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“Forecasting Remains A Challenge For Cooling Appliances”
Micro and macro trends may lead to a higher inventory cost cautions Manish Sharma, Chairman, Panasonic Life Solutions India & South Asia in this conversation with BW Businessworld’s Arjun Yadav
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What was your strategy towards adding fresh inventory this summer?
When it comes to cooling products, production typically peaks around September or October, and inventory accumulates in the warehouses. From this time till about February-March, the stocking with distributors begins to happen. Earlier, it used to be from December to February. In the last few years, it has shifted slightly and the reason is that the supply chain efficiencies have improved significantly. The filling starts to happen from January and February in case March starts to peak in summer.
In terms of channel filling compared to other emerging economies or including the developed ones, we are very well balanced. About 30-35% of sales in our country come from organised retail and another 35-40% through conventional distribution. The remaining can be attributed to exclusive or ecommerce channels. Being a country with lower penetration rates for air conditioners and distribution contributing 35-40% of the overall demand, it takes time for the entire value chain to streamline inventories. That is why channel filling starts early, which would be our case too.
What was the experience this year given the fluctuations in the weather as summer had just set in?
January and February were good months to deal with. There was significant growth over last year, but March witnessed unseasonal rains, which continued in April. Forecasting is a challenge when it comes to cooling products. And this is not when you are getting into summer but when you are coming out of the season because that is when you have to ensure that inventory control is optimally managed. This year will be tougher for air conditioner manufacturers because the challenges on the cost side will start to ease, and commodity prices, including the exchange rate, will start to improve. And the forecasts are that in the third quarter of the calendar year, the cost pressures will begin to soften, which means that the current inventory might be of a higher cost.
What are the product features that you are incorporating based on customer demand or feedback?
One big change in the last three years is that people prefer products that help them multitask and lead convenient lives. Consumers are also starting to prefer products which are lower on the total cost of ownership.
That is what we have done with our products in the last three to five years. So, for example, in our air conditioner range, we introduced a ‘sleep’ profile, in which you can set hourly temperature basis your comfort. In the time to come, this may also be done automatically, where the air conditioner would adjust itself, knowing your
discomfort. Apart from that, the durability and reliability of products are a prerequisite and, therefore, a lower total cost of ownership.
What categories of appliances are you seeing as your growth drivers?
Consumer durables are just about 30 per cent of our revenue in India. In that sense, there would be many other categories including industrial devices, energy products, like batteries, products in the systems solution domain, smart factory solutions and the like. We are a diversified technology company, but air conditioners will remain the first engine of our growth within consumer durables.
Our factory in Jhajjar, Haryana, is backward integrated. From drawing copper wires to doing heat exchangers within the same campus, we manufacture our air conditioners and that happens to be the reason for the durability of the products. Washing machines might be the second engine of our growth in the future. And subsequently, we are also looking at lifestyle products, beauty products such as hair dryers and kitchen appliances.
What are the investments that have been made to boost manufacturing capacity?
In the last six years, we have invested nearly Rs 391 crore to beef up our appliance manufacturing units in Jhajjar, Haryana. We have invested over Rs 169 crore in R&D and Rs 326 crore for our electrical device manufacturing units in Haridwar and Sri City, with more investments planned till 2025. We have invested over Rs 250 crore to set up IIC, and apart from these, critical investments have been made into business operations and brand building, among other initiatives.
What are the channels you are using to reach out to customers?
Panasonic would be one of the very few brands operating into almost all consumer touch points, providing an opportunity for people to witness and experience the products much closer than several other brands.
We operate not only in the conventional distribution channels today such as small dealers in tier 2 and tier 3 markets but also across all the organised retail partners. We also have hundreds of exclusive stores, where a wider range of Panasonic products can be experienced.
We are also present on all major ecommerce platforms. Last year, we also introduced a direct-to-consumer channel, the exclusive Panasonic portal for consumers to purchase and experience Panasonic products. This year, we will also let Panasonic employees across the country become ambassadors of the brand for them to reach out to their friends and families.