Onset of early summer may boost sales of packaged goods makers
The early arrival of summer is likely to boost sales of summer-centric packaged goods and cooling appliances, while adversely impacting agriculture and health
New Delhi: Bad news for some can be good news for others.
The early arrival of summer, coupled with the India Meteorological Department’s forecast of an average 1.3 degrees Celsius above-normal temperature prevailing in the March-June summer months is likely to boost sales of summer-centric packaged goods and cooling appliances, while adversely impacting agriculture and health.
Those who are set to gain the most include makers of aerated drinks, juices and other ready-to-drink beverages, glucose, ice-cream, cooling oils, talcum powder, deodorants, soaps, air-conditioners and other cooling appliances.
“Most consumer companies will benefit from a harsh summer. However, key beneficiaries will be Emami Ltd, Hindustan Unilever Ltd, Dabur India Ltd, Godrej Consumer Products Ltd, among other packaged goods companies,” said Abneesh Roy, an analyst with Edelweiss Securities.
“The early onset of summer, especially in the northern and eastern parts of the country will fuel the demand for air-conditioners this time around. In the past few years, the industry has grown in single digits. However, we are foreseeing rapid growth in aeration and cooling systems, which are all set to grow by 10-15% over last year,” said Manish Sharma, president, Consumer Electronics and Appliances Manufacturers Association.
Equities research firm IIFL, in a note on air-conditioner maker Voltas Ltd, said the early onset of “summer can drive demand and allow a price hike of 4-5%, to pass on higher commodity costs.”
Gaurav Sah, business head (air-conditioners group), Panasonic India, the local unit of Panasonic Corp. of Japan, said that the company is “anticipating a huge demand for ACs this summer” that could lead to 15% growth. The company is planning to launch several new products that will be suitable for Indian conditions.
Korean brands Samsung and LG, Daikin and Hitachi from Japan, and home-grown Godrej are the key players in the AC segment.
Carbonated beverages being a summer-centric product, the local units of American firms Coca-Cola Co. and PepsiCo Inc. are likely to see a surge in demand, helping them arrest the trend of declining demand for such drinks. Besides, both companies have been expanding their presence in the juice and juice-mixed aerated beverages segments over the past few quarters and have already lined up a fresh line of launches for the summer.
Local units of Coca-Cola and PepsiCo did not respond to queries.
New Delhi-based Dabur India, which sells juices and juice-mixed aerated drinks under the Real brand, is readying for a slew of launches this summer, and is pushing its 200ml packs.
“While packaged fruit juices are consumed for health reasons and their consumption can be seen all through the year, we do witness an increase in packaged fruit juice consumption in the summer months. The summer months, hence, provide a good opportunity to introduce new variants and add new consumers,” said Mayank Kumar, marketing head (foods), Dabur India.
Cigarettes-to-shampoo maker ITC Ltd, a late entrant to the fruit juice market, is ready with its summer specials under the B Natural brand. “We will continue to focus on delivering differentiated offerings and superior value propositions across our portfolio to drive consumer franchise. We will be launching new summer special variants in the market like Masala Phalsa and Masala Jamun that are tailor-made for summer,” said an ITC spokesperson. The country’s largest packaged goods company HUL declined to comment.
The cheer, however, is likely to be short-lived. An intense summer could result in droughts in parts of the country, adversely impacting agriculture, and by extension the rural economy. So, the much-talked-about rural boost for packaged goods makers may prove elusive.
Editor's Picks »
- Policy rethink and higher volumes to aid container shippers
- DCB Bank delivers a strong Q2 but pressure on margins foreseen
- Havells India: Rising costs give a jolt to profitability in September quarter
- All’s well at Mindtree, except for high client concentration risk
- India’s rising steel demand is making companies starry-eyed