FMCG, durables makers on rain watch

Chennai, July 21 Fast moving consumer goods makers as well as durables makers, for whom a bulk of sales comes from the rural hinterland, are still not pressing the panic button, despite the erratic monsoons over large swathes of the country.
Indeed, consumer durables manufacturing companies are confident of meeting their growth targets. They say there is hardly any need to press the alarm button right away. “We can wait for at least another one week,” says Mr Moon B. Shin, Managing Director, LG Electronics India Ltd, the country’s largest durables maker.
Half of FMCG company sales (particularly soaps, shampoo, toothpastes and talcum powder) and close to 25 per cent of consumer electronics and durables sales come from the rural areas.
According to Mr Shin, so far the rural market has been very vibrant. “If the situation persists for one more week, the vibrancy may be washed away,” he says.
However, Mr Shin says the net impact would be very negligible, as the situation is “not so bad across the country.” Only some pockets are affected.
In rural markets, the demand is greater for entry-level colour TVs, and low-end twin-tub washing machines. As most durables makers have exceeded their sales targets for the first half of the year, thanks to a prolonged summer and the “surprisingly good demand” for top-end models of durables from urban and semi-urban markets this year, the companies can at least maintain their topline growth.
For example, rural markets contribute close to 60 per cent of the entry-level CTVs. Of this, only 30 per cent of sales happen during the festival season.
Even if the monsoon fails, the knock-on effect would take away only three-four per cent of the overall turnover of any company that has exposure in other durables such as refrigerators, air-conditioners and washing machines, say industry sources.
According to Mr Ravinder Zutshi, Deputy Managing Director, Samsung India, right now there is no need to panic. If the monsoon is deficient in north-western India, Punjab and Haryana are the two major markets that will be affected.
“We are currently offering freebies in these markets to boost our CTV sales ahead of the festival season.”
FMCG makers have their fingers crossed as well. Says Mr V.S. Sitaram, COO, Consumer Care, Dabur India, “It is early days to talk about this. After all, the monsoons continue till end-September, and rain prediction can be a very inaccurate science. At this point, the monsoon seems to have revived across most of India.
“Yes, FMCG demand is impacted by monsoon quality and the impact on agriculture. My best estimate is if it is below 90 per cent of normal, we need to worry; above that the impact will be there but not major.”
The National Rural Employment Guarantee Scheme (NREGS) and loan waivers are other factors which will soften the potential adverse impact of the monsoon by ensuring income flow into rural India, adds Mr Sitaram.
Mr C.K. Ranganathan, CMD, CavinKare Pvt Ltd, says as the phenomenon is not pan-India the growth rate may come down marginally, by one or two per cent, as FMCG companies are on a growth path. “There is no need to panic,” he adds.