Consumer durables players bet on ACs, fridges to beat slowdown blues

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Retailers and manufacturers of consumer durables are banking on cooling devices such as air-conditioners and refrigerators to revive flagging sales as the summer temperature rises.

Most retailers have reported disappointing sales in the post-Diwali period on sluggish demand across categories.

Samsung India recently launched its first frost-free refrigerators.

"There is a slack in business now. We expect sales of cooling products to pick up across the country over the next three months. This should lead to a jump in volumes," Ravindra Zutshi, managing director, Samsung India, told Financial Chronicle.

He declined to share details of the company's investment plans and market share estimates for the cooling range.

India's industrial production (IIP) contracted 1.9 per cent in February, which was a nine-month low after an anaemic 0.1 per cent growth in January. Production of consumer durables, a measure of discretionary consumer demand, contracted 9.3 per cent in February while that of consumer non-durables fell for the first time since December 2012, declining 1.2 per cent.

Forecasts of an El Nino in 2014, which may result in weak monsoon rains, pose an upside risk to inflation. The insecurity of a volatile economic situation and an uncertain outlook for the near term has forced customers to delay purchase of electronic goods leading to inventory pileup with the retailers even during the sale season.

Manish Sharma, managing director of Panasonic India, told Financial Chronicle the company was hoping to make substantial investment in the cooling segment to perk up sales and raise market share in the summer season. "It's a difficult time for consumer durables retailers and manufacturers as sales have fallen drastically. We expect the situation to improve in the summer season," Sharma said.

Despite repeated phone calls, Rajeev Jain, business head for home appliances at LG Electronics India, could not be reached for comment.

Manufacturers feel margins will be squeezed further if the summer season gets delayed, forcing them to offer discounts on the slow-moving stock.

Kamal Nandi, vice-president of Godrej & Boyce, said, "Our largest portfolio is refrigerators. If the weather improves in north, we expect demand for cooling products to improve. Growth should be 12-15 per cent. We are now launching a new range of high energy-efficiency refrigerators and air-conditioners. We are looking to increase market share to three per cent in refrigerators and five per cent in air-conditioners," Nandi said.

NEXT Retail, a unit of the Videocon group, expects cooling products to make up for the slackening sales growth in the previous months. Rajiv Sharma, business head of NEXT Retail, said, "Sales were slow even last month. As the summer kicks in, sales of cooling products are increasing. We expect this segment to contribute around Rs 45 crore to our overall sales this summer."

Typically, the April-June period accounts for around 35 per cent of the annual AC, air-cooler and refrigerator sales.

Eric Braganza, president of Haier Appliances, expects the cooling range to contribute an average growth rate of 35 per cent during April-June. "We have seen a decent growth so far even though the industry is barely crawling with single-digit growth. The situation should improve in summer."

Shantanu Dasgupta, vice-president, for corporate affairs & strategy, Asia South at Whirlpool India, said the company was betting on the refrigerator segment to beat the slump in volume growth. "There is a dip in demand in most categories. We hope cooling products will compensate for it," said Nilesh Gupta, managing director of Vijay Sales.

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