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Consumer goods makers line up new launches to ride the recovery

LiveMint logoLiveMint 11-06-2014 Zahra Khan

Mumbai: Perceiving early signs of a revival in demand for consumer durables, manufacturers are planning to unwrap an array of new models of TV sets, washing machines and kitchen appliances this year.

Godrej Appliances, Whirlpool of India Ltd, Videocon Industries Ltd, Daikin India and Bosch India have lined up new products to cash in on the improving consumer sentiment and as banks push more consumer goods loans.

Godrej Appliances, which had little new to offer last year “because it was not the right market for launches”, will have 50 launches this year, said Kamal Nandi, business head and executive vice-president.

“After two bad years, the sector is seeing good sales, especially in cooling products. The overall sentiment has improved,” he added.

Two years of sub-5% economic growth, high inflation and borrowing costs, and a weak rupee that made imported electronic components more expensive have weakened consumer demand for durables.

Consumer sentiment may be starting to change, going by anecdotal evidence as the rupee stays stable, the stock market rises and a new government stirs hopes of an economic revival.

There has been good demand from the beginning of the year, Nandi said, adding that Godrej has seen rising sales of its air conditioners and refrigerators in south India.

Whirlpool will launch 213 models this year, said a top company executive.

“We have seen a good summer, the currency is stable and interest rates have not gone up. We should be able to grow our revenue by 10-12% this fiscal year compared with around 2% in the last fiscal year,” said Shantanu Dasgupta, vice-president (corporate affairs and strategy) for Asia South at Whirlpool of India.

Sales of TV sets, in particular, have received a boost from the month-long Fifa (Fédération Internationale de Football Association) World Cup in Brazil starting 12 June, said Anirudh Dhoot, director of the Videocon Group and president of the Consumer Electronics and Appliances Manufacturers Association (CEAMA).

Dhoot expects football lovers in West Bengal, Goa, Kerala and the North-East to drive demand. “We are planning a spree of launches with Sansui and with our own brand Videocon,” he said.

Bosch of Germany and Daikin of Japan—both relatively newcomers in India’s home appliances market—are also hoping to make gains.

“As of now, we are expanding geographically. Since our base is so small, any expansion is growth for us,” said Bhavya Shah, head of brand marketing at Bosch Home Appliances India. “The last two years were slow, and if not the overall growth, the growth rate was definitely impacted.”

Bosch, which started making home appliances in India in 2011, will add 22 stores across metros and tier-I cities this year. After the recent launch of its cooking ranges, it is also planning to bring out microwave ovens. The company is currently building a factory in Chennai.

Daikin India, meanwhile, plans to bring out 64 air conditioner models during the year. Managing director Kanwal Jeet Jawa said the firm will add more exclusive showrooms, besides 200 stores this year.

But is the worst really over?

According to CEAMA data, the `45,000 crore consumer goods industry grew a mere 5% in 2013, down from 14% in 2011. Experts on the sector blame the slowdown on poor consumer sentiment, persistently high inflation and weak wage growth.

Ajay Srinivasan, director of Crisil Research, said demand is definitely better this year and that the market should be able to absorb the launches. Crisil is expecting the sector to grow at 12-13% this fiscal year compared with 8% last fiscal year.

Bank loans data seems to indicate the rising sentiment. According to the Reserve Bank of India, personal loans to purchase consumer durables rose 60% year-on-year to `13,700 crore in April 2014 from `8,600 crore in April 2013.

Srinivasan, however, cautioned that the pickup in loans may also reflect the fact that banks have become more aggressive in pushing loans for consumer durables at a time of sluggish overall loan growth.

H.S. Bhatia, a former chief marketing officer at Videocon Industries and now an independent expert on the sector, said that a stable currency—which had fallen to a record low of 68.85 a dollar in August—has given companies the room to cut prices, which could increase demand.

“Going forward, the World Cup will help boost further sales for some categories and a good budget announcement will further improve sentiment,” he added.

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