The Indian summer turns more harsh every year and 2019 could scarcely be different. The Meteorological Department says the mercury is one to five degrees above normal in most parts of the country. The plight of a panting, perspiring multitude though, will keep cash registers tinkling for not just manufacturers of cold, bottled beverages, but manufacturers of compressor products like air-conditioners (ACs) and refrigerators, who are recovering from sluggish sales in 2018.
In the year gone by sales of consumer durables grew in single digits and AC sales were almost flat. This year the industry is banking on some recent trends, like the electrification drive that has taken power supplies to vast parts of the country and the growing purchasing power of consumers in tier-1, tier-2 and tier-3 cities. The trends are significant because the market penetration of ACs in India tends to be low.
Consumer durables stare at a wide market of first time buyers in the tier-2 and tier-3 cities, where the India growth story is increasing disposable incomes of consumers. India-on-the-go also opens up a wide market for the more demanding “upgrade customers”, looking for technological innovations in home appliances. Urban India is also where a migratory workforce from rural Bharat hankers for household gadgets and as summers across most of India turn torrid, ACs are no longer a luxury.
Industry sources talk of a “mind-set shift” among consumers, who see ACs as a household necessity.
White goods manufacturers say the feedback from the market has been positive so far. Chinese consumer electronics and home appliances multinational Haier, expects its air-conditioner business to grow 50 percent and a 45 percent growth in its refrigerator sales. “At Haier we’ve been witnessing optimistic growth trends for both categories. We witnessed a 40 percent growth in our home AC segment and 50 percent in our commercial AC business in 2018, followed by 71 percent in our overall refrigerator business and have doubled our sales in the mid and high segment,” said Eric Braganza, President, Haier Appliances India. Haier India closed the 2018 calendar year with net sales of Rs 3,500 crore.
South Korean LG has already witnessed a 40 percent growth in sales in south India, where LG India is selling it’s high-end variant split ACs, which make up 95 percent of it’s total AC inventory. Vijay Babu, Head of Home Appliances at LG India said sales of ACs and refrigerators have picked up in the last 15 days in other parts of India as well, particularly in the north and east, thanks to “wide electrification”. “This year we will see sales worth Rs 8,500 crore in refrigerators and Rs 3,500 crore in ACs, up by 30 percent over last year,” said Babu. According to market research institute GFK, LG is a market leader in India with 22 percent share in AC sales and 36 percent market share in refrigerators. Korean consumer durables manufacturer Samsung is a close competitor.
The rapid growth in demand is prompting manufacturers of electronic goods and home appliances to scale up production capacities. And the Indian consumer is turning more demanding. Customers, for instance, now want an air-conditioner that not only cools effectively but saves on electricity bills too. LG India is banking on the five star BEE (Bureau of Energy Efficiency) labels on its AC’s. The more aware and more demanding and more cash empowered Indian purchaser is now prompting brands to introduce newer technologies. Haier has launched the PuriCool Range of air-conditioners that come with built-in air purifiers and an automatic PM 2.5 air quality detection system that can remove up to 99.99 percent of air-borne pollutants.
More Fizz in FMCG
The Indian beverage market is rolling on at a dynamic speed too. The market for cold beverages grew at a compound annual growth rate (CAGR) of 30 percent plus between 2012 and 2017 and is gaining momentum year-on-year. The market for ready-to-drink juices, in particular, is growing rapidly. Producers of such fast moving consumer goods (FMCG) have begun to increase investment in rural markets by 10 percent to15 percent annually. The FMCG companies are, for instance, investing more in direct distribution and activation in rural areas. Spread of urban infrastructure in the rural backwaters and of course, a rise in purchasing power is growing the rural consumer base.
The top five players in the ready-to-drink (RTD) juices category are Dabur’s Real, Tropicana, Paper Boat, Minute Maid and B Natural. “Keeping the trends in mind, we will continue our focus on our existing range of OTC (over-the- counter) and lifestyle products. A lot of work is happening on new products which will be extensions of our core categories, and will be focused on the millennials and new consumers,” said Mansoor Ali, Chief Sales and Marketing Officer, Hamdard India. “Our marketing spends have gone up considerably over the past three to four years, and are now in the high double digit range as spend-to-sales ratios. New initiatives and category extensions are looked at as investment spends and hence, do not require any boundary conditions for spending,” said Ali.
“This summer, B Natural has a gamut of initiatives planned to garner sales and market share in the juices and nectars category,” said a spokesperson for ITC’s Foods division. “We are launching a new unique range within our portfolio which will be in a transparent PET format, without any preservatives for the first time ever. This new addition to our portfolio, we believe will disrupt this category which has predominantly existed in the opaque carton format so far. Along with this, there is an entire marketing calendar planned around various consumer access channels like TV, digital, outdoor, print, digital etc. to communicate,” said ITC spokesperson said.
The fast-paced life of modern Indians lure them to “convenience food” like ready-to-drink, ready-to-eat, ready-to-cook, and ready-to-serve edibles and beverages. The health and wellness category within the FMCG category has seen a solid boost in sales over last year. With changing consumer preferences and lifestyle, brands now focus more on products that are healthy for consumers.
There is a massive movement happening towards herbal, non-synthetic products too. Consumers today are very aspirational. The information explosion is creating a brand new prism of vision for them and they are opting for customized e-commerce and omni channel experiences. They are goading brands to expand their array of offerings. Industry sources in the FMCG market say millennials would continue to be their “strategic drivers of marketing communication, product extensions and digital strategy”.
“We have conducted pilot market studies for Rooh Afza Fusion in selected markets. The basic idea was to acquire new, younger consumers, while retaining the loyal ones who have a huge affinity to the mother brand Rooh Afza,” said Mansoor Ali. “Basis the feedback received on the pilot launch, the product will be formally launched very soon,” he said, adding, “This product marks Hamdard’s entry into the juices and RTD category, and is slated to grow in double digits.”
The fruit-based juice market is reported to be one of the fastest growing categories in the beverages segment. It has been growing at a CAGR of close to 30 percent over the past decade. Unorganized players dominate the business and organized retail (comprising juice bars, juice cafes and packaged juice players), has a market share of only 25 per cent.
The potential market for packaged juices is close to Rs 1,500 crore, according to consulting firm Technopak. If you believe India Juice Market Outlook 2021, the market for fruit juices has been growing at a CAGR of 18 per cent consistently and is expected to grow by more than 15 per cent in the years ahead. The market for syrups and concentrates is valued at close to Rs 900 crore.
The fruit-based beverages market in India is dominated by fruit drinks (with 30 percent fruit content). Fruit juices (with almost 100 percent fruit content) have almost 35 percent market share and nectar drinks (with between 30 per cent and 90 percent fruit content) have a market share of 10 percent. The market for bottled drinks, ranging from fruit juices, carbonated soft drinks and bottled water, is worth a whopping Rs 65,000 crore. Euromonitor forecasts that the market would grow at a CAGR of 17 percent and be worth Rs 27,250 crore by 2021.―Business World