market is also responding positively which is a good indicator of sentiments. Things are not going to look as bad as they were earlier. Advertising will not get impacted as it was in 2020. There will be business as usual and although there could be some restrictions there won't be complete lockdown due to which businesses will not get affected," he asserted.

Dubey believes that digital will surpass or will be on par with TV in the coming months. "Both TV and digital grew by 20-30% last year and will continue to do well in 2022. 2021 was one of the best years for the TV industry and 2022 is likely to be similar. Print is also recovering well. Regional print is performing better than English. Vernacular newspapers were not impacted in the first and second waves as well. Radio is still soft and will take some more time to recover."

Parle Products Senior Category Head - Marketing Krishnarao Buddha feels that the third wave will not have a huge disruption even as the cases are disproportionately higher. "The difference in the cases between March, April, May, and June 2020 is that there is no need for hospitalisation which means that these are relatively mild cases. Last time, there was a lack of preparation which led to increase in the cases of hospitalisation and shortage of oxygen. This led to lockdowns and shutdowns which hurt businesses and had an impact on overall AdEx. Print, Radio, and OOH were severely impacted and so was television. Digital was the only medium which saw some respite," he noted.

Buddha also said that the overall AdEx might see a 10-15% increase as consumption is unlikely to see a drop in demand. "Parle would be active, and we look forward to advertising as usual and my outlook is that there is going to be growth in AdEx over 2021. I expect AdEx to see a 10-15% increase across mediums. Digital will be disproportionately higher and will continue to thrive. Television will hold its ground due to the presence of high-impact properties. We will also have to see whether IPL will happen in one go in April-May or it will be a truncated season like last time," he said.

Parle uses a mix of TV and digital for achieving its marketing objectives. "Five years ago, our digital spends used to be 2-3% today it is upwards of 10%, and as we progress it might be upwards of 12% next year. We may further up it depending on the properties that we get. For us, TV is the biggest advertising vehicle with over 80% of the total allocation. We use TV for our mass as well as premium brands because TV provides that opportunity," he informed.

Amplifi Group Trading Director Sujata Dwibedy feels that the surge in Covid-19 cases might be a dampener but the AdEx will continue to see growth since the preparedness is much better this time. "We are seeing a surge in Covid-19 cases but like a lot of forecasts suggest the peak might happen in February. What is seen in the last two years of the pandemic is that the festive season has uplifted the sentiments and the advertising spends have come back to almost 2019 levels in 2021. It will be a little bit of a dampener, but the growth will still happen."

She added that it's too early to speak about the exact impact on the AdEx as the advertising is happening just the way it was happening. "Many people are vaccinated and people are much more conscious and aware. I don't think AdEx will get impacted, but there is a concern that it may dampen it for sure. Digital will see double-digit AdEx growth, but TV will also see good growth with so many events lined up. Print, radio, and outdoor will see some recovery. Cinema advertising may also see some upside because it had gone to zero."

DDB Mudra Group Country Head & Managing Partner – Integrated Media Rammohan Sundaram believes that the country is well-prepared now than the previous two waves. Based on the changes in consumer behaviour in the last two years, Sundaram feels that the overall dependence on technology has increased. He also said that there won't be any drop in AdEx as TV and digital consumption are still high.

"Television viewing is only going to increase. With the usage and adoption of various apps for general activities we need to do during our regular lives in the current state, we will see the surge of new-age companies advertising for that eyeball. Also, to remain top of mind, regular brands will continue to maintain their GRPs so that a consumer looks for them on various platforms which will be used for shopping, for example. We are not losing any more jobs, which means more disposable income. With all these pluses, there is no way we will see dramatic drops in AdEx. If not significant growth there will still be growth," he added.

He also said that the media and advertising companies will not see de-growth. "As a team, we delivered record numbers in 2021 when the going was tough for everyone. So we believe there is always an opportunity in adversity. I am sure we are not seeing any such indications in Q1 currently. If things go dramatically wrong by Q4, we will need to see then. However, there is no such indication I am seeing currently."