Late onset of summer may hit AC, refrigerator sales

With mercury levels shooting up, how are air conditioner and refrigerator manufacturers set to benefit?
Both refrigerator and air conditioner categories are directly dependent on rising temperatures. Hence, mercury level shooting up is certainly a very positive sign. In the refrigerator category, however, the recent sporadic rains and hailstorms in various parts of the country is a reason to worry. Approximately 70% of the refrigerators sold today in India are direct cool (single door refrigerators), which are sold primarily in non-urban areas.

Hence disposable income from agriculture is a major factor that drive sale of direct cool refrigerators. With the untimely rains and hailstorms the crops have been destroyed thus hitting agricultural disposable income adversely. This will impact refrigerator sales and we are not expecting a good season for the refrigerator category.

The AC category witnessed a turnaround last year. What factors led this change?
During the period 2006 to 2010 the AC industry saw a year-on-year growth of around 30%. However, during the period 2011- 2012 the industry went through de-growth, clearly indicating that the consumers were postponing their purchase. This postponement was largely due to unfavourable economic scenario and inconsistent weather patterns. Last year, though the trend reversed and the category showed a growth of 12%. Among favourable factors included pent-up sales of the previous two years as consumers did not want to postpone the purchase further and the onset of early summer especially in the southern part of the country. This year summer is setting in late compared with last year and this might impact the category growth.

How much sales have the air-conditioners category generated in January-March 2014 thus far -- overall industry in general and Godrej Appliances in particular?
At industry level, the AC category has seen de-growth of 10% in volume in January-February 2014 as compared with the same period last year. The primary reason for this is the fact that prices across the industry have gone up due to the star rating regime getting stricter – an AC that was five star energy rated last year is only four star energy rated this year. Having said that, we have seen a growth of 30% in volume during the period of January-March 2014 over the last year. The reasons for this growth are the various steps that we have taken to expand our product portfolio, our focus on expanding our channel network across the country and our marketing and communication efforts to reach out to the consumers through traditional and digital media.

Based on this data, what could be the sales projections in the air-conditioners category for the next 45-60 days?
March has seen temperatures in the southern, western and eastern part of the country shooting up. This is a good sign for the AC category and we are already seeing an increase in demand. If temperatures continue to be high and if there are no sporadic or early rains, we expect the AC industry to growth by 8% to 10% in volume in the next two months over the same period last year.

If you could also give us a projection of how are the volumes looking like for the January-May 2014 period?
We are expecting to maintain a growth of 30% in volume over last year.