Sunday, June 14, 2009

Stimulus packages put consumer durables back on track

Kamal Nandi is a relieved man. As vice-president (sales & marketing) of Godrej & Boyce Manufacturing, Nandi has been seeing sales back on track for the last two months.

The numbers speak for themselves. Refrigerator sales have grown 5-7 per cent; airconditioner (AC) sales 10-15 per cent and washing machines 15-20 per cent.

“The December and February stimulus packages, which included a cumulative 4 percentage point excise duty cut, have helped the industry register this growth,” said Nandi, adding that the festive season would bring more cheer, unlike last year, when the slowdown was taking effect.

Like Nandi, all consumer durables majors, including LG, Philips and Samsung, confirmed that the estimated Rs 26,000-crore consumer durables industry had been clocking good sales over the past two months after a hiatus.

Listen to Moon B Shin, managing director of LG Electronics. Shin said the company grew 22-25 per cent in April and May over the same period last year. “Most of the categories are growing, especially liquid crystal display (LCD), mobile phones and home appliances. The rural market, too, is doing quite well.” So much so that Shin expects festive season sales to grow 15-20 per cent over last year.

Things were no different for Philips Electronics. Sales were “definitely” looking up, according to Mahesh Krishnan, vice-president (consumer lifestyle).

Stung by last year’s experience, the company is being cautious and is tracking month-to-month sales projections now. Since people are looking at value for money, Philips is targeting that segment by running a value-for-money campaign — Philips Of Course.

Krishnan was, however, quick to add that the company’s premium range was doing quite well too.” It’s just that people were holding back their purchases last year. The fist is opening now,” he said.
Samsung said TV sales went up mainly because of the Indian Premier League, which ended last month. “We grew 30 per cent in the first five months of this year over last year,” a Samsung India spokesperson said.

Between January and April 2009, according to an ORG report, the high-priced LCD TV segment grew 86 per cent, followed by Plasma TV at 54 per cent; flat TVs showed a marginal growth of 1 per cent. Colour TVs account for over half the consumer durables market.

Retail outlets agreed. Executives at Croma, the Tata group-owned retail chain, said, IT, entertainment and appliances were the categories that were doing well. Given the summer season, products like air conditioners and refrigerators have also seen major growth. Croma expects a 25 per cent growth in sales in this year’s festive season over last year.

Most AC manufacturers, however, said institutional sales were still a worry. Institutional sales — commercial ACs used in retail stores and offices — account for 15-20 per cent of total sales. Although robust sales growth in the residential segment is making up for the loss, consumer durables companies were expecting a revival in hospitality and healthcare to prop up institutional sales.

Analysts, however, said not too much should be read into the summer season sales. Anand Ramanathan (Manager, Business Performance Services, KPMG) said positive consumer sentiment was the main reason for the surge in sales, but there were several other factors. “Refrigerators and ACs are doing well because of the seasonality of the category. TV sales have picked up because of the IPL and T20 cricket tournaments. Let’s wait for the festival season to get a clear picture,” he said.


Source: Business Standard

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