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Fridge sales may fall short of targets

15-September-2004
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Fridge sales may fall short of targets

Refrigerator sales will fall short of growth targets this year by a wide margin, according to industry estimates. Industry had been banking on a growth of at least 5%, with initial optimistic estimates hoping for double digit growth of 10 to 12%. However, according to industry players, in the January-July period, the actual growth has been barely 2%. Delayed monsoons and the truckers strike are being cited as some of the reasons for sluggish growth. With August-September traditionally being a sluggish selling period for fridges, second half sales also may not be able to make up for the dismal performance in the first half.

In calender year 2003, total refrigerator sales had touched 3.2 million units and this year it was expected to touch 4 million. However, with disappointing first half sales, the general consensus is that the industry would barely manage 3.6 million units.

Says R Zutshi, Director-Sales, Samsung India, “The industry has not been able to meet its expected 5% growth over the last calendar year. The industry was assumed to grow by 5%. However, in the January-July period, the actual growth has been 2.1%. The Direct Cool growth has been 0.4%, whereas the frost-free category grew by 16.7%.”

The only category that has seen growth is Frost Free refrigerators. This is in keeping with the general trend in consumer durables that has seen a faster shift to the upper end products.

However, more than 80% of the total refrigerator sales is contributed by Direct Cool refrigerators, and this segment has actually seen a de-growth of 1.3% in the first half (January-June: ORG), a fact that has left players groping for answers. The 170 litres category is the only segment in Direct Cool refrigerators that has seen growth (less than 2%) though not as much as expected. The categories between 185 litres and below 220 Frost Frees have also seen sluggish growth.

Explaining this pattern, Electrolux CEO & MD Rajeev Karwal said, “These categories are under pressure from the 220-270 litre segment, which has been seeing maximum growth due to tumbling prices and easy finance.”

According to Mr Zutshi, “Direct Cool refrigerators are sold primarily in the rural market. One reason that might have affected their growth could be the stunted growth in the income group between Rs 5,000 to 8,500, which forms the bulk of the target segment.”

In the frost free category too, the 220 to 270 litres segment has seen the maximum growth. Even here, though volumes have grown by 45.5% in the January-June period as per ORG figures, there has been a 9% fall in value growth at 36.3%.

Said LG’s refrigerators head Anil Arora, “The industry is estimated to be growing at a rate of 1%, against the expected double digit growth. As such, it would in all likelihood end the year with single digit growth.”

Industry is now banking on the festive period to perk up sales. Though companies are not talking, a range of offers and promotions are expected all through the festival season.

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