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AC, refrigerator makers face another bleak season due to weather fluctuations, price increase [India Business] [Times of India]
[March 13, 2014]

AC, refrigerator makers face another bleak season due to weather fluctuations, price increase [India Business] [Times of India]

(Times of India Via Acquire Media NewsEdge) KOLKATA: It's anybody's guess on how hot and dry this summer will be, but white goods makers are already staring at yet another bleak season for air conditioners (ACs) and refrigerators due to weather fluctuations, price increases and poor early sales.

Companies say that dealers have slowed down purchases of cooling appliances in the South and the West. The seasonal demand for cooling appliances in these regions usually starts in January. Both primary sales (sales to dealers) and secondary sales to end-consumers are down by 15% from January till now over the same period last year.

"The start of the season has been poor. So, we don't expect a full recovery for cooling appliances' sales this year even if it becomes a hot summer," said Kamal Nandi, vice-president for sales and marketing at Godrej Appliances.

Marketers say unseasonal rains in several parts of the country, a cold wave sweeping the North, and fresh price increases of 5-12% on these products due to upgradation of energy rating norms, have dampened the demand. Unless there is a dramatic pick up in the coming months, this will be the fourth consecutive year of poor sales for AC and refrigerator makers.

The industry is particularly worried about the likely delayed arrival of summer due to weather fluctuations. Soft drink makers, too, are keeping a close watch on issues related to climate change.

"Unusual weather conditions, as seen in parts of India this month, do tend to have a short-term effect on sectors and industries that have a direct correlation to weather," a Coca-Cola India spokesperson told ET. "However, we have observed that by and large the weather patterns still stick by forecasts and the current conditions appear as an aberration. Our long term outlook for our business is robust," the person added.

A PepsiCo India spokesman said that untimely rains in some parts of the country have delayed the onset of the season for beverage industry. "However, over the last few years, the category has been working at growing consumption in non-seasonal months," he said.

For white goods makers, meanwhile, price hike is as big an issue as weather fluctuation. A senior executive with a leading Korean appliances maker said that dealers had picked up inventory in January, but haven't purchased much since on poor consumer demand. "Due to successive price hike for last few years, both air-conditioners and refrigerators have lost their affordability," he said.

AC sales have been slowing in the last four years as their prices have gone up by an average of 10% in each successive year due to increase in input cost and a weakening rupee, which made components costlier. The refrigerator market was mostly flat during this period with a marginal growth of around 4% last year. The size of AC and refrigerator markets together is estimated to be around 20,000 crore.

To overcome poor demand, these companies plan to focus on premium products such as large capacity refrigerators, side-by-side refrigerators and inverter ACs, pushing their existing consumers to upgrade their appliances.

A Samsung India spokesperson said the company expects to consolidate its market position with products like smart refrigerator and an inverter AC.

CM Singh, COO at Videocon, said the company will give EMI (equated monthly instalment) payment options specifically for high-end products. "Some incentive will be required since energy efficient AC and refrigerators have gone out of the reach of middle-class consumers," he said. "For instance, a 240-250 litre refrigerator now costs around 25,000 as compared to less than 20,000 earlier." Singh said that the company expects cheaper single-door refrigerator models to bounce back this year and eat into the frost-free segment due to the rise in prices.

(c) 2014 Bennett, Coleman & Company Limited

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