note demonetisation

A dull December: How demonetisation is hitting the advertising industry

With product sales dropping across industries, companies are pulling out of marketing campaigns planned for the next month.

With Christmas and New Year to cash in on, December is usually a busy – and profitable – month for the advertising sector. But this December is likely to be a dull one. If the cash crunch caused by demonetisation has led to a slump in business across sectors, advertising is the one industry that ends up feeling its collective pinch.

In the three weeks since currency notes of Rs 500 and Rs 1,000 were demonetised, advertising agencies and other media companies have seen a marked decrease in the advertising expenditure of companies, particularly those producing fast-moving consumer goods. By the end of December, some media agencies are expecting to see advertising cancellations worth Rs 600-Rs 700 crore, while others estimate a 25%-30% drop in advertising spend in the short term.

While this would mean a definite gloom in the third quarter of the financial year (October to December), advertising experts are unsure if these effects of demonetisation will spill over into the next quarter.

Pulling out of product launches

Since advertising both influences and reflects consumer sentiment, the industry serves as a sensitive barometer of the mood of a country and its consumers. “The moment a chill sets in, it [the ad industry] is one of the first sectors to catch a cold,” said Anvar Alikhan, senior vice president and strategy consultant at JWT, a prominent advertising agency.

With the government suddenly invalidating 86% of the India’s circulating currency, and the Reserve Bank of India still struggling to push new, valid currency notes back into circulation, demonetisation has had a direct impact on consumers’ ability to buy commodities. This, in turn, has brought down sales of almost all goods that are discretionary, or not essential to people’s lives. These include real estate, durable goods like vehicles and gadgets and a host of retail and fast-moving consumer goods. For instance, Britannia Industries – known for its biscuits and processed food products – is expecting its sales to be hit by 15% to 20% in the next six weeks.

The drop in sales in the past three weeks has led to a clear drop in the advertising expenses companies are willing to make. “If consumer demand is going to be significantly lower, then advertising spends will also be correspondingly hit,” said Anant Rangaswami, editor of CNBC TV18’s Storyboard, a show on advertising, brands and entrepreneurship.

Since FMCG companies are among the biggest advertisers in India, particularly in the sector of television commercials, they are now cancelling or postponing ad campaigns and product launches that were planned for December.

“Companies are categorically postponing product launches, which will affect the revenues of general entertainment channels,” said Rangaswami. “December and Quarter 1, 2017, are likely to be dry months.”

At several advertising agencies, senior client servicing executives confirm this unexpected slowdown. “One of our clients, an FMCG brand, had a whole ad campaign ready for the launch of a new product, but they have paused it for now because this is not the right market environment for a product launch,” said the client servicing head of a leading advertising agency in Mumbai.

At another prominent agency, a senior executive claimed that campaign launches have been deferred for “cash offtakes”, or products that are usually always paid for by cash. “One quarter is definitely going to be washed out,” said the executive, who did not wish to be named. “A lot of marketers are sitting on the fence, waiting and watching to see how things play out.”

A long wait?

Most companies and advertisers have no option but to wait and watch, because of the widespread uncertainty about the medium and long-term impact of demonetisation.

“From November 8 till today, the government has made so many changes on demonetisation, it is difficult to predict what the next quarter will look like,” said Rangaswami.

So far, says Alikhan, advertising spends had been reflecting the country’s GDP growth in recent months, which was clocking 7%. “But now suddenly the mood has turned frosty, and the big question is how much of a hit the economy will take in the coming six to 12 months,” he said.

Since there is almost no precedent to the kind of demonetisation that the Indian government is now attempting, what happens in the next few financial quarters will depend on how the government is able to manage the current liquidity crisis, says Alikhan.

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“My body instantly craves chai and samosa”

German expats talk about adapting to India, and the surprising similarities between the two cultures.

The cultural similarities between Germany and India are well known, especially with regards to the language. Linguists believe that Sanskrit and German share the same Indo-Germanic heritage of languages. A quick comparison indeed holds up theory - ratha in Sanskrit (chariot) is rad in German, aksha (axle) in Sanskrit is achse in German and so on. Germans have long held a fascination for Indology and Sanskrit. While Max Müller is still admired for his translation of ancient Indian scriptures, other German intellectuals such as Goethe, Herder and Schlegel were deeply influenced by Kalidasa. His poetry is said to have informed Goethe’s plays, and inspired Schlegel to eventually introduce formal Indology in Germany. Beyond the arts and academia, Indian influences even found their way into German fast food! Indians would recognise the famous German curry powder as a modification of the Indian masala mix. It’s most popular application is the currywurst - fried sausage covered in curried ketchup.

It is no wonder then that German travellers in India find a quite a lot in common between the two cultures, even today. Some, especially those who’ve settled here, even confess to Indian culture growing on them with time. Isabelle, like most travellers, first came to India to explore the country’s rich heritage. She returned the following year as an exchange student, and a couple of years later found herself working for an Indian consultancy firm. When asked what prompted her to stay on, Isabelle said, “I love the market dynamics here, working here is so much fun. Anywhere else would seem boring compared to India.” Having cofounded a company, she eventually realised her entrepreneurial dream here and now resides in Goa with her husband.

Isabelle says there are several aspects of life in India that remind her of home. “How we interact with our everyday life is similar in both Germany and India. Separate house slippers to wear at home, the celebration of food and festivals, the importance of friendship…” She feels Germany and India share the same spirit especially in terms of festivities. “We love food and we love celebrating food. There is an entire countdown to Christmas. Every day there is some dinner or get-together,” much like how Indians excitedly countdown to Navratri or Diwali. Franziska, who was born in India to German parents, adds that both the countries exhibit the same kind of passion for their favourite sport. “In India, they support cricket like anything while in Germany it would be football.”

Having lived in India for almost a decade, Isabelle has also noticed some broad similarities in the way children are brought up in the two countries. “We have a saying in South Germany ‘Schaffe Schaffe Hausle baue’ that loosely translates to ‘work, work, work and build a house’. I found that parents here have a similar outlook…to teach their children to work hard. They feel that they’ve fulfilled their duty only once the children have moved out or gotten married. Also, my mother never let me leave the house without a big breakfast. It’s the same here.” The importance given to the care of the family is one similarity that came up again and again in conversations with all German expats.

While most people wouldn’t draw parallels between German and Indian discipline (or lack thereof), Germans married to Indians have found a way to bridge the gap. Take for example, Ilka, who thinks that the famed differences of discipline between the two cultures actually works to her marital advantage. She sees the difference as Germans being highly planning-oriented; while Indians are more flexible in their approach. Ilka and her husband balance each other out in several ways. She says, like most Germans, she too tends to get stressed when her plans don’t work out, but her husband calms her down.

Consequently, Ilka feels India is “so full of life. The social life here is more happening; people smile at you, bond over food and are much more relaxed.” Isabelle, too, can attest to Indians’ friendliness. When asked about an Indian characteristic that makes her feel most at home, she quickly answers “humour.” “Whether it’s a taxi driver or someone I’m meeting professionally, I’ve learnt that it’s easy to lighten the mood here by just cracking a few jokes. Indians love to laugh,” she adds.

Indeed, these Germans-who-never-left as just diehard Indophiles are more Indian than you’d guess at first, having even developed some classic Indian skills with time. Ilka assures us that her husband can’t bargain as well as she does, and that she can even drape a saree on her own.

Isabelle, meanwhile, feels some amount of Indianness has seeped into her because “whenever its raining, my body instantly craves chai and samosa”.

Like the long-settled German expats in India, the German airline, Lufthansa, too has incorporated some quintessential aspects of Indian culture in its service. Recognising the centuries-old cultural affinity between the two countries, Lufthansa now provides a rich experience of Indian hospitality to all flyers on board its flights to and from India. You can expect a greeting of Namaste by an all-Indian crew, Indian food, and popular Indian in-flight entertainment options. And as the video shows, India’s culture and hospitality have been internalized by Lufthansa to the extent that they are More Indian Than You Think. To experience Lufthansa’s hospitality on your next trip abroad, click here.

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This article was produced by the Scroll marketing team on behalf of Lufthansa as part of their More Indian Than You Think initiative and not by the Scroll editorial team.