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FMCG sector shows recovery ahead of festival seasons on the back of rural, pent-up demand

Nandana James Mumbai | Updated on August 04, 2020 Published on August 02, 2020

With demand in the rural market reviving, along with positive signs of replacement demand and pent-up demand from the lockdown time, fast-moving consumer goods and appliance companies are looking forward to the festival season to recover some of the losses incurred during the Covid-induced lockdown. Companies also expect to ramp up production levels to meet the festive season demand.

India was under a strict lockdown from late March to June, bringing businesses to a standstill. This was followed by lockdowns in containment zones, some of which continue till now.

“The consumer durables industry lost nearly 12 per cent of its overall revenue in the lockdown months. While it will be difficult to make up for the same, we are positive on the upcoming festive season…We are hopeful that the festive season will help us recover some of the losses incurred during lockdown,” Manish Sharma, President and CEO, Panasonic India and SA, told BusinessLine.

Cautious spending

There will be some pent-up demand, with rural markets performing better and several firms initiating hiring and reversing their pay cuts, said Kamal Nandi, Business Head and Executive Vice-President, Godrej Appliances. But given the uncertainty due to the economic slowdown, consumers may still be cautious and curb expenditure, he added. Godrej Appliances is expecting a growth rate of 15-20 per cent over last year for the festive season. Even for this year, we are optimistic about reviving some of the sales loss, during this period, he emphasised.

We expect replacement demand to be high since there has been a gap in consumption during peak lockdown, said a spokesperson for Voltas.

“While June saw a steady pick-up in demand post the lifting of the lockdown, the series of intermittent lockdowns in the month of July is a matter of concern,” siad Anuj Poddar, Executive Director, Bajaj Electricals. If such lockdowns do not continue, he expects demand to pick up in the festive season. Both demand and supply can be privy to disruptions otherwise, he said.

Stimulus measures

The government’s recent indication that they could announce some stimulus measures for demand revival is another reason why Poddar is hopeful about the festive season. Measures to enable consumers to have more money in their hands and spur consumption would be helpful as many have suffered loss of income amid the pandemic, said Poddar.

“We believe that there would be an uptake in demand for the festive season, particularly in the rural market,” said Harsha V Agarwal, Director, Emami Limited. Fuelled largely by rural demands, the year-on-year sales for the month of June showed growth, said Sharma.

Bajaj Electricals plans to step up its marketing and advertising push during the second half of this fiscal year, and intends to go back to spending on it as much as it used to be prior to the lockdown. “In general, we want to bring back a feel-good sentiment. We want to bring back a sense of positivity and upbeat communication in whatever we do,” said Poddar. There would also be more focus on e-commerce during this festive season, he added.

“We are adapting to new marketing campaigns and trends that appeal to the consumer mindset. Our marketing communication is targeted to appeal to the consumer mindset and will follow the current prevailing trend,” said Emami’s Agarwal.

Depending on the surge in demand, companies also have plans to ramp up production levels.

Plans to up production capacity

“We are currently operating our factory at 30 per cent capacity, with plans to ramp up to 50 per cent in August and by September we are looking at operating at full capacity to meet festive season demand,” said Sharma.

In the light of the ongoing crisis, savings matter even more to consumers at this moment, and tactical promotions will continue to get the due attention, said Nandi. “The targeted growth will be propelled by the exclusive consumer offers and finance schemes around the festive season in addition to the strong service offering and product line up,” he said.

“In the last quarter, the industry had pulled back all marketing investments due to the lockdown. With signs of recovery and the festival season coming up, we will focus on promoting tactical consumer offers, for generating secondary sales,” said the spokesperson for Voltas.

“We will continue to focus on the problems faced by our consumers and continue to create conversations to drive awareness. Festivals are an occasion to share our happiness and celebrate the trust our consumers have placed with us; launches and discounts are not the dominating point,” said Kartik Johari, Vice President, Nobel Hygiene.

Discounting is not likely to trigger demand, said Poddar. “These are low-price basic products so I don’t think affordability is the issue. In the current environment, from a profitability point of view, we can’t afford to be cutting prices now,” said Poddar.

As an industry, we remain optimistic and bullish, concluded Poddar. “We are hoping to make up for the (losses suffered during the) pandemic and put this behind us. We have had one bad quarter, but we hope the rest of the three quarters go well for us,” he said.

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Published on August 02, 2020
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