FMCG Trends: Low A&P, Higher Returns Over 5 Years

The Fast-Moving Consumer Goods (FMCG) sector has always been associated with heavy advertising and brand-building campaigns. However, a five-year analysis reveals an interesting shift: companies spending less on advertising & promotion (A&P) are delivering higher shareholder returns, while those investing aggressively in brand campaigns are not seeing proportional gains.

The Divergence Between A&P and Returns    

According to the data, companies like Godfrey Phillips and Patanjali, which allocate a relatively small share of revenues to A&P expenses, have delivered stronger compounded annual growth rate (CAGR) returns.

In contrast, big names such as HUL, P&G, Colgate, and Godrej—despite their consistent and significant ad spends—have underperformed in terms of shareholder returns. This indicates that heavy advertising no longer guarantees stock outperformance in the FMCG space.

Why Are High A&P Spends Not Paying Off?

The results suggest that the market is shifting its focus away from pure advertising intensity. Investors are rewarding companies that emphasize:

• Operational efficiency
  
  
• Product innovation
  
  
• Premiumisation strategies
  
  
• Diversified product portfolios
  
  

In other words, brand equity remains essential, but efficient execution and adaptability matter more in today's competitive landscape.

Key Takeaways for Investors

The trend highlights a structural shift in the FMCG sector:

• Advertising alone is not enough. While brand visibility is critical, high A&P expenses are not translating into proportional shareholder value.
  
  
• Balanced strategies win. Companies focusing on cost management, product diversification, and innovation are delivering stronger performance.
  
  
• The investment approach should evolve. For long-term investors, analyzing A&P spends alongside efficiency and adaptability will provide a clearer picture of a company’s growth potential.
  
  

Final Word

The FMCG sector is at a crossroads where operational excellence, innovation, and premiumisation drive shareholder value more than aggressive advertising campaigns. For investors, this means going beyond traditional metrics like A&P spends and focusing on companies with strong fundamentals and strategic adaptability.