Nielsen survey shows 74 per cent Indians bullish on personal finances
Encouraged by improving consumer sentiment, consumer durables companies have lined up new product launches and are increasing their advertising and marketing spends by anywhere between 10 and 60 per cent this year. They believe sales will increase by 30-40 per cent in the festive months, even as analysts say the optimism is misplaced.
LG Electronics, for instance, is targeting Rs 2,800 crore beginning September -- a sales growth of 35 per cent over the corresponding period last year. Amitabh Tiwari, business head - consumer electronics, of LG, says: "Last year, consumer sentiment was bad. But it has improved substantially now. So we are spending Rs 110 crore this festive season for advertising and promotions during the festive months -- up from Rs 68 crore last year (slightly over 60 per cent increase). We are looking at launching a new range of products and investing in more television commercials." LG is also expecting to close this year with a turnover of Rs 11,500 crore -- up from Rs 10,000 crore last year.
Godrej & Boyce, which registered 20-25 per cent growth in sales in the April-June quarter, expects to earn nearly Rs 700 crore in the four festive months starting September. Kamal Nandi, VP - marketing, says: "Thanks to the extended summer, our refrigerator and air-conditioning sales grew between 20-25 per cent in the first quarter. Now that consumer sentiment is improving, we expect Rs 700 crore from the festive season starting September. Last year, we made Rs 500 crore during the festive months."
Typically, the festive months between September and December make up 30-35 per cent of a durables’ company’s overall turnover. Around 35 per cent of Godrej & Boyce’s turnover, for instance, comes between September and November. The company is also looking at launching a new range of refrigerators and washers during September and December. It is targeting a 20 per cent overall growth in turnover, to touch Rs 2,000 crore this year.
Statistics are on the side of the consumer durables companies. The latest round of the Nielsen Global Consumer Confidence Survey, for instance, reveals that 74 per cent Indians are bullish when it comes to the state of their personal finances over the next 12 months (good: 65 per cent, excellent: 9 per cent). In March, the proportion was 62 per cent (good: 56 per cent, excellent: 6 per cent). Moreover, 43 per cent of Indians have said they feel it is a good time to buy the things they want and need over the next 12 months. In March, the figure stood at 40 per cent.
Analysts, however, put out a cautionary note against misplaced optimism. B Vijayalakshmi, Assistant Vice-President at Evalueserve, counters that "the economy now is a compilation of two factors: lack of monsoons and the global economic recession, which has definitely resulted in a slowdown of sales. The upcoming festive season could see a change in consumer trends. Given the importance of festivals in India, one can see the same number of people coming in to buy various products, but there is a strong chance that they would spend only a fraction of what they did last season. Companies have to work extra hard to make their products more attractive and be able to convince the buyer to spend on their product despite having a limited disposable income this season."
Nevertheless, a spokesperson for Samsung Electronics said: "Now that consumer sentiment is improving, we expect 30 per cent growth in the third quarter this year over the corresponding period last year. We are also expecting 30-35 per cent growth in overall sales during the festive season between September and December." The company is expecting to close this calendar year at $2 billion, up from $1.7 billion last year.
Whirlpool India, too, is looking at increasing its advertising and marketing spending by 10-15 per cent this financial year, from Rs 45 crore last year, thanks to the improving consumer confidence that has boosted the company’s sales by 30 per cent in the June quarter. Shantanu Dasgupta, VP - corporate affairs and strategy of Whirlpool, said, "We are now a debt-free company and with the festive season round the corner, we are looking at improving our sales, quarter on quarter. While last year was uncertain due to the global recession, markets are already improving now." Whirlpool is looking at earning Rs 500 crore this year during the festive September to November months, a 25-30 per cent increase over last year’s festive period.
Pranay Dhabhai, wholetime director and COO, Haier India, concurs: “We have not yet firmed up our options on what we want from the festive season. The focus will, however, be on consumer promotion and I don’t see a downslide due to the bad monsoons. This season will continue with new LCDs, TVs and washing machines. There will be no price reductions or discounts of any kind, as 35 per cent of our revenue is gained during the festive season.”
(With inputs from Shahana Joshi, New Delhi)
