After subdued growth in FY19, consumer firms pin hopes on a normal monsoon

Several consumer facing companies said it will help boost demand of goods and keep the inflation in check post-September after IMD's monsoon predictions

Forecast of a near-normal monsoon by the India Meteorological Department (IMD) is not going to rain on the parade of consumer goods companies this year. If anything, they are buoyant after a dampener year. The general elections this year have also added to their cheer.

Several consumer-facing companies said the twin benefits of monsoon and the hustings will help bolster demand of goods and keep inflation in check after September. 

Consumer goods firms expect rebound in rural, semi-rural markets to buoy sales. In fact, companies whose fortunes hinge on the hinterland expect a bumper year in sales — from cars to colas.

According to Kamal Nandi, vice-president, Godrej & Boyce and president of industry body Consumer Electronics and Appliances Manufacturers Association, a near-normal monsoon has the potential to give relief to the makers of air conditioners (ACs), refrigerators, and home appliances. “This is welcome news. Last year, the demand for ACs had shrunk due to tepid demand. But a near-normal monsoon this year may also perk up the sale of items in the festive season,” he said.

“IMD’s earlier prediction of a subpar monsoon this year had many jittery. But if the monsoon turns out to be normal as predicted, it will help the AC industry grow 10-15 per cent this year. Given summer has already arrived in most parts of the country, we expect to grow 15-20 per cent in 2019-20,” said B Thiagarajan, joint managing director, Blue Star.

Last year, the sale of ACs went down to 5 million units, from 5.5 million, as consumer demand remained muted. However, this year, Nandi expects sales to surpass the 6-million mark for the first time. Sale of refrigerators that remained flat at 12.5 million is also expected to cross 14 million.

Passenger vehicle makers may finally see growth arriving in the festive season, said a senior executive of an auto major. In 2018, unit sales growth declined to 2.7 per cent, from 7.9 per cent in 2017-18 (FY18).

Vikash Jain, national sales head, Hyundai Motor India, said, “A good monsoon is one of the key drivers for creating a good business environment in the rural economy. It will enhance the efforts towards consumerism and bring cheer to customers”.

A better monsoon is raising hopes of tractor makers as well. “While last year sales growth went down to 9 per cent, from 18 per cent in FY18, this year growth rate may inch up if farm income improves. However, a large base and tractor-buying cycle are factors that may impact sales this year as well,” said an executive from a major tractor manufacturer.

Better yield of crops as a result of a normal monsoon will not only improve purchasing capacity of rural and semi-rural households, it will also keep inflation of agri-commodities low — benefiting fast-moving consumer goods (FMCG) companies. Manufacturers of soaps to wafers are expecting to benefit from it.

According to Mayank Shah, category head, Parle Products, a lower rate of inflation will be helpful in improving FMCG companies’ margins. “Categories that we play in are observing high growth due to massive on-field activities in the election season. Further, a good monsoon will also help the sale of branded packaged foods in the rural market,” Shah said.