The impact of the pandemic can no longer be ignored. The refrigerators market is either seeing subdued demand or else a shift to large-capacity machines that offer more storage capacity.
Household refrigerators have been an integral part of the majority of households for several decades. Penetration of refrigerator ownership in India is projected to grow to 0.64 per household in 2030. Rise in the number of nuclear families, easy availability of credit, evolving lifestyle, introduction of new models, uninterrupted electricity availability, technology advancement, and increasing consumer awareness drove the growth of Indian refrigerators market in 2019.
The Indian market for refrigerators is estimated at 14.2 million units in 2019-20, valued at Rs 22,000 crore, with a 12.5 percent increase by value, and a 15.4 percent growth by volume over 2018-19. LG and Samsung continue to dominate the segment.
Whirlpool, Godrej, and Haier are the other three aggressive players. Panasonic and Hitachi cater to the premium segment. Empire Home Appliances is now primarily an OEM supplier with Onida, Voltas Beko, and Bajaj as its large customers. Bosch, Liebherr, Mitashi, BPL, Intex, TCL, Siemens, Midea, Electrolux, Kelvinator, and other regional players continue to have presence. The online brands include Samsung, LG, Whirlpool, Haier, Godrej, Panasonic, Blue Star, Mitashi, Bosch, Gem, Aisen, MarQ by Flipkart, AmazonBasics, Croma, and Koryo.
Strong brand equity, a wide product range from basic single-door direct cool to large volume side-by-side door appliances is what separates the leading brands from the others.
The profile of the refrigeration appliances offer is changing in line with consumer expectations. While single-door products account for a significant majority of fridge-freezers volumes, double-door appliances are gaining strongly in popularity.
The focus on energy efficiency exerts a growing influence on the development of refrigeration appliances. Refrigerators fall under the mandatory Standards and Labelling Program, introduced by the Bureau of Energy Efficiency (BEE) under the Ministry of Power. As new energy norms kicked in, in January 2020, prices rose by 3–8 percent, depending on the model. On high-end models, the price increased by Rs 5000–Rs 6000 as the labelling guidelines mandated the manufacturers to shift to vacuum panels from traditional foams for cooling to attain a higher level of energy efficiency.
Moreover, on the government’s mandate for extended producer responsibility (EPR), firms need to now collect and recycle 30 percent of what they sold a decade ago by 2019-20, which will continue to go up by 10 percentage points every year till 2023. For instance, in April 2020, manufacturers had to collect and recycle 40 percent of what they had sold a decade ago. With consumers unwilling to return used electronics and durable items directly to manufacturers, most firms are forced to buy them from producer-responsibility organizations. These organizations have the task of collecting scrap electronics and giving them to the companies concerned, which adds to cost.
Having said that, manufacturers do not have much pricing power for this product, and are always under compulsion to drop prices or keep them competitive. In most cases, the price hikes have been lower than the domestic inflation rate.
The traditional two key growth drivers identified as lower penetration at 26 percent, coupled with increased urbanization, and rising affordability; and easy availability of finance schemes may not be relevant for the major part of this year as the country remains in partial paralysis, thanks to the COVID-19 lockdown. With the citizens migrating to their semi-urban and rural homes, huge downsizing of employees, retail lending at standstill and the finance sector in distress, this segment too, as all the others, is expected to face muted demand.
Increased electrification may be a saving grace to some extent. The Make in India campaign is likely to propel the supply of refrigerators. Apart from that, many incentive schemes like vouchers, discounts, and coupons are being persistently made available by these campaigns. These are also attracting consumers toward buying refrigerators. However, the lack of repairing services for these products may hamper the refrigerator market growth in the coming years.
The dealer fraternity finds a shift in the buying pattern. Pre-COVID-19, the consumer preferred to make this high-value purchase with a long replacement cycle from a brick and-mortar store. The need to touch and see has played an important role. Moving forward, this is gradually changing. Dealers are desperate to liquidate their stock and are relieved that the lockdown has been lifted.
The manufacturers, at their end, do not have high expectations from the upcoming festive season. With COVID-19 continuing to paralyze the economy, the consumer is expected to conserve his cash. The procurement of components (orders are placed around July) is planned for a 30 to 50 percent lower level than last year.
The manufacturers are on a localization drive. In the past 5 years, overall, approximately Rs 7500 crore investment has been made by ACE manufacturers, mainly for capacity expansion and new capacity development. This trend will continue in the future. Encouraged by the government’s new duty structures, backward-integration component production is being encouraged by the makers. They are working very closely with their suppliers, and encouraging them to start local manufacturing.
