Delayed monsoon and high humidity are giving consumer durable manufactures a reason to celebrate as sales of air-conditioners and refrigerators are still going strong.
This has been the best summer for us in the last four years despite fears of weak consumer sentiment and downtrading, according to Nilesh Gupta, director, Vijay Sales. Gupta, who is still selling ACs in states like Gujarat where the monsoon has been delayed, says, "Sales for split ACs have increased and now account for 60-65 per cent of the total, compared with 40-45 per cent last year."
Kamal Nandi, vice-president, sales & marketing, Godrej & Boyce Manufacturing Co, concurs. "Due to a long summer this year, AC sales are strong. As a whole, the AC category is likely to have grown 10-15 per cent in January-June. Our sales have doubled. We have registered 20 per cent growth over last year (January-June)."
Last year, AC sales were bleak due to good monsoon and partly because of the slowdown. Around 70 per cent of AC sales happen in summer. This figure is 50 per cent for refrigerators.
Due to the brief summer last year, the companies were left with large inventories. Additionally, due to credit crunch and weak consumer sentiment, the companies were hesitant to ramp up production.
Sales of split ACs are growing faster than that of window ACs. Split ACs account for around 60 per cent of total AC sales. This figure is 70 per cent for Godrej, 62 per cent for Samsung and 70 per cent for Videocon.
"The industry had not anticipated such good growth this year," said Pradeep Bakshi, vice-president (operations), Voltas, adding that the company could have recorded at least 20 per cent higher sales if it had not run out of supplies. The company also took time to ramp up production as it had shifted its manufacturing unit to Pantnager from Silvaasa.
"We did plan cautiously at the beginning of the year," admitted Moon B Shin, managing director, LG Electronics India, which witnessed 37 per cent growth in the refrigerator category in the April-June quarter over the corresponding quarter of last year. In the AC category, the growth in the second quarter (April to June) is 40 per cent
Likewise for Haier. "We were unable to meet the demand in June as we ran out of stock by the beginning of June," said Pranay Dhabahi, COO, Haier. The company recorded 20 per cent higher sales for ACs and 35 per cent for refrigerators for January-June 2009 as compared with the same period a year ago.
Affirming strong consumer demand this year, especially in June, Samsung's Deputy Managing Director R Zutshi said, "In the first six months of the year, both refrigerator and AC volumes grew 20 per cent over the corresponding period in the previous year."
Following a good summer, Ajit Joshi, chief executive officer, Croma is hoping for the monsoon to set in and washing machine sales to pick up. The retail chain, which recently launched its back-to-school offer, is already seeing sales of laptops and mobile phones picking up. "The extended summer has seen cooling appliances like ACs, refrigerators and coolers do well. In the last month, even laptop sales picked up and we sold 5,200 units," said Joshi.
Whirlpool, however, saw modest growth. Shantanu Dasgupta, VP, corporate affairs and strategy (South Asia), said, "We have performed according to our expectations, We had taken a conservative outlook on Aircon volume this summer as there was slow growth at the time we were taking decisions on building inventory for the season. As a result, our growth is modest, but as mentioned, this was quite deliberate."
But the industry is concerned that if the monsoon remains below normal, it will be bad for other durable categories. Nandi said, "In that case, festival sales may be disappointing in Tier II and Tier III cities." Festival season sales comprise 30-35 per cent of the yearly sales of the consumer durables industry (worth Rs 25,000-26,000 crore). A weak monsoon would hit rural sales. Between 20 and 25 per cent sales of the industry come from rural India.
A Samsung spokesperson, however, said it would be premature to make a statement about the impact of weak monsoon on sales of other durables.
Dasgupta believes it is too early to quantify the impact of late or poor monsoon on sales, adding, "I would say it could have an adverse impact going forward in small towns should the rains indeed be deficient. Approximately 60 per cent of the home appliance market is in towns with over 500,000 people. Hence, while a poor monsoon may dampen offtake in small towns in the coming months, particularly over the Diwali period, on an overall basis, if the demand continues to be strong in larger markets, the industry should continue to grow."
