Soaring temperatures are driving strong growth for the AC industry despite inflationary pressures. After two consecutive washed-out summer seasons due to the pandemic-induced restrictions, Panasonic India expects to see a robust first half driven by stronger AC sales. Manish Sharma, CEO, Panasonic India & South Asia, said that the company is hopeful of witnessing significant growth in this fiscal over pre-pandemic levels across B2C and B2B businesses after a challenging two years. Excerpts :
How is the summer season panning out for air-conditioners?
In the past two years, the two pandemic waves came bang in the middle of the summer season and the restrictions disrupted demand for air-conditioners. This summer season, we see that the pent-up demand has come back strong. Sales were up 15 per cent in March 2022 compared to March 2021. Demand trends are very solid in April also. Overall, we expect to garner a growth of 30-35 per cent in the March-May period compared to last year and look at revenues of over ₹1,000 crore in this period from air-conditioner sales alone.
One key trend is that consumers prefer higher star-rated products this summer. So the sales of our four-star and five-star air-conditioners have picked up and can be attributed to better awareness among consumers. There is also a rapid shift from fixed speed ACs to inverter ACs. Nearly 85 to 90 per cent of sales for us are now coming from inverter ACs. In fact, we plan to phase out the fixed speed air conditioners as we exit this summer season. Another trend has been that people prefer connected products and we are offering the widest range of connected and smart ACs, and we are leading in that category. We have roughly about 7 per cent market share in the AC segment, and we hope to increase it to 10 per cent by March of 2023.
How was FY 2021-22 for the company in terms of revenues ? Do you see revenues getting back to pre-pandemic levels?
Overall, Panasonic in India (all group companies included) witnessed a growth of 18 per cent in FY 21-22 over the previous fiscal with revenues over ₹9,000 crore .We are very bullish this year. The air-conditioners business is the first engine of growth and will drive revenue growth and profitability, followed by TVs, washing machines, refrigerators and kitchen appliances. We are hopeful of growing significantly compared to pre-pandemic levels in this fiscal year. Our B2B business is also growing fast and is profitable.
But how are the unprecedented Inflationary pressures impacting demand?
Clearly, on the supply side, there are challenges as commodity prices have increased quite significantly, resulting in significant cost pressures for all the product categories. In January, we hiked prices by 5-6 per cent. There is a possibility that we may consider taking another price hike in May. Currently, challenges are not only due to increased costs of commodities but also due to other factors such as pandemic-induced containments in China. Consumers’ wallets have been impacted by the increase in costs for fuel and other products. But favourable factors are driving AC sales in this summer driven by soaring temperatures, pent-up demand, lower penetration rate and urbanisation. Infact, if inflationary pressures were not there, we would have seen even higher demand for ACs. I would call it more of an opportunity loss.
Do you expect any adverse impact on supplies of components due to China lockdowns?
Production in May could witness some disruptions. The air-conditioners category may see some temporary supply shortages due to the impact on component supplies because of pandemic-induced containments in China. It will be more clear in a couple of weeks, depending on how the China situation pans out. As a multinational company, with a global supply chain, we hope to mitigate any opportunity losses.
What are the other key priorities for the year regarding business growth?
So if you look from the top, our priority is to align capabilities with the opportunity in the market. Now. this opportunity has accelerated because of Covid. Consumers are increasingly looking for energy-efficient products that offer comfort and convenience and help them multitask. So there will be a strong focus on connected home (spatial) solutions. We are looking at riding on our Miraie platform to expand our connected home solutions. After air-conditioners, we are also looking at widening our smart products range across other appliance categories.
With easing of restrictions how are the various channels performing especially e-commerce?
With low penetration rates of appliances, there is a huge opportunity for growth, and all the channels will coexist. Our strategy has been to provide products that are common across all the channels and offer exclusive products . The e-commerce channel continues to witness substantial growth. Three years ago it used to contribute less than 5 per cent to our total air-conditioner sales, and now it has jumped to 10 per cent in the backdrop of Covid, and we expect this share to increase to 15-20 per cent.