1. Monsoon set to hit festive season sales as buyer sentiment turns tepid in rural India

Monsoon set to hit festive season sales as buyer sentiment turns tepid in rural India

While scattered rains this year have inundated chunks of land, besides rendering arid as many as 235 districts, consumerism in the hinterland remains patchy at best and could well be damp this festive season.

By: | New Delhi | Published: September 17, 2017 4:58 AM
monsoon, monsoon impact on festive season, how monsoon can affect festive season, festive season monsoon With the season’s rain deficit currently at 6.2%, the monsoon appears headed for a below-normal performance, something India Inc is watching with fingers crossed.

While scattered rains this year have inundated chunks of land, besides rendering arid as many as 235 districts, consumerism in the hinterland remains patchy at best and could well be damp this festive season. With the season’s rain deficit currently at 6.2%, the monsoon appears headed for a below-normal performance, something India Inc is watching with fingers crossed.

FMCG and consumer durable companies and auto majors, among others, might be putting up a brave face, but scepticism runs high. When FE contacted Hindustan Unilever and Proctor & Gamble, they refused to comment. However, Dabur India exuded confidence about the rural economy showing signs of revival. Dabur India CFO Lalit Malik said, “With the market sentiment showing signs of improvement and stability post-GST implementation, we expect the demand scenario to move up, both in rural and urban markets.”

Japanese financial services major Nomura indicated recently that growth in foodgrain production is expected to be much lower in the country this year due to less progress made in the sowing of summer (kharif) crops than a year ago.

“The jury on the monsoon is not fully out, with large parts of central India reeling under drought-like conditions and flooding elsewhere. Most companies are not thinking of the impact of monsoon yet,” said Pinakiranjan Mishra, partner and national leader, retail and consumer products, EY.

In Motown, the mood is optimistic after an above-average first quarter, wherein Maruti Suzuki reported a 30% growth in sales volume in the rural market and Hyundai clocked 23% over the same timeframe the previous year. During April-June, Maruti Suzuki sold 1,34,624 vehicles in the rural market, up 30% from 1,04,059 vehicles sold in the same quarter a year ago. However, from the April to August period, sales have soared by 20% over the same period last financial year.

Similarly, in the first quarter, Hyundai sold 18,337 vehicles, up 23% from 14,879 vehicles over the same timeframe last fiscal, although sales grew by just 12.5% in the April to August period over last year.

In light of past performance and restocking after the rollout of the goods and services tax (GST) on July 1, carmakers seem to be in a cheery mood, not paying much heed to the vagaries of nature. “Our growth is in line with our expectations and we are on course to meeting our annual targets,” said a Maruti executive, albeit guardedly.

The two-wheeler category, too, is expecting robust growth, but with caveats thrown in. For Hero MotoCorp, the country’s largest two-wheeler maker, almost half the sales come from the hinterland. Over the past four months, the company has been clocking a record 6 lakh vehicles month-on-month. But when FE approached the company if rains were playing spoilsport in the upcoming festive season, an executive said, “We count the Navratri to Bhai Dooj period as the festive season, unlike most other companies, which consider the (longer) timeframe from Ganesh Chaturthi to Bhai Dooj,” clearly buying time for the overall impact of the monsoons.

However, consumer durables firms are expecting a 10-20% spike in sales this festive season, irrespective of the monsoon, as most Indians consider it auspicious to buy durables, precious metals, jewellery and cars during this time. “During Onam, LG registered 17% growth over last year. Throughout the festive season, we are targeting double-digit growth,” said Amit Gujral, CMO, LG Electronics India.

But what could trigger negative consumer behaviour might be the cash component traditionally attached with consumer durables, which could be impacted because of recent government scrutiny. Also, hardening metal prices might squeeze manufacturer margins, further discouraging discounts.

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