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| Early Diwali cheer for consumer durables firms |
| Pradipta Mukherjee / Kolkata Oct 06, 2009, 00:57 IST |
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And so, further investment plans on production, marketing all firmly on track.
Kamal Nandi, vice-president (marketing) at Godrej & Boyce, has got into a Diwali mood rather early this year, with reason. The company’s sales in September have gone up by 35 per cent, compared to 30 per cent in the same month last year.
And, going by the increasing footfalls in the sales outlets, the next two months are expected to be even better. More than a third of Godrej’s sales happen between September and November.
The extended summer has helped. “Our refrigerator and air-conditioning sales grew between 20-25 per cent in the first quarter. Now that consumer sentiment is improving, we expect Rs 700 crore sales from the festive season starting September. Last year, we made Rs 500 crore of sales during the festive months,” says Nandi.
This implies that Nandi’s investment plans stay. Godrej & Boyce is investing around Rs 100 crore in its plants at Punjab, Maharashtra and Uttaranchal. The funding is through internal accruals. It is looking at launching a new range of refrigerators and washers during September and December. The company is targeting a 20 per cent overall growth in turnover this year, to touch Rs 2,000 crore as of March 2010.
Godrej & Boyce is a case in point. Durables companies, including Godrej, Whirlpoorl, LG Electronics and Samsung Electronics, have lined up investments worth Rs 1,000 crore over the next few months for product launches, research and development (R&D) and to expand capacity at their existing manufacturing plants.
Their optimism rose with the central government announcing payment of the second installment of the Sixth Pay Commission arrears, amounting to Rs 29,373 crore. As a result, government employees in the A to C groups will get anywhere between Rs 50,000 and Rs 2 lakh in October. This, with improving consumer sentiment, is making companies hopeful of meeting or even exceeding the 30-35 per cent growth target during this period.
Whirlpool, for instance, is targeting Rs 500-600 crore this year during the festive (September to November) months, a 25-30 per cent increase over the corresponding period last year. Shantanu Dasgupta, VP of corporate affairs and strategy at Whirlpool, says: “A lot of ground work like meeting the over 14,000 dealers in 162 locations, as well as new product launches and promotional offers have ensured that the sales growth we projected for the festive season is on track.” Whirlpool is also looking at increasing its advertising and marketing spending 10-15 per cent this financial year, up from Rs 45 crore last year.
Whirlpool had recently effected a 4-5 per cent price reduction in its refrigerator offerings, which is expected to help boost sales. The company would invest more than Rs 300 crore in product development and promotion over the next three years. It expects a 10 per cent top-line growth during the current financial year, and 25 per cent during 2010-11.
The largest selling products during the festive season, according to durables companies, are refrigerators and washing machines while microwaves are the biggest gifting option for consumers this season. The Consumer Electronics and Appliances Manufacturers Association estimates the size of the industry at Rs 30,000 crore. However, the penetration level of various appliances in India is fairly low. Refrigerators are about 18 per cent of the total number of consumer durables sold, washing machines six per cent, air-conditioners account for less than two per cent and microwave ovens for about one per cent, which translates into a great potential to tap new consumers.
Take the case of LG Electronics, which is targeting Rs 2,800 crore in the three festive months, beginning September — a sales growth of 35 per cent over the corresponding period last year. Amitabh Tiwari, business head of consumer electronics at LG, says: “Last year, consumer sentiment was bad. But it has improved substantially now. So, we are spending Rs 110 crore on advertising and promotions during the festive months, up from Rs 68 crore last year. We are planning to launch a new range of products and investing in more TV commercials.”
LG also plans to invest Rs 500 crore in R&D activities, as well as on advertising home appliances this year. “LG is looking to double the amount of investments done in R&D to Rs 400 crore and spend Rs 100 crore on advertising and marketing of home appliances,” LG Electronics India’s Managing Director Moon B Shin said. Currently, LG has manufacturing units at Greater Noida (near Delhi) and Ranjangaon in Pune, which would be expanded in the next three years. The company may set up another unit by 2012 as a part of its plans to augment manufacturing capabilities, Shin said. LG is also expecting to close this year with a turnover of Rs 11,500 crore, up from Rs 10,000 crore last year.
For Samsung Electronics, the company’s sales grew by 30 per cent in the first six months of the year. “Now that consumer sentiments are improving, we expect a 30 per cent growth in the third quarter this year over the corresponding period last year. We are eyeing a turnover of Rs 1,700 crore from our consumer durables segment within the festive months of October and November, a growth of 40 per cent year on year,” says a Samsung spokesperson.
The company plans to attract buyers by providing a 22-inch Samsung LCD television free of cost with its 40-inch LED (LCD) TV. The company also offers DVD players to buyers of its 32-inch LED television. Samsung has also planned an investment of Rs 100 crore to increase the capacity of its Noida facility. The company is looking to strengthen its portfolio with a new range of air conditioners, refrigerators and washing machines.
(Additional reporting by Shahani Fatimah in Chennai)
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