AC, fridge sales zoom by nearly 50% this summer

The scorching summer may make consumers sweat but it has been good news for consumer durables companies such as LG, Godrej & Boyce and Samsung. They have seen, on an average, growth of around 50 per cent in air-conditioner (AC) sales and 40 per cent in refrigerator sales as compared to the same period last year.

The summer season has always been good for these categories of consumer durables. Last year, for instance, AC sales witnessed a 25 per cent year-on-year growth, while the fridges saw sales grow by around 20 per cent on an average.

“We have seen an over 60 per cent growth in the AC category and over 40 per cent in refrigerators as compared to the same period last year,” says Jaideep Rathore, chief marketing officer of Videocon. Godrej, too, witnessed a high growth of 50 per cent in ACs and 32 per cent in refrigerators. LG registered 50 per cent growth in ACs and 55 per cent in refrigerators.

Samsung is expecting a doubling of its sales volumes in ACs this year to one million units, a market share of over 30 per cent. In refrigerators, the market share target has been set at 26 per cent by the end of 2010. “Overall, we are looking at a 40 per cent jump in sales volume of our refrigerators and ACs in the April-June quarter,” adds R Zutshi, Deputy MD, Samsung India.

Production at full pace
To meet the growing demand, Samsung has begun manufacturing split ACs at its Sriperumbudur facility (near Chennai) in November 2009 and the Noida facility (near Delhi) since February. It now has a total production capacity of 1.2 million units per annum for split ACs in India. This company invested $10 million (Rs 48 crore) in capacity expansion.

Godrej, too, has expanded its production capacities for both products. LG has almost doubled its manufacturing capacity from 0.8 million units last year to 1.4 million this year and the production capacities are running full.

As the trend goes, the year has shown a huge jump in split ACs. About 70 per cent of Videocon’s AC sales came from split ACs. For Godrej, split ACs pushed the category growth with 70 per cent, while the window segment grew only by five per cent.

Demand across regions
Companies say growth has been almost equal in both urban and tier-II and tier-III markets. “Last year, we saw a trend of higher growth in Tier-II and Tier-III towns compared to metros, with the mix more skewed towards DC and window ACs. This year, the trend has changed and we witnessed more or less equal rate of growth across metros and Tier-II and Tier-III towns. It can be attributed to higher disposable incomes this year, with the economy’s revival,” says Kamal Nandi, vice president of sales & marketing at Godrej & Boyce.

Another important trend is the increase in preference for energy-efficient products. Consumers are willing to pay a premium of up to 20 per cent for 5-star rated products, say companies. “In fact, this year it is expected that the share of the 5-star rated product is likely to increase to 30 per cent from seven per cent last year,” says Nandi.

Consequently, companies are sharpening their focus on ‘green’ products and plan to roll out more star-rated ones. An LG spokesperson says: “The focus is on providing quality products, for which we are emphasising on the use of greener products, as Indian consumers nowadays are willing to look for green and energy-efficient solutions.”