homebusiness NewsConsumer durable makers gear up to make hay while the sun shines, expect 20% growth in sales
Consumer durable makers gear up to make hay while the sun shines, expect 20% growth in sales
The Consumer Electronics and Appliances Manufacturers Association is expecting sales in the summer periods of March to May this year to be anywhere between 15 to 20 percent higher than last year.
Summer has come early this year in India and that has come with a heat wave sweeping across several parts of the country. A forecast by the India Meteorological Department (IMD) has warned of a searing summer heat with temperatures being above normal levels. This has consumer durable and white goods companies hoping to clock in record sales. Companies believe a hotter and longer summer will translate into higher sales for air conditioners, fans, coolers, refrigerators and other cooling products.
The Consumer Electronics and Appliances Manufacturers Association expects sales in the summer periods of March to May this year to be anywhere between 15 to 20 percent higher than last year.
Godrej Appliances, which said it is seeing demand for the cooling category picking up, is expecting 20-25 percent better demand over last year. Blue Star, which gets about 40 percent of its bottom-line from the summer season, is expecting a 25 percent growth in summer demand and is aiming to grow 30 percent between the March-June period this year.
Air cooler maker Symphony is hoping to record its highest ever domestic sales. “And if no major accident happens in ensuing summer, then again in the April-June quarter, we are looking for a decent performance,” Nrupesh Shah, ED, Symphony told CNBC-TV18.
At a retail level too, companies are seeing cooling products starting to fly off the shelves. Vijay Sales said the sales for summer products started from Mid-February itself and it is expecting a 15 percent growth in sales over the same period last year.
“It is very rare that we sell air coolers in February, which has now started selling. So summers definitely seem to have arrived early. And not only early, they also seem to be more severe than previous summers and that is translating into sales also,” Nilesh Gupta, the director of Vijay Sales, said.
However, these ambitious growth expectations, companies said, are contingent on there not being any adverse events that could result in the summer season being cut short.
This is encouraging for the industry, which has seen two disappointing periods in summer and the festive season last year. Despite last summer being the first near normal summer post two years of the COVID-19 pandemic, sales didn’t meet expectations for many players on account on inflation. The impact was carried through into the festive season too, a period that usually accounts for one-third of annual sales of white goods players.
Over the past year, commodity prices for the industry shot up by 32-33 percent over 2019 levels, making white goods costlier by 15 to 17 percent over 2019. This hike in prices, coupled with rising prices of essentials, led to the mass and entry-level segment performing poorly during the festive season, while the premium segment did well. Godrej Appliances’ Kamal Nandi told CNBC-TV18 at the time that the mass segment saw volumes decrease by 5-7 percent over pre-pandemic levels.
However, commodity prices have largely cooled off over the past quarter, though they’re still around 19 percent higher over 2019, and consumer durable players have ruled out a price hike in the near term.
Brands also said that in a severe summer, higher prices may not be a deterrent. “In a severe summer, price hikes are forgotten. It could cause a dampener only if summer is not severe,” Eric Braganza, President, CEAMA told CNBC-TV18.
“As there is a decent summer, other factors including economic factors, rate of interest, inflation actually don't matter,” Symphony’s Shah added.
This year too, brands expect the premium segment to drive sales and ACs in terms of product segment.
“Demand is largely led by the AC category and then the premium segment of refrigerators. Chest freezers are also in big demand. In refrigerators, the direct cool refrigerators, which is the mass segment, is yet to cross the March 2019 levels,” Nandi said.
Gupta of Vijay Sales is expecting air coolers to drive volume, but not value. “Starting with air conditioners, we expect a growth of at least 15 percent in ACs, 14 percent growth in coolers. Refrigerators could be 8-10 percent growth only,” he added.
However, some experts disagree that a heat wave could automatically mean higher sales. ICICI Securities, in a note, said consensus expectation of earnings upgrade due to heat wave appear overdone, and that it differs from the consensus that ongoing heat wave is likely to result in strong valuation upgrade for fan, cooler or air conditioner companies.
It said that its channel check feedback suggests that there is no material change in consumer off-take. With respect to the fans category, it said that companies had sold inventory of non-star rated fans in Q3FY23 and there is 3 weeks extra inventory in trade, which will get liquidated in Q4FY23. This is likely to result in lower primary sales for fan companies in Q4FY23,
ICICI Securities also said there is steep competition among air conditioner companies, which has resulted in weak profitability as companies did not raise prices in Q3FY23.
First Published: Mar 21, 2023 7:08 PM IST
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