Consumer goods makers bet on bumper festive sales
Robust growth expected despite shortage of components and the threat of a third wave of Covid-19 pandemic
In spite of high commodity inflation, shortage of components and the threat of a third wave of the Covid-19 pandemic, makers of packaged goods, home appliances and consumer electronics are expecting to grow by 12 to 25 per cent during the upcoming festive season.
After one-and-a-half years of disruptions, manufacturers are now more confident about managing their inventories better, keeping their supply channels well-stocked and the impact of any Covid-related restrictions minimal, even as they gear up for the festive season, which usually accounts for 25 to 35 per cent of their yearly sales.
Take the home appliances sector. After a dismal April-june quarter, the makers of air conditioners, refrigerators and washing machines are expecting to grow their businesses by 15-20 per cent in the coming months. While the cost of key components is skyrocketing and supply from China and Taiwan remains a major concern, leading manufacturers of appliances have already begun building their inventories in anticipation of bumper festive sales.
According to Kamal Nandi, executive vice-president at Godrej Appliances, as work from home continues, consumers’ need for superior appliances will only go up. “After severe disruptions in the June quarter, consumers are waiting for festive offers to make the purchase that they couldn’t earlier. Further, as the economy is reviving, bonuses and festive buying mood will surely drive growth,” he said.
Appliances major LG Electronics has already regained momentum after the lockdowns eased in June, and is now growing at over 20 per cent. “We will offer a slew of new products with meaningful consumer benefits. We are very bullish about good sales as we can already see revival in the overall business environment,” said Deepak Bansal, vice-president, corporate planning, at LG Electronics India. The firm is ramping up its market presence with new branded outlets in Mumbai.
As for rival Samsung India, it is launching new product lines and offering loyalty programmes to lure consumers.
Since the industry incurred near-zero sales during the peak summer months, a period when some 40 per cent of the appliance sales takes place, manufacturers have tied up with consumer finance companies to come up with easy finance and combo offers. Nandi expects the market to grow by over 15 per cent this year.
However, the shortage of components like compressors for ACS and refrigerators and chipsets used in products like smart televisions, notebooks and smartphones and other electronic items, remains a key concern for the ~3 trillion industry.
According to Avneet Singh Marwah, CEO, Super Plastronics, manufacturers and brand licensee for Kodak and Thomson smart TVS, the shortage of chipsets could lead to supply constraints for TV sets in the coming months. With the Indian Premier League and the ICC T20 World Cup coinciding with the festive sales period, the demand for smart TVS may outstrip the supply capacity of local manufacturers, he said.
It's not just home appliances — the ~4.5 trillion fastmoving consumer goods (FMCG) industry is also anticipating a sharp spike in demand. And leading brands are busy expanding their reach through e-commerce channels and getting ready to launch new products.
FMCG major ITC is aggressively preparing for the festive season. “This year the sector is expected to receive the muchneeded boost – both in the urban and rural markets – during the festive period, with augmented traffic-building events in modern trade and e-commerce. ITC is planning to actively participate in the upcoming festivities with a bouquet of special offers, gift packs, focused product sampling and unique marketing activations,” a company spokesperson said.
The Kolkata-based firm is banking on real-time marketing initiatives. It also plans to boost sales through a host of new launches centred around the theme of festivities to generate excitement in key categories like biscuits, frozen foods, health foods, premium skin care and home care, among others.
During the June quarter, ITC managed to double the contribution of e-commerce channels in its FMCG sales to eight per cent. It is now expanding the in-house ITC e-store, a D2C platform that is already operational in 11 cities.
Packaged foods company Parle Products, too, is planning to unveil its festival-focused products in the coming weeks, said Mayank Shah, senior category head at the firm. “We expect to grow by over 15 per cent during the festive weeks when many will also resort to revenge buying. Last year, in spite of the severe impact of the lockdowns, the market had grown by single digits, which was beyond our expectations. This time, the pandemic’s impact on demand has been much less and demand is steady,” he said.
Festive season sales apart, FMCG majors are also banking on higher sales growth in the rural markets. India’s hinterland houses close to 70 per cent of the population, but accounts for only 35 per cent of FMCG sales in the country, thereby leaving room for growth. In the last two years, all leading FMCG players — from ITC and Hindustan Unilever to Nestle and Britannia - have expanded their presence in rural areas.
According to Shah, the rural market is growing by about 35 per cent higher than the urban market, which has registered a growth of about 12 per cent in recent months.