Commodity price inflation has been plaguing the white goods industry throughout the year. After the festival season, appliance makers announced a third round of price increase. In an interview to BusinessLine , Kamal Nandi, Business Head and Executive VP at Godrej Appliances, spoke on demand, future price hikes and what the next year will hold for the industry. Excerpts:

White goods or appliances have seen the third tranche of price increase this year? Will this continue and how will it impact demand?

We have been postponing the price increase for some time. We did not hike prices during the festival reason. Before that we had announced two rounds of price increase. Even with the recent third price increase, we will cover around 18 per cent of the 23-24 per cent of commodity price hike that we have seen due to inflation. So there is still a gap of 5-6 per cent that we need to bridge, which we will take as and when we see an opportune moment. The next hike is not yet planned, so we don’t know when we will go for it. We expect the market to bounce back in the fourth quarter of this fiscal year, though there is uncertainty with the Omicron variant. We may be in a better position this year in comparison to last year. Summer demand for ACs etc will be good, since there has been postponement of purchase last year, due to the second wave, as well as inflation.

What are the commodities where you are facing issues, and when do you foresee this subsiding ?

Everything, from copper, steel, aluminium, MBI- which is used for foaming, plastics…everything is going up. There are no signs of resolution in the near future. It will continue to be at this inflated level for some time.

This year’s festival season sales did not do as well as was anticipated. Could you provide us a comparison on how sales did this year compared to last year?

If you compare October-November 2021, to the festival months for 2020, we must have seen degrowth of around 20 per cent in quantity, whereas in terms of value — degrowth must have been of around 5-6 per cent, given that there was a price hike of 15-16 per cent. For the coming summer season, we expect it to be better than 2019 (pre-pandemic) summer. A comparison with 2020 summer is irrelevant since that season was a washout as a result of the second wave.

With 2021 ending, if you have to summarise the impact of this year on your business, what will it be?

I believe that 2021 has been the most challenging year so far, worse than 2020...given that we faced a double whammy of headwinds on the overall business and the second wave of Covid along with the inflationary trend, both of which impacted demand as well as the overall growth of the industry. 2022 is expected to be better than 2021, we also expect it to be better than 2019-20 (pre-pandemic levels). How the Omicron impact pans out, will define whether 2022-23 will be better than 2019-20 or not.

There is a trend in the appliances industry of localising sourcing of components. To what extent have you managed to localise the value chain to India?

Godrej Appliances has gone ahead and made investments in developing components for our own use, specifically derisking ourselves from all imports. As an industry as well, we have encouraged ecosystem development for components. Over the last two years, after the first wave, all industries had found alternative vendors and sources. India specifically looked for alternative vendors and vendor sources, which were also localised. In the appliances industry, the component import varies from category to category anywhere between 15 to 75 per cent (75 per cent of import of components is found in air conditioners). That highest per cent import has gone down to roughly 50 per cent, so an overall 20 per cent reduction has happened in the imports. I believe down the line in three years this will come down to 20-25 per cent. Godrej invested close to ₹1,000 crore to develop critical components in house, in the last five years and the investment will continue for the next three years as well.

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