Intermittent rain spells during the ongoing summer season have hurt sales of products such as air conditioners (ACs), refrigerators and beverages, top companies have told FE.
The problem is particularly acute in the north, a region that contributes to 35% of overall summer sales, where unseasonal rains in key markets such as Delhi-NCR in April-May has disrupted business, resulting in a sharp dip in sales.
“At the industry level, the overall AC and refrigerator sales this summer have fallen by around 30-40% versus last year. The north market has been bad on account of rains spells through April and May,” says Kamal Nandi, business head and executive vice president, Godrej Appliances. “This is definitely a cause for concern because the summer season is important for manufacturers of cooling products,” he said.
While the hot weather in the west, east and the south of the country have helped appliance and beverage makers to some extent, the north has been a clear dampener, top executives said. The west, south and east contribute to 27%, 23% and 15% of overall summer sales, say industry experts. Growth in sales in these regions has been in the region of 10-15% versus the previous year, as temperatures have remained high in key markets such as Mumbai.
Beverage sales, on the other hand, have suffered a drop of about 10-15% year-on-year in the north, a key market for companies.
“While there is a blip in terms of sales in the north because of inclement weather, the other regions have compensated for this drop,” Ravi Jaipuria, chairman of RJ Corp-owned Varun Beverages, PepsiCo’s bottling partner, said.
“If the summer season extends into June and temperatures begin to rise in the north, it could help recoup sales in the region,” Jaipuria said, adding that the weak summer performance may not blur the overall growth picture for the market.
Kanwaljeet Jawa, chairman and managing director, Daikin India, has also reiterated a similar point, saying weather uncertainty is a factor that firms cannot control.
“While the months of April and May are likely to see a dip in sales because of unseasonal rains, in the medium to long term, prospects for the market remain bright. AC penetration in the country is only 7% and there is a lot of work that AC firms are doing to improve sales, from localisation to aggressive marketing, pricing and innovation,” Jawa said.
Nandi says that the inventory pile-up due to weak sales in April-May could get liquidated in June, if the summer season gets extended.
“Companies these days do not keep more than 30-45 days inventory. One reason being that the summer season tends to get extended. The demand scenario is also dynamic during the period, which means advance planning may not help. So, companies do real-time production planning to factors in all of these attributes,” he said.