They have been importing a significant number of completely built units and components for refrigerators from China. Owing to supply disruption and lockdown, sales of refrigerators slowed from March 2020. While the segment witnessed higher on-year sales in January and February, the same met a downward trajectory in March.
Also, Chinese suppliers increased the prices of some components by more than 2 percent. Both international and indigenous brands have been impacted by the shortage of components imported from China. Hence, price increase in the range of 3–5 percent is anticipated. In addition, dealers are turning away from offering discounts to boost sales.
Almost all brands are investing in energy-efficient technologies, including the inverter technology. The thermocouple, which senses the temperature inside the refrigerator and makes the compressor go on or off as per the temperature set in the refrigerator, plays an important role here.
Essentially, inverter technology controls energy and power consumption as per the requirement. The inverters change the power provided to a compressor and motor through voltage and frequency to switch their speeds at any time. With this technology, the compressor is always on but will only draw lesser power when the set temperature is achieved. This enables power-output control, which in turn consumes lesser energy and reduces wastage. Since the compressor is always on, the start/stop cycle is eliminated, thus increasing the efficiency. Quicker cooling or heating can be attained for a desired temperature as there are no fluctuations. Since the cooling or heating is done at a sustained level, and there are no voltage peaks, the life of the component is also extended. The consumer is well aware of this future-oriented technology, that increases efficiency and reduces power consumption.
While the industry complained that 2019 started off well with cooling products showing traction in the first half, and with floods in various parts and low economic sentiments, overall demand started tapering in the second half, Samsung declared that the brand had grabbed 33.9 percent market share by value in the second half of 2019.
2019 saw LG after extensive consumer research introduce the InstaView Door-in-Door refrigerator. Research revealed that consumers opened their refrigerator door an average of 79 times per day, causing a waste of cold air and energy. As a result, there were a higher number of users forgetting to close the door, despite 56 percent stating that they disliked it when the refrigerator was left open. In order to resolve this consumer pain point, the company implemented the innovative knock-on feature. By knocking twice on the glass of the InstaView Door-in-Door, users could see inside the refrigerator without opening the door.
Analysis at Haier revealed that the traditional refrigerators are designed in a way where the less-used freezer section is at the top and the most-used refrigerator section is at the bottom, for which every time the user needs to use the refrigerator section, they have to bend down to access it. The company pioneered the bottom-mounted refrigerators, in which the freezer section is mounted at the bottom and the more-used refrigerator section is at the top, allowing proper visibility of the food items stored inside and reducing bending by 90 percent for a user.
Another trend Haier introduced is the 8-in-1 convertible feature, where users can easily convert the freezer into a fridge, and back to freezer, with eight convertible options within a time span of 50 minutes.
In response to the consumer preference toward high-capacity models, Hitachi is promoting premium refrigerator series – Made in Japan (MIJ) – and side-by-side three-door refrigerators, with the target being the discerning customer, no longer swayed by price points, but demanding a good-quality product with the latest technology that is worthy of its price. These high-capacity, inverter models offer dual fan cooling, vacuum insulation panels, and intelligent controls.
Staying cool while going green
Refrigerators built in the past and those built today have much difference in terms of the energy they utilize. Thus, there is a high demand for replacement of old refrigerators with the latest-technology products. Manufacturers today are striving to meet the standards and are thus manufacturing efficient products. They are also offering customers user-friendly features like water tap on the door, through-the-door-ice, and similar other technological advancements.
Compressor efficiency is a crucial determinant of energy performance in refrigerators. The most common type of compressor used in domestic refrigerators is the reciprocating compressor. Linear compressors, which are more efficient than even brushless DC (BLDC) reciprocating compressors, have been introduced by some manufacturers, and are found to reduce energy consumption by 10 percent. Variable speed drive (inverter) compressors are deployed in some domestic refrigerators. However, these are not yet mainstream since they cost more.
The most common type of insulation is polyurethane foam (PUF) with different blowing agents. With a push to phase out HFCs and switch to zero-ODP and low-GWP blowing agents, cyclopentane is now commonly used as the blowing agent for PUF insulation. Vacuum insulation panels (VIP) are used in higher-end refrigerators, but these are much more expensive than PUF. Insulation thickness can be increased as well. However, this will generally impact net volume or the overall size of the refrigerator.
The surface area and heat-transfer capability (thermal conductivity) of heat exchangers have an impact on energy performance. Increasing the surface area can improve the efficiency of heat transfer.
Additionally, using lower-power fans, like BLDC fans, to improve heat-transfer capacity for heat exchangers can improve the energy performance of the refrigerator. With the push to drive out HFCs, R600a has replaced R134a in newer refrigerators and is equal to or better than R134a when it comes to energy efficiency.
The main differentiators between 3-star models, and 4- and 5-star models in India are the compressor efficiency, use of variable speed drive, type of insulation, and heat exchanger improvements. Compressors in 4- and 5-star models are about 10–25 percent more efficient than those in 3-star models.
Further, most 4- and 5-star models are equipped with variable speed drives. The most common insulation is cyclopentane PU foam, with some 5-star models also incorporating vacuum insulation panels (VIP). Other technologies used in 5-star models are high-efficiency fan motors, dual evaporator, and forced condenser.
Barriers. 5-star refrigerators that consume 30–35 percent less energy compared to 3-star refrigerators are already available in the market. Yet, their higher cost is a deterrent to the widespread adoption of 5-star refrigerators. The lack of local availability of some technologies like highly efficient compressors and the latest insulation technology is a related barrier, increasing cost and making it more difficult to obtain supplies.
Consumer interest and awareness about energy-efficient models has improved with the introduction of the BEE star rating. However, there is scope to enhance consumer awareness and access to information on the energy performance of the products in the market.
Recommendations. According to Mainstreaming Super-Efficient Appliances in India, a report by Alliance for an Energy Efficient Economy and American Council for an Energy-Efficient Economy, the technology used in the most energy-efficient products already exists but is currently more expensive. Government policies and initiatives to spur local production and to create a well-developed ecosystem for super-efficient technologies and components used in refrigeration – highly efficient compressors, fan motors, and vacuum insulation panels – will help bring down the price of super-efficient technologies.
The government could consider setting up R&D programs for the development of energy-efficient heat exchanger technology and super-efficient design technology for small compressors and motors.
India Cooling Action Plan (ICAP) is an opportunity to invest in a robust Make in India ecosystem for critical components and make a step change in the energy efficiency of refrigerators. Consumer incentives like subsidy, on-bill financing, and differential tax rates for superefficient appliances (5-star rated) could be considered for demand-side management programs.
The actual operational energy consumption of refrigerators depends a lot on consumer usage. Adding a display panel to show actual energy consumption and input power for a refrigerator, along with Quick Tips, could prompt consumers to maintain and use their refrigerators to get optimal energy performance.
Global market dynamics
The global household refrigerators market was worth USD 35.1 billion in 2019. It is expected to reach USD 42.9 billion by 2023, at a CAGR of 5.14 percent. The French-door bottom-freezer refrigerator segment accounts for the maximum market share, although side-by-side refrigerators are projected for the highest growth rate.
The rising demand for higher-capacity and frost-free products is a trend that market players have noted, besides focusing on higher-end spectrum or premium product that ultimately offer higher profit.
The online sales channel is expected to gain a higher market share by 2026 owing to the high sales of electronic appliances through e-commerce websites and company online portals. The manufacturers and e-commerce companies are partnering to provide advanced offerings, faster delivery, and convenience.
Moreover, as coronavirus continues to spread around the world, there have been significant impacts to consumer behavior, product demand, and retail store, factory, and logistics services availability. Consumer durables retailers are being hit the hardest as consumers forego discretionary purchases in favor of stocking up on food and household supplies.
As shelter-in-place orders proliferate and potentially extend, and consumer anxiety about infection persists, consumers across age groups have shifted spend to online channels. The longer the crisis lasts, the greater the likelihood that online and omni-channel purchasing will become the next normal.
Asia-Pacific is likely to dominate because of the rising demand for infrastructure in this region. In addition to that, the rising number of households, rapid urbanization, increasing disposable income, and inclination of people from conventional to smart appliances are set to surge the demand for refrigerators in this region.
Europe, on the other hand, is anticipated to grow at a fast pace owing to the emergence of technologically advanced refrigerators developed by industry giants present in this region. It would, in turn, attract more consumers.
In 2019, North America was the largest region in the global refrigerator market. The region is likely to generate a significant share soon on account of the increasing disposable income of people residing in Canada and the US. The increasing consumption of processed food products like frozen meat, vegetables, dairy products as well as change in the dietary habits of consumers in the region, is driving the market growth. The processed food industry estimated at USD 2 trillion globally is expected to drive the refrigerators market.
The manufacturers are implementing IoT and embedded sensors in their products to improve overall functionality. They are introducing advanced human-machine interface designs in refrigerators, and also manufacturing models that can automatically recognize the type and weight of the food stored in the refrigerator, and adjust and monitor the temperature as per requirement.
They are partnering with various technology, software, and component providers to support technical developments in intelligent refrigerators. Additionally, compressor-less refrigerator is one of the notable technological innovations, which will become a significant growth factor in the market.
Intense pricing pressure on manufacturers is restraining the growth of the refrigerator market. It has numerous players competing in terms of price, specifications, and other characteristics. Refrigerators are more price-elastic than necessities. Consumers are more likely to purchase when there is reduction in the price and less likely to purchase when there is a price hike.
Refrigerators getting smarter with AI and IoT
Refrigerators have been around for over 100 years, and while their design, function, and usage have remained largely unchanged, the advent of AI technology has brought a new wave of innovation to create a smart refrigerator. In addition, the integration of IoT to produce the smart refrigerator is an inevitable result of the IoT technology and a direct reflection of consumers’ pursuit of higher quality and a more convenient life.
In contrast with the traditional ordinary refrigerator, smart refrigerators can remind users of foods stored in the refrigerator in a timely way, collect data relevant to the refrigerator’s operation to issue early warnings, and prompt maintenance, and help them use it more easily, changing living habits to a certain extent.
Smart refrigerators market size is estimated to grow at 16.65 percent CAGR between 2019 and 2026. The global industry shipments are projected to reach 2 million units by 2026. Growing smart home establishments, increasing penetration of intelligent appliances, and consumer awareness are driving the smart refrigerator market globally.
Smart models are also gaining high market demand owing to smartphone connectivity options that allow operations from distant locations. Furthermore, product launches with technical advancements and regional expansion by established refrigerators manufacturers have created opportunities for market development.
Key market players are involved in the development of technically advanced smart refrigerators and software to provide high security and connectivity to the consumers. Companies are also investing huge amounts in R&D activities to develop advanced technologies over their competitors in the smart refrigerators market.
The residential application is witnessing a high market share owing to technologies like temperature-control components. Easy availability of intelligent appliances and the growing knowledge of consumers in the developing countries will support the product demand. Moreover, the architectural developments in new residences and the need for intelligent products to support aesthetics are transforming the market outlook.
Consumers in North America and Europe are shifting toward intelligent home appliances to reduce power consumption and gain benefits from internet connectivity features.
The market statistics of the Asia-Pacific region are growing rapidly owing to the increased consumption of intelligent appliances, including smart refrigerators, in China, South Korea, and Japan. The market is driven by low product prices, increased purchasing power, and consumer awareness in the region.
China and South Korea witnessed high smart refrigerator sales in 2019 compared to other Asian countries owing to the presence of market leaders. Several governments across the globe are promoting the use of intelligent products to achieve digitization and smart home adoption at a rapid pace.
The Indian consumer does not seem to be warming up to this technology, yet. The smart refrigerator challenges include several security and malware issues, increasing the chances of personal data leaks. Smart refrigerators are prone to software hacking and cyber-attacks owing to weak security parameters and connectivity with other home devices.
High cost of modern technologies is a major concern as every manufacturer is focused toward size and design of equipment. Initial investment of smart refrigeration technology is high. Additionally, day-to-day technical changes make the system complex.
Further, regular maintenance of the technical and smart equipment results in increasing the cost. High cost of IoT enabled appliances is amidst the key factors restraining the growth of smart refrigerators market.
The next couple of years will determine the fate of this segment!
Head – Refrigerators Segment,
Johnson Controls-Hitachi Air Conditioning India Limited
Evolving Indian refrigerators market, with changing consumer preferences
The domestic refrigerator industry is witnessing a major transition right from product and design innovations to giving value for money and energy-efficient solutions to consumers with a variety of choices. Penetration of refrigerators in India is currently at 33 percent; hence, there is sufficient head room for growth. Rise in numbers of nuclear families, increasing the global consumer awareness, evolving lifestyle, easy availability of consumer finance, changing the Indian consumer eating habits, and uninterrupted electricity availability are driving the growth of refrigerators in India.
The overall market size of refrigerators in India for FY19-20 is estimating at 145 lakh units and it is expected to grow at a CAGR of 12 percent till FY25. The Indian refrigerator market is categorized into two segments i.e., direct-cool and frost-free refrigerators. Direct-cool refrigerators dominate the market with almost 75 percent share. However, the popularity of frost-free and French door bottom freezer refrigerators is growing, especially among urban households owing to technology enhancement and global exposure of Indian consumer.
Domestic manufacturing and assembly activities in refrigerator add up to 55 percent of the total market size. Main door panel (pre-coated sheet) has aesthetic appeal and is currently imported from Korea and China. Compressors, MDI-foaming chemical, evaporator, condenser, and fan motor are imported as well as domestically sourced.
Hitachi offers a premium range of imported refrigerators, which are designed, especially as per Indian consumers’ eating/consumption habits. The company’s focus is on offering premium range of frost-free and bottom freezer refrigerators to the Indian consumers, which match their requirement. With dual-fan cooling technology, Hitachi refrigerators offer independent cooling of refrigerator and freezer compartment separately. This results in 35 percent faster cooling, and more energy saving in the new series.
The new fresh select compartment provides extra storage space for keeping fruits, vegetables and dairy products, with a working temperature range of 1°C to 5°C, which keeps them fresh for a longer time. This selectable mode compartment is easy to convert and is available in the entire range of product lineup. This is very important under the current circumstances as people are staying at home more, and need to store fresh vegetables, fruits, dairy, etc., for a longer time.
The new four-door French bottom freezer refrigerator (with glass black-color finish), 638-liter capacity, comes equipped with fresh select convertible feature, automatic ice maker, and vacuum compartment. This new launch has given more options to Indian customers, resulting in favorable using as per their choice.
Now, during COVID-19 lockdown, when customers are restricting frequent market visits and want to store more food in one go, the demand for the company’s bigger-capacity refrigerators, especially bottom freezers (500-liter-plus) segment has increased. This has resulted in good sales numbers, and Hitachi is expecting further upgradation of this demand in coming future. Thus, with good consumer offers and continual availability of superior-quality, high-end imported refrigerators, Hitachi aims to connect more with its customers and keep enriching their lives.
Product Group Head – Refrigerators,
Emerging trends in the COVID world
COVID pandemic is definitely going to leave a mark on the world, with businesses either scrambling or strategizing. A few emerging trends need to be considered, which could provide an edge up in the current situation.
Market scenario. The summer season is about to end and demand for cooling products like refrigerators, are usually high during this period in normal times. While markets are opening up and lockdown being lifted in a phased manner with social distancing and other precautions in place, we expect that sales will not pick up immediately.
The loss of sale in April and half of May will not be compensated to its full extent in this FY but most of it will get covered in H2 of FY. We are seeing pockets of demand, therefore more in markets which have fewer red zones obviously. Markets like Maharashtra and Delhi are a key concern even in coming months and these markets contribute to the industry in a big way.
Changing preferences. Having said that, the COVID impact is playing out in different ways – a set of consumers are now more open to try new but relevant products and service, some are now more open to a different way of product purchase and service, new users are emerging as well across different segments.
For example, in the post COVID-19 world, consumers may opt for a larger refrigerator with higher storage capacity with better health and hygiene features, to reduce the visits to the market. Likewise, side-by-side and bottom-mounted refrigerators will be gaining share in the coming times for better comfort.
Furthermore, health and hygiene has emerged as a relevant theme and a matter of utmost concern for the consumers. We also anticipate more demand for eco-friendly appliances in times to come.
Communication to fit the post-COVID world. Firms are adapting to this new business climate by retuning their plans, finding new ways to increase efficiency and effectiveness and also changing the ways to connect with customers. It is critical to redefine how we as a brand interact with our audience, avoiding grave pitfalls of insensitivity or myopia.
The consumer clearly needs brands to play a larger or at least a different role than what it may have played in the past. It is important to be authentic, credible, and empathetic toward the consumers’ concerns. Reflecting on the real issues that consumers are facing and addresses consumer needs with the right value and solutions is the need of the hour.
Rebound of the market. It is becoming more and more evident that we all need to innovate and re-orientate our products, services and reassess both, offerings and the way they are delivered, to address the new consumer concerns. This requires designing fresh consumer communication and promotion which flows from these new ways of adding value to consumers.
The COVID crisis has put forth a multitude of challenges, foremost being to cater to consumers via their preferred channels. Being able to make use of various digital channels to reach out to customers will be key. Equally important will be to offer digital payment options and remote service assistance to consumers. From a current perspective, as the government is easing restrictions, we will need to focus on bouncing back from the current situation with speed and agility as the key levers.