The Hindu Business Line : Summer of discontent?

WITH summer months being the peak season for a host of products such as soft drinks, air-conditioners and ice-creams, companies dealing in them had set their sights on doing brisk business since March this year. However, two-and-a-half months into the season, these companies have had to rework their sales targets. Reason? Summer temperatures have been mild, especially during March and April this year, throwing these companies into a tizzy.

Take the case of air-conditioners. K. J. Jawa, Vice-President (Operations), Voltas Ltd, said, "AC industry sales have not been looking good till about May 15 this year, mainly on account of intermittent rains. In fact, sales have been flat even in the first half of May. Similarly, sales grew by only 10 per cent in April." The slow sales offtake in the last two months may force the AC industry to lower the 25 per cent growth target it had set for itself this summer.

Kamal Nandi, Head (Sales), Godrej Appliances, concurred, saying sales had been particularly affected in the North. "However, we expect an extended summer this year, and a prolonged period of sales for the industry," he added.

Not only are AC sales affected, even products such as carbonated soft drinks are selling less. A senior industry official said sales projections have gone haywire. "We did not increase prices this season despite a continued increase in input costs of sugar, packaging and other raw materials. Even then, sales are down 10 per cent between March and mid-May compared to the same period last year, mainly on account of mild weather," he said.

The soft drink industry bled last summer due to the affordability strategy of lowered price points so this summer is even more crucial for the bottomlines of Coca-Cola and PepsiCo in India. This season, neither company has announced a price increase. The accent is on promoting the entire beverages portfolio including the colas, juices, iced tea and cold coffee. Both companies have unleashed new advertising and promotional activities to build interest around their brands but with the summer playing spoilsport till now, overall sales targets may have to be revised downwards.

Kolkata-based Emami Ltd is faced with a similar dilemma. The company had launched Sona Chandi Amritprash, a variant of Chyawanprash, three years ago, and positioned it as an ideal product to beat the summer heat. But this season, Sona Chandi Amritprash sales have taken a beating.

"For Sona Chandi Amritprash, the March-June period is critical since the product sells primarily in these months every year. This season, the uncertainty over the value-added tax hurt sales in a big way during March and April and the mild summer temperatures added to our woes. We had targeted 50 per cent sales growth this season over last year but sales between March and mid-May have been down by 25 per cent," Hari Gupta, President (Sales) of Emami's sales arm, J. B. Marketing & Finance Ltd, said. Whether the overall sales growth target for 2005 would be met is anybody's guess but Emami has stuck to its MRP and decided against lowering prices till now.

Universal Dairy Products Pvt Ltd, the Jaipuria Group company that has a technical tie-up with French dairy major Soddial for the Cream Bell brand of ice-creams in India, is also worried. At the beginning of this year, the company had set itself a target of 25 per cent growth in sales volume over last year. As of now, this appears to be an ambitious one. CEO M. S. Parikh said, "March and April were very bad for us, sales have started picking up only in May." He said that besides facing mild weather, ice-cream sales have also been affected by sustained pricing action by competitors such as Amul, but asserted that the company will make up for lost sales in the coming months.

But while most companies dealing in summer products acknowledge that milder-than-usual temperatures have hurt sales, a few contend it is business as usual. R. S. Sodhi, General Manager Marketing at the Gujarat Cooperative Milk Marketing Federation (GCMMF) avers sales are better compared to last year. "Ice-cream sales are up by 16-17 per cent, flavoured milk is up 20 per cent and dahi has also shown good growth. Yes, April was a mild month but temperatures are back to normal in May and we see no reason to complain."

Brotin Banerjee, COO of coffee chain Barista, also dismissed the vagaries of the weather. He said the chain has just introduced its summer menu comprising 25 new drinks and sales growth has been on expected lines, adding that Barista maintained a "balance" with both hot and cold items on the menu all year round.

Even Bisleri's Ramesh Chauhan appears unfazed, saying sales of bottled and bulk water do not normally fluctuate, except during a month in severe winters in some markets. He said that this summer, Bisleri has been growing "at a healthy pace."

Analysts said that the sales loss due to a milder summer could well be made good in the months ahead if monsoon gets delayed. Besides, temperatures have already begun to rise and companies dealing in summer products are keeping their fingers crossed.

For products such as soft drinks, ice creams, other beverages and milk-based products, the period between March and October accounts for as much as 85 per cent of annual sales. Analysts said sustained input cost increase and the simultaneous pressure to maintain MRPs is putting added strain on these companies to maintain targets. The next three months will be crucial in determining whether this summer will be one of contentment.

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