Coolers, induction stoves, fans, mixer grinders – until recently, consumers were splurging on these appliances even as they cut back on big ticket purchases like LCD televisions and ACs. In the last two years, producers of small consumer appliances were growing at 15 per cent, higher than the industry rate of 8-10 per cent. But the June quarter numbers suggest that pressure is building in this segment, too.
Sales growth for the small appliances makers is slowing. Sample this: In the April-June 2013 quarter, Bajaj Electricals reported a 12 per cent growth in revenues in consumer durables, down from 29 per cent in the previous year period. The company markets fans, mixer-grinders, electric cookers, induction cook tops and a few other kitchen appliances.
TTK Prestige, a top kitchenware brand, reported an 11 per cent drop in cookware sales in the June quarter. Overall sales recorded a muted 1.4 per cent growth, compared with a whopping 30 per cent in the corresponding period previous year.
Similarly, V-Guard Industries saw sales growth slip to 28 per cent from 33 per cent last year.
So, what has changed?
Small-ticket home appliances registered strong growth in the last two years, helped by two factors. One, they were not impacted by rising interest rates, because while LCD TVs or fridges are bought on instalments, less than 10 per cent of the home appliance industry’s sales happen via the financing route.
As the slowdown hit, manufacturers said the affordability factor helped. Consumers actually bought more kitchen appliances with the money they didn’t spend on LCD/LED TV, high-end refrigerators or ACs.
But this year, demand for smaller appliances has given way on persisting inflation. From an average of eight per cent in the beginning of 2012, inflation (represented by Consumer Price Index) crossed 10.5 per cent in January 2013.
“Consumer sentiment is weak now and we are seeing a slowdown in demand. Even in rural markets there is little growth now,” said a large player in the kitchenware space. He however, added that appliances may see better growth in the coming quarters with good monsoons reviving rural demand.
Players, including white goods makers, are betting on a bumper crop this harvest season, to revive demand. Rural demand growth will largely offset the slowdown in demand in the urban market, they believe. They are also planning new product launches and widening distribution networks to grow sales and negate some pact of slowdown in demand.