Godrej To Panasonic, Appliance Makers Bet On A Festive Turnaround

After the second Covid-19 wave stalled a rebound, makers of appliances to electronic gadgets hope for a turnaround in fortunes during the festival season.

Brands including Godrej, Realme, Thomson, and Panasonic, among others, have lined up discounts and stocked up adequately in anticipation of demand ahead of the Diwali season. In a recent interaction with analysts, Nilesh Gupta, managing director of the Mumbai-based electronics retailer Vijay Sales, said he expects the ongoing festive season to be “the best” in the last three to four years.

This comes as sales in southern India during Onam—a key festival for companies to gauge demand—failed to boost volumes materially as Covid-19 infections rose sharply, especially in Kerala, Neeraj Bahl, managing director and chief executive at BSH Home Appliances, the maker of Bosch and Siemens products, told BloombergQuint. In the north and the west, too, the inauspicious 'Shraadh' period in September dampened demand, he said.

Eastern India, however, saw an uptick in sales as consumers rushed to utilise discounts during the Durga Puja season, Bahl said.

The October-December quarter, coinciding with Diwali festivities, is crucial for the Rs 50,000-crore domestic appliances industry as it accounts for 35-40% of their annual business, according to Consumer Electronics and Appliances Manufacturers Association. Even the pandemic-hit 2020 saw a value sales growth of 7.3% and volume growth of 5% in the festive quarter over the previous year, according to data from market researcher Nielsen.

“We’ve experienced a depressed Q1 because of Covid-19 restrictions,” Kamal Nandi, business head and executive vice-president at Godrej Appliances, told BloombergQuint. “But now, we’re seeing encouraging signs of demand revival as consumers are gearing up to celebrate the festival season.”

The company’s targeting a growth rate of 20% this year from the upcoming sales, he said. “Refrigerators, particularly frost-free, and fully automatic washing machines are still in great demand," Nandi said. Sales of high-end appliances, and inverter and split air conditioners are also increasing, he said, indicating a progressive shift toward premiumisation.

Bahl, too, expects to clock 50-55% growth in festive sales this fiscal.

Incentives, New Launches

White goods makers are rolling out offers and launching new products even amid challenges like an acute global shortage of semiconductors, rise in logistics costs and import curbs—all of which have put pressure on their bottom line.

Avneet Singh Marwah, chief executive of Super Plastronics Pvt., the seller of Thomson and Kodak range of TVs online in India, said the brands will see the “best deals of the year” on Flipkart.

“Demand in August-September was stagnant as people were saving their disposable incomes in anticipation of a possible third wave. This should unlock the pent-up demand during the festive season as there’s no better time than this to grab the best deals across e-commerce platforms,” he said. “We expect a spike in mid-screen TVs, especially 43 inches onwards.”

Panasonic India, too, is offering incentives under its Great Delights scheme. That includes extended warranties, zero down payment, long-term EMIs, and up to 12 months of no-cost instalments to online and offline buyers, said Manish Sharma, president and chief executive officer of Panasonic India and South Asia.

“We’re hoping to maintain a growth of 25% throughout the festive season to make up for losses due to the pandemic,” he said.

Realme expects to sell at least six million smartphones and two million artificial intelligence-based devices in the upcoming season, driven by improved economic conditions, pent-up demand and offers, said Madhav Sheth, chief executive officer of Realme India, Latin America and Europe.

A Pause On Price Hikes

Commodity costs have soared as demand surged when economies started easing restrictions. That has already prompted makers of appliances to increase prices multiple times this year, making refrigerators to mobile phones costlier for consumers.

“Price hikes may stop temporarily during the festive season as companies fear a slowdown in demand,” Mayank Bhandari, research analyst at Nirmal Bang, said.

Godrej Appliances' Nandi said the company has had three rounds of price hikes totalling 15% against 22% increase in commodity costs since December. "Appliances in general are competitively priced, and that leaves us with no choice but to pass on this cost escalation to consumers,” said Nandi, also the president of CEAMA till September-end.

Despite restrictions in China, a paucity of shipping containers and the looming threat of chipset supply crunch, he said the industry is refraining from price hikes during the festive season “with the intent of not dampening consumer sentiments”.

Saurabh Baishakhia, president of appliances at Usha International Ltd., however, said there could be a 3-4% price increase in heating and cooking appliance categories in the third quarter depending on how the commodity prices fare.

Nandi, Sharma and Marwah said there are adequate stocks to cater to demand throughout the festive season. But Nirmal Bang said its channel checks revealed high-end microwaves being in short supply, and the trend is likely to persist.

Sharma of Panasonic India has another fear—that a third wave could “derail the performance”.