• MAY 28, 2001

Consumer durable: The slow down effect

The Indian consumer durable industry is one of the sectors, which felt the pinch of a slow down in the economy to a considerable extent in FY01. We take the closer look at the performance of each of the segments viz. television, audio, air conditioner and refrigerators.

The overall industry growth declined by around 8% primarily on account of a 4.6 decline in agricultural production during the year. The fall in agricultural production in the previous year was the highest in the last 21 years (by 12 m tonnes), in absolute terms. Since more than 70% the Indian population is dependent on agricultural income, average monsoons and drought conditions in four states subdued growth of the sector. However, sales growth in certain categories like 25 to 29 inches CTVs, split air conditioners, CD systems and double door refrigerators was higher.

The television segment is one of the key categories, which witnessed substantial decline in total sales. B&W TV sales declined by more than 23% during the year to around 2.4 m sets against the average of 3.2 m sets every year. CTV sales also dropped by more than 10% to 2.8 m sets as rural demand declined on account of lower agricultural production. Aggregate production of televisions for the first eleven months of the previous year i.e. April 2000-February 2001 fell by 10.5% to 2.1 m sets.

Production declines...
(' 000) Apr-Feb 00 Apr-Feb 01 Change (%)
Washing machines 709 658 -7.2%
Air conditioners 37 35 -6.6%
Refrigerators 1,811 1,807 -0.2%
TV receivers 2,396 2,146 -10.5%
Total 4,953 4,645 -6.2%
Source: CMIE

There is a considerable level of shift in consumer-purchasing pattern in the audio segment. While radio sales have stagnated, consumers are gradually shifting from mono-recorders to CD systems, especially the portable CD segment. Having said that, the car audio and headphone segment are growing at a CAGR of around 25%. But, this is a competitive segment, especially with multinationals having made an aggressive entry. However, the organised players are also witnessing severe competition from the huge unorganized sector and imports (like Taiko and Daiki).

Growth in the air conditioners and the refrigerators segment was comparatively higher than the industry growth rate. Introduction of new products in the refrigerator segment like Bio-Fresh ranges from Samsung and Fresh Master from LG topped urban refrigerator sales. Besides, window air conditioner sales also recorded a 12% growth in April 2001.

The penetration levels across the segment in the industry continue to remain sluggish. To put things in perspective, penetration levels of televisions in India is just 2.4% as compared with 98% in China, 11% in Brazil, 235