Saturday, June 21, 2008

Monsoon Madness: Early showers hit sales of FMCG companies

The early onset of the monsoon may have come as a big relief for heat-weary consumers, but it has left consumer durable companies and FMCGs feeling high 'n' dry. All leading brands in the sector such as Amul, Baskin Robbins, LG, Samsung, Coca-Cola, Pepsi and Whirpool are all reeling under the spell of early showers. Marketers contend that North India has been impacted the most due to the early monsoon arrival this year.

In fact, in the Rs 25,000-crore consumer durable industry, companies have not had it easy. According to sources, the industry is feeling the impact. The growth for the Rs 3,750-crore air conditioner market and the Rs 5,000-crore refrigerator segment has come down to half this year. While last year, the two categories registered a 30% growth, this summer has seen them grow by a mere 15% only. Soft drink and ice-cream sales have taken a beating, with ice-creams seeing a dip of at least 50% during rains. However, even though sales have been hit as badly in the Rs 7,000-crore soft drink market, PepsiCo officials maintained an optimistic stance.

"While the rains have been unseasonal, we are confident that the strength of our programmes will give us a sustainable trend through the rest of the year," said Punita Lal, executive director marketing, PepsiCo India.

Sources in the soft drink industry, however, say that both Coca-Cola and Pepsi's growth has come down considerably.

Even though PepsiCo officials declined to comment further on the impact, ice-cream major Amul agreed that there has been a slump in demand. "Every time in the monsoon, ice-creams see a dip of 20-25% in sales. On the days it rains, the sales dip by almost 50%," says R S Sodhi, chief general manager of Gujarat Co-operative Milk Marketing Federation (GCMMF), that sells the Amul brand of ice-cream.

Pankaj Chaturvedi, CEO of Baskin Robbins, a premium ice cream player, shares a similar sentiment. "The peak that we mostly witness during summer has dipped due to the early monsoon. The sales have gone down by 20% this time." The company now hopes to recover lost sales by associating itself with Bollywood movies in future.

Monsoon has washed away some of the sales of consumer durable companies as well. "Due to the early monsoon, we have seen a slower growth rate and a slight impact on sales for air-conditioners. This summer we have seen a growth of 42% for ACs which is below our expectation and less compared to sales figure of last year," says Sukhpreet Singh, general manager, brand marketing, Whirlpool of India.

R Zutshi, deputy MD, Samsung India, feels that 15% more growth could have easily been recorded in ACs had it not been for the early monsoons. “Overall all, India sales in ACs have been good — over 40%. However, we could have gained by 15% in the North if it hadn’t rained so much during May. But sales for refrigerators have been consistent with a 30% growth seen during the Jan-May period,” he says.

Surprisingly, most brands don't have a fall-back strategy for the strong impact that has been felt. "It will be hard to compensate or have a counter-strategy for such seasonal losses. This year summer has been shorter and this had a major impact on our growth figures for ACs. We saw a 14-15% growth during April-May-June this year as against 30% last year," says LG Electronics director, sales & marketing, V Ramachandran.

So even though people may cool themselves off with the early monsoons, many of the leading brands are facing the heat.

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