2011 was a “very average” year for the consumer electronics and durables sector. It had to grapple with high inflation, expensive money, and rupee depreciation in the last quarter. The Telangana agitation in key market Andhra Pradesh also proved to be a drag on sales. The industry is expected to post less than 10 per cent growth over 2010, say analysts.
“We had a lot of challenges, both internal and external,” says Mr Amitabh Tiwari, Sales Head, LG India. The internal challenges were cost pressure and allocation of ad budgets; the external factors were more competition, particularly from Japanese players and the rupee depreciation.
Summer turns spoilsport
LG had 36 per cent growth in Q1, but in the following quarter — the key summer months when sales are driven by air-conditioners — the cool weather turned spoilsport. Price increase also pulled down overall sales.
And, the smaller pie was shared with more players such as Daikin, Hitachi, General, Voltas and Blue Star, who had become more aggressive. “Moreover, yielding to cost pressure, we had to increase air-conditioner prices by almost 10 per cent. Surprisingly, the Japanese dropped prices,” said Mr Tiwari. This dragged LG into negative growth territory during the period.
During the second half, when the majority of sales usually come from TVs, washing machines and refrigerators, most brands upped prices between 6 and 8 per cent.
During this period, Mr Tiwari says, though high-end washing machines and Cinema 3D TV sales picked up very well, the market for CRT (cathode ray tube) TVs started tapering.
Then thanks to food inflation, a chunk of the consumer's income went into food, particularly in the rural markets. Investing in gold, too, became lucrative for them.
These things left hardly any surplus in their hands to buy a TV or a refrigerator, Mr Tiwari explains.
Thanks to the Telangana agitation “we lost almost two month's sales in Andhra,” he says. According to him, overall, LG would grow a little less than 15 per cent this year over the last.
Samsung seems to have a different view. It says though there were blips here and there, overall, shipment was good at the factory gate.
“We would post a moderate growth this year, led by our premium categories such as flat panel TVs, frost-free refrigerators and fully automatic washing machines,” said Ms Ruchika Batra, spokesperson (South West Asia), Samsung Electronics. The festival season too saw a good spurt, she added.
For Japanese brands such as Panasonic, Sony, Toshiba, Sansui and Hitachi, who have play in the flat panel TV segment, the year 2011 was reasonably better. According to market observers, they managed make inroads in major cities this year.
Mr Daizo Ito, President, Panasonic India, says the year witnessed a healthy growth led by flat panel TVs and air-conditioners. “Though there were many challenges such as rising commodity prices, fuel prices, depreciation of rupee, we witnessed phenomenal success and business growth this year,” he said. Claiming 7 to 8 per cent share in the Indian durables market, he said the company registered 200 per cent growth in the last three years. In financial year 2010-11 it registered a turnover of Rs 3,200 crore and for the current year it expects to post Rs 5,500 crore, says Mr Ito.
For Sony, which has major presence only in flat panel TVs and laptops, the year was better than 2010. Mr Sunil Nayyar, Senior General Manager, Sony India, says 2011 has been extremely special for us as the brand entered the tablet market with two products. On the TV platform, Sony launched LED TV during the year.
Retailers see growth
Even as manufacturers were closing the year on a gloomy note, retailers said there would be 15 to 16 per cent growth this year, driven predominantly by flat panel TVs.
Mr Kothandarama Setty, Chairman of Viveks, a South-based durables retail chain, attributes the growth in sales to higher income levels, growing number of nuclear families and their aspirations. Mr Vasantha Kumar of Vasanth & Co, another leading retail chain in the South, says more and more money in the hands of young consumers and their changing lifestyle created a potent combination.
Mr Francis Xavier of Francis Kanoi Marketing, however, said 2011 did not live up to expectations. It was a poor summer (when product categories such as refrigerators and air-conditioners and air-coolers sell the most) as well as festival season for the durables industry. It would have been a single digit growth if not flat, he said attributing that to the economic environment that prevailed during the year.
The industry hopes with inflation easing and signs of improvement in monetary situation, year 2012 will be a lot better.
“We expect high-end categories to sustain their growth, and for mass categories, growth will come from tier-II and tier-III towns as companies will expand their reach in these markets,” say industry observers.
Mr Nayyar of Sony says continuing with the momentum, “we have a very positive outlook for 2012, and will continue to rollout innovative and unique products that fit our brand promise.