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FMCGs to raise their digital ad spends by 7%, Zenith forecasts

Madhushree Chakrabarty April 26, 2021

Zenith releases its Business Intelligence – FMCG Food and Drink report. According to the report, FMCG brands will be increasing their ad spends by 7% a year to 2023. The figure is ahead of the 4% annual growth forecasts for FMCG ad spend as a whole in the 12 markets included in this report*.

These FMCG brands are heavily dependent on traditional TV, spending 39% of their budgets on television advertising in 2020, compared to 24% for the average brand. This excludes China, where FMCG brands spend 52% of their budgets on television, compared to an average of 26%.

As per the reports, FMCG digital ad spend will increase from US$12.3bn in 2020 to US$14.9bn in 2023, and that its market share will rise from 46% to 49%.

“FMCG brands need a new comprehensive approach to reach-based planning,” said Ben Lukawski, Global Chief Strategy Officer, Zenith. “That means combining TV, paid advertising in online video, virtual placement in SVOD platforms and perhaps even a presence in gaming, using first-party and second-party data to prevent duplication and optimize incremental reach.”

FMCG out-of-home advertising is forecasted to grow by 9% a year from 2020 to 2023, while its market share rises from 6.1% to 7.0%, slightly ahead of its pre-pandemic share of 6.8% in 2019.

FMCG ad spends to track total market growth as it recovers from an 11% slump in 2020

Ad expenditure by FMCG brands fell more sharply than the ad market as a whole in 2020, shrinking by 10.7% to US$26.7bn.

Zenith forecasts 4.4% annual growth in FMCG ad spend between 2020 and 2023, reaching US$30.3bn in 2023. Fully recovered from the pandemic-induced drop in ad spend, it will now be exceeding 2019 levels of spending by US$0.5bn.

India leads ad spend growth but China leads digital transformation

Zenith forecasts that Indian FMCG ad spend will be expanding by 14% a year, and will be the fastest-growing market in the next three years. Its disposable incomes rise rapidly with the catch-up expansion of the underdeveloped ad market: advertising accounts for only 0.3% of India’s GDP, less than half of the global average of 0.7%. All of the other markets in the report are predicted to grow steadily at between 2% and 5% a year.

Jai Lala, CEO, Zenith India said, “FMCG growth will continue to be robust considering various reasons. Firstly, despite the pandemic, it is one category where the demand is constant, if not seen increasing. Secondly, with evolving consumer demand, FMCG continues to see a slate of new product launches and category expansion. Lastly, with the vast population being in Tier 2 and rural areas – it is one untapped potential market where the FMCG brands continue to increase penetration.”

Chinese FMCG brands in 2020, spent 71% of their budgets on digital advertising, compared to 46% across all 12 markets. Chinese FMCG brands spent 35% of their total budgets on online video and 13% on eCommerce advertising in 2020.

“E-commerce will be the key battleground for FMCG brand growth over the coming years,” said Jonathan Barnard, Head of Forecasting, Zenith. “Western brands should look to China for best practice in using digital communication to drive FMCG e-commerce sales.”

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*The 12 markets included in this report are Australia, Canada, China, France, Germany, India, Italy, Russia, Spain, Switzerland, the UK, and the US, which between them account for 73% of total global ad spend. FMCG Food and Drink includes all packaged foods and soft drinks.

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