Indian firms gear up to cash in on the heat
CHENNAI/BANGALORE: Indian consumer goods companies such as makers of cooling systems, beer and ice cream are attempting to capitalise on a hotterthan-usual summer season by cranking up output, launching new products and ramping up spending on marketing.
The world’s most populous nation expects 10 to 20 heatwave days, which it describes as temperatures hitting at least 40 degrees Celsius in the plains, from April through June this year, versus the normal four to eight days. Already temperatures have crossed 40 degrees in a few cities in the western Maharashtra and Gujarat states.
The searing heat is why appliances maker Blue Star has launched dozens of new home air-conditioning products as it targets a 25% jump in revenue from that business this summer versus just a 5% increase last year, according to Managing Director B. Thiagarajan.
And US-based ice cream brand Baskin Robbins has l aunched 20 new products in India ahead of the summer season.
“An unusually hot year will significantly impact the sector and uplift consumer discretionary companies’ demand for selling air-conditioners, fans, fridges, etc,” said Akshay Mokashe, senior research analyst at Axis Securities, adding that they will report robust growth numbers for the first quarter of the current fiscal year.
Cooling systems providers are one of the main beneficiaries of summer, with the season contributing up to 60% of their annual revenue.
While the industry has previously estimated that less than 10% of Indian households have air-conditioners, the hotter summer season and new product launches from companies such as appliance maker Voltas and Johnson Controls-Hitachi Air Conditioning India are expected to lift that number.
“People generally plan for air-conditioner purchases a couple of months in advance. But harsher summer expectations have triggered fence-sitters also into buying,” said Deepak Jasani, head of retail research at HDFC Securities.
‘TWO FANS NOT ENOUGH’
Roughly nine in 10 customers this year are first-time buyers as they long for air-conditioners after getting used to temperature-controlled spaces in offices, banks and theatres, Blue Star’s Thiagarajan told Reuters.
G. Hariharan is one of them. The software engineer from Thiruvananthapuram city in the southern state of Kerala bought his family of four their first air-conditioner last month.
“We have always muscled through the hot January-May months, but this year, it is too hot, and it has become too difficult to sleep,” Hariharan said. “Even two fans are not enough.”
Ceiling fans are India’s go-to during summer, while air-conditioners are still considered a luxury for most people.
Companies are stretching their production and distribution capabilities to meet the increase in demand. Graviss Foods, which runs Baskin Robbins stores in India, is ensuring its “factory is running at full throttle” after opening more distribution centres to reach retailers and distributors faster, said CEO Mohit Khattar.
Advertising budgets are also up this summer, partly because slots on the popular Indian Premier League cricket games have become more expensive as they coincide with India’s massive general elections.
Blue Star is nearly tripling its summer advertising budget to 400 million rupees, while Baskin Robbins’ marketing budget is being raised by up to a quarter as it aims to reach twice the number of people through TV and online advertising.
SUMMER BUMP
It is not just manufacturers who are cashing in on the summer heat wave, but delivery and other service companies too.
Grocery delivery app Zepto shows a banner on its home page to highlight “hydration heroes” with images of tender coconut, watermelon, and muskmelon, while rivals Swiggy and Zomato’s Blinkit are doubling down on fruits, beverages, and ice creams.
Swiggy has seen a 28% surge in demand for cold drinks and juices, along with a 43% increase in orders for ice cream since the summer began, according to its spokesperson, while orders for instant drink mixes and ice cubes have shot up.
Demand for beer is likely to go up as well.
“With the arrival of summer, beer consumption naturally i ncreases, necessitating careful planning in production and distribution ... as brewery capacities are stretched to their limits,” Carlsberg India Managing Director Nilesh Patel said.
The harsher weather is expected to increase the prices of vegetables, which could eat into discretionary budgets, and curtail outdoor spending. Some analysts, nevertheless, expected consumers to find ways to spend on the small joys.
“Drinking beverages or eating ice cream gives some sort of a satisfaction, although temporary, to people,” HDFC Securities’ Jasani said.