Hotter season forecast boosts hopes of 'summer product' makers

For the stretch between April and June, the day temperature hovers between 40 and 50 degrees Celsius in most of north and northwest India

Summer this year would be hotter than usual, predicted the India Meteorological Department last week, boosting hopes of makers of “summer products” such as air-conditioners, fans and cool beverages.

For the stretch between April and June, the day temperature hovers between 40 and 50 degrees Celsius in most of north and northwest India, especially states such as Delhi, Haryana, Rajasthan and Uttar Pradesh, and also Madhya Pradesh and Andhra Pradesh.

Consequently, people flock to electronics shops to buy air conditioners, coolers and fans to beat the heat.

Last year, however, summer was milder than usual. Unseasonal rain did not let the temperatures soar. As a result, the sale of summer products took a hit.

But this year, a different trend can already be observed. With temperatures touching the high thirties already, sale of ACs and coolers have gone north in Haryana, Rajasthan and Delhi.

“A harsh summer can be positive for some consumer companies, which produce products to beat the heat,” said Abneesh Roy, associate director, Edelweiss Securities.

“The April-June stretch of this year will be important for those who have a large portfolio of such products.”

Beverage majors such as Coca-Cola, PepsiCo and Parle Agro, some 40 AC marketing firms and thousands of coolers and fan manufactures are expected to cash in on the surging heat.

Fast-moving consumer goods companies such as Emami, Hindustan Unilever, Dabur, Amul and Mother Dairy, whose portfolio consists of talcum power, cooling oils, ice creams and juices — mostly consumed during summer — are expected to benefit, too.

Rohit Mathur, vice-president, fans business, Usha International, is ecstatic over the prospective sales in 2016-17.

“Fan sales last year was nearly flat, with two-three per cent volume growth because of a short and mild summer.

But with rural demand picking up, I expect better sales in 2016 as temperatures are predicted to be above average,” he said.

Usha has 20 per cent share of the yearly Rs 4,500 crore fans market.

The organised air cooler sector has an annual volume of 2 million units.

It could grow by up to 20 per cent as sales have already picked up in southern and western markets. States in south India contribute 30 per cent to the total sales, followed by north (28 per cent), west (22 per cent) and east (20 per cent).

“Markets in Andhra Pradesh, Rajasthan, Madhya Pradesh, Odisha and Uttar Pradesh are on a roll,” an industry executive said.

Home AC makers such as Daikin, Voltas, LG, Carrier Midea and Blue Star are expecting double-digit volume growth this year as consumers have already started buying ACs.

“Our sales went up by 25 per cent in February and March, compared to the zero growth last year.

It has been driven mostly by the southern states,” said Kanwal Jeet Jawa, managing director, India operations, Daikin Industries.

He added: “The IMD has predicted that the summer temperatures could be about two degrees above normal. It would be good for the industry.”

The AC sector is expected to grow by 25 per cent to 5 million units in 2016-17 from 4 million currently. For the Rs 15,000-crore beverage sector, too, this could be a windfall.

In 2015, these firms had to cut their production.

“This year will be a strong one for the beverage industry,” said Nadia Chauhan, joint managing director and chief marketing officer, Parle Agro.

The beverage major expects to grow by 30 per cent this financial year. Emami, which gets 25 per cent of its sales from summer products such as cooling oil, talcum powder and deodorants, also hopes to register higher sales this year.

“Emami’s volume growth depends on seasonal variations. The company will certainly get a boost in the summer portfolio in the April-June period of 2016-17,” Roy from Edelweiss said.

“Last summer — or rather the lack of it — led to a slowdown in all the summer products across the sector.

This year, however, the forecast for summer says it will be hotter and we expect the demand for our summer portfolio especially Navratna Cool Oil and Navratna Cool Talc to pick up in the first quarter of FY17,” Harsha V Agarwal, director, Emami, said.

HEAT HITS

With the Met department predicting a hotter summer this year, makers of “summer products” hope to expand their sales between April and June

Forecast: The IMD has forecast a hotter-than-usual summer this year, with temperatures soaring 2-3 degrees above normal
Hope for cool makers: Sale of fans, ACs and coolers expected to go up by 15-25%

• FMCG majors HUL, Coca-Cola, Parle Agro, Emami, Amul and Dabur to benefit, as demand for ice creams, cold beverages, talcum powders, cooling oils and deodrants expected to soar

Bad history: Last year, a cooler summer punctuated by unseasonal rain had hit the sales of makers of cooling products

Image:Children cool off in a canal in Bhatinda, Punjab. Photograph: PTI.