Consumer durable makers eye revival in 2019
New Delhi: The consumer durable and home appliances industry are betting big on its return to growth in the new year, after a flat 2018 due to increased input costs and a weak demand.
The FMCG players, on the other hand, are confident about their growth momentum continuing in 2019 on the back of growing rural demand and online sales.
According to the Consumer Electronics and Appliances Manufacturers Association (CEAMA), the year 2018 did not go as per its expectations and the entire industry saw a flat growth, while some segments even witnessed decline in sales volume.
"The consumer appliances and electronics sector, barring washing machines, witnessed almost flat growth in H1 (April-September)," said CEAMA President Kamal Nandi, adding that the demand only picked up during festival sales.
"Although the ensuing rupee depreciation, uncertain climatic conditions and increase in input costs has resulted in a slowdown for the industry, we believe that with the new strong market fundamentals in place and policy reforms such as GST slab reduction on TV..., digital cameras and monitors, will help the industry achieve enhanced levels of growth, said Manish Sharma, President and CEO Panasonic India and South Asia.
With the recent government decision to reduce the GST duty on TV screens up to 32 inch to 18 per cent from 28 per cent, manufacturers are expecting an increase in sales in the mass market segment.
"... We expect consumer sentiments to be better and, hence, demand to pick up, pushing the market out of the slump. With some momentum in the rest of the fiscal, we expect the industry growth to be in single digit, Nandi said.
The industry is also expecting some tax incentives from the government, especially in the air-conditioner segment and some energy efficient products.
On the policy front, we appeal to the government to consider the reduction of the GST rate for air conditioners, and 32 inch and above size TVs from 28 per cent to 18 per cent. Some tax consideration for energy efficient appliances will also help drive consumers towards making more efficient choices, Nandi added.
The FMCG market, on the other hand, expects to benefit from a robust consumption growth and growing rural markets, while it also expects technology and digital space to be a key growth enabler.
The advent of technology and internet, coupled with the rise of young consumers, have helped the industry.
With an increase in average spend by consumers using internet and e-commerce, it has become essential for these companies to make additional investment to meet increasing demand for products, Deloitte India Partner Anil Talreja said.
Grant Thornton India Partner Dhanraj Bhagat said the FMCG sector, going forward, is expected to grow with rural demand, companies catering to different market needs with niche product offerings and higher market penetration through online sales.
"This has been an exciting year as the FMCG sector has shown notable growth. It has gone up from $31.6 billion in 2011 to $52.75 billion in 2017-18, and it is anticipated that the momentum will be maintained with a 27.86 per cent compounded annual growth rate till 2020," Hershey India Managing Director Herjit Bhalla said.
Bhalla said the current economic scenario suggests that urban FMCG sector will report 8 per cent revenue growth in fiscal 2018-19 while the contribution from the rural segment will be higher at 15-16 per cent.
Moreover, the FMCG companies are also trying to influence consumers with intelligent deals. "Keeping in mind the changing tastes of the Indian consumer, FMCG companies are introducing new products to gain market share," Talreja said.
The FMCG companies are also doing product flanking, under which they introduce different combinations of products at different prices, to cover as many market segments as possible, he added.
Besides traditional brick and mortar shops, growing catchment of online sales is also expected to broaden the customer base for the FMCG and the consumer durable and home appliances sectors and the companies are expected to take further steps to broaden their margins.
In 2018, factors such as a good monsoon and pick-up in rural demand helped some segments manage issues like rise in input cost.
FMCG sector in India also witnessed large merger and acquisition activities in 2018 where Hindustan Unilever (HUL) merged GlaxoSmithkline Consumer Healthcare with itself in an all-stock deal which will give the country's largest pure-play consumer goods company access to brands like Horlicks, Boost and Maltova.
Zydus group also announced acquisition of Heinz India known for its brands like Complan, Glucon D, Nycil and Sampriti Ghee at a valuation of Rs 4,595 crore.