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Summer Survivors

Cooling appliances makers are leaving no stone unturned to reach out to the consumers

Bengaluru, once popularly known as a pensioner’s paradise, is witnessing increasing sales in the number of air conditioners (AC) and air coolers. “We hardly even used to switch on the fan 10-15 years ago,” says a retired bank employee residing in Rajajinagar who recently installed a Lloyd AC. Blame it on heavy urbanisation and delayed and short-term monsoons, several Indians are flocking the electronic appliances store to buy ACs, air coolers and even additional fans for their homes and offices.

Retailers too are all set for the big summer war. With the mercury touching 45 degrees, players such as LG, Akai, Videocon, Samsung and Panasonic are preparing to consolidate their presence in the market across the country. “We believe that factors such as good monsoon and 7th Pay Commission would positively affect the organised market,” says Rajiv Kenue, COO, Kenstar. The brand is targeting more than 30 per cent growth in air cooler sales over the last year.

Current weather predictions also point to an extended and a harsh summer, and thus, would increase the demand for air coolers, ACs and refrigerators. Sanjeev Bakshi, COO, AC Division, Videocon, says the market size of ACs in India is likely to reach 10 million units with a penetration rate of 11 per cent and CAGR of 15 per cent in FY20. Videocon is expecting to sell 6.5 lakh units of ACs this year and plans to increase their market share in the segment to 13 per cent. “Growing urbanisation is fuelling the construction of retail, hospitality and commercial properties, and in turn, expanding the market for ACs in India,” says Bakshi.

Summer Advantage
In their report on consumer durables, India Brand Equity Foundation (IBEF) points out that by 2025, India would become the 5th largest consumer durables market in the world from the current 12th position. In 2015, revenue from consumer durables sector in India stood at $9.7 billion, which further increased to $12.5 billion in FY16. Samsung saw a positive 2016 and registered a double-digit growth. Rajeev Bhutani, VP, Consumer Electronics, Samsung India, says, “This year has seen an early onset of summer and we are already seeing a considerable demand for ACs and refrigerators.”

The white goods market in India is highly competitive and fragmented with the presence of domestic, international and unorganised market participants. According to IBEF, the refrigerators segment makes up 31 per cent of the consumer appliances market. The market share of direct cool and the frost-free segment is 75 per cent and 25 per cent, respectively. This segment is expected to grow at 10 per cent from 2014 to 2020.

The Indian AC market too has seen a high demand over the years. Perceived as a high-end product, it is expected to grow at 6.7 per cent during 2014-2020.

Reaching Out
Companies are riding on the back of latest technology to woo the customers. Manufacturers of AC, cooler and refrigerator are launching hybrid solar ACs, inverter and low consumption ACs, double-door refrigerators, convertible refrigerators, and smart coolers. And not just those in the sprawling cities of India. These brands are also reaching out to consumers in the hinterlands.

Rural markets contribute 33 per cent of the total revenue generated, which represents 69 per cent of the rural population. Indian consumer durable market saw a growth at a CAGR of 10 per cent during 2012 -2015. And the market is expected to grow at CAGR of 13 per cent from FY05 to FY20. These figures only add to the zeal with which brands are reaching out to their retailers in India’s tier-2/3 cities and villages who have access to power.

Kim Ki Wan, MD, LG Electronics, sees huge potential in rural areas. “With the current government’s focus on infrastructure, we expect more demand generating from these cities in the coming years,” he says. This year, LG targets double-digit growth compared to last year. LG’s top competitor Samsung is planning to boost investments in non-metros to create a retail experience in these cities. True, urban areas contribute more to revenue compared to rural India and Samsung agrees. However, Samsung is attempting to create a similar retail experience in rural areas to reduce the gap between urban and rural.

Bhutani says easy financing schemes will help increase demand in the tier-2 markets. “We are offering attractive finance schemes and with our new line up, our focus will be to gain numeric distribution in tier-2/3 cities.”

Lowered tax rates for MSMEs, 100 per cent rural electrification, schemes like Electronic Development Fund and the allocations in the Budget 2017 have ensured growth in disposable income among people in tier-2/3 cities. Panasonic India recently introduced an AC with inbuilt air purifiers. “With rising per capita income, our aim is to expand in tier-2 markets for ACs, and so, we are emphasising on the distribution segment,” says Mohammed Hussain, Business Head (AC), Panasonic India.

Sharing the target revenue for next year, Bharat Kharbanda, AVP Marketing, Usha International, says, “We aim to sell around 2 lakh air cooler units next year compared to last year’s 1.5 lakh units.”

Industry leaders believe, the sector is expected to grow double digit this summer on the back of consumers shift from unorganised sector to organised sector.

Set in Bhopal, the popular children’s book Fakruddin’s Fridge, tells the story of little Fakru who tries to find options to drink cold water as the fridge in his house breaks down once again. After trying several options, he discovers the joy of a better and cheaper substitute in a mud pot. Today, with options aplenty Fakruddin would have asked his Abbu to go for an EMI and replace the old fridge with a new one.

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magazine 01 May 2017 kenstar akai india videocon ibef

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