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Thursday, December 27, 2001

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Year sees durables in the doldrums

Sankar Radhakrishnan

CHENNAI, Dec. 26

IT'S been a year that most marketers, indeed most business people, in India would love to forget. With the `R' word increasingly doing the rounds and the ripples of the global economic slowdown breaking on Indian shores, consumer spending -- especially on high value items -- was reined in.

And the first casualty of this sudden cost consciousness was the consumer durables sector. For an industry that has witnessed some robust growth on account of a rise in incomes and a boom in the economy over the last few years, 2001 held a few shocks.

"The last 11 months have been rather disappointing," says Mr B.C. Kishore, Associate Vice-President, Tamil Nadu Operations, Vivek Ltd, consumer durables retailer. He adds that this year witnessed a shift in the product categories being purchased, with consumers moving away from white goods such as refrigerators, washing machines and air-conditioners. In fact, these products "have seen their worst times," adds Mr Kishore.

Estimates put out by the CII-Ascon Industry Monitor shows that of the host of consumer durables, only motorcycles as a category is estimated to record an excellent growth rate of 28 per cent in the period April-December 2001 over a similar period in 2000. In other durables, refrigerators as a category is estimated to grow only by 1.5 per cent, while washing machine is expected to show a negative growth of three per cent. The air-conditioners segment has, however, notched up relatively higher growth rates and is estimated to grow by 10 per cent in this period.

Mr Francis Xavier, Managing Director of the Chennai-based research agency, Francis Kanoi Marketing Research, while acknowledging that this year has not been all that good for consumer durables, says it hasn't been too bad either. Some products have seen growth, while for some others growth may even have been in the negative zone, he adds. What's more interesting is that he says this year has been better than the last one for some product categories. An observation Mr Kishore agrees with. "We do have a shortfall when we compare our targets, but when we compare over the last year, we do have some growth," he declares.

The best example of this is the colour television (CTVs) industry. According to Mr Xavier, the growth in this category will be around 10 per cent this year. And though this may not seem very exciting when compared to the robust 30 per cent plus in 1999, it certainly tops last year's rather weak 5 per cent. Mr Kishore too agrees that CTVs have led growth in the consumer durables sector, and adds that other categories such as higher-end music systems, mini-combos (that combine a VCD player, a hi-fi, an MP3 player and so on) have also done well.

Most of the volumes, especially in CTVs, seem to have come in the last quarter of the year. It's perhaps no coincidence that this is also the festival season that normally witnesses a spurt in the number of promotions from manufacturers and retailers. Mr Rajeev Karwal, Senior Vice-President, Consumer Electronics, Philips India Ltd, who's also the President of the Consumer Electronics & Television Manufacturers Association (CETMA) told Business Line in November that the industry grew at 7 per cent in October alone. Philips itself did well in high-end CTVs, hi-fi music systems and MP3 audio systems during this period, he added.

Similarly, Mr Pradeep Tognatta, Senior General Manager, Marketing, LG Electronics India Ltd, had also told this paper that LG registered a growth of 43 per cent in value terms during the festival season. In fact, he said the company had exceeded its sales targets for the period by around Rs 72 crore. Other brands such as Onida, Videocon, Samsung and BPL too have reportedly done well in the last couple of months, especially around Diwali.

Industry observers attribute several reasons for this sudden growth. According to Mr Xavier of Francis Kanoi, many people, especially those from states such as Rajasthan and Gujarat, with some money to spend have been postponing purchase decisions. But with a slight improvement in sentiment following a good monsoon many of these people decided to buy, he says.

Another factor at work were the aggressive promotions launched by the manufacturers. While Samsung had its Phod Ke Dekho offer, LG launched an `Achievement Bash' and BPL shook consumers with its `Entertainment Dhamaka'. Philips too had a slew of promos including, gifts, scratch cards and the long term `MP3 Mania' targeted at the youth. Mr Kishore of Vivek's, says most of these took the form of discounts, freebies and additional warranty.

These promos were accompanied by some soaring ad spends during the festival period, with companies such as LG reportedly earmarking Rs 25 crore for this period alone.

CETMA's Mr Karwal says one of the reasons for this was the decision by the manufacturers to step up marketing activities, especially during the festival season. "The industry has been among the most aggressive in terms of advertising and launching new technologies," he declares. In fact, the CETMA's five-point programme, which also touched on creating new technologies and products to revive consumer interest, was developed to help the industry beat the slowdown.

And while it may have done that, at least to an extent, 2002 may be a different cup of tea! Vivek's Mr Kishore is optimistic that things will improve next year. "The future is bright, prospective, challenging and very demanding, and only the best and fittest will survive to the serve the needs of the consumer," he declares. And that might just be an indicator of the times to come.

 
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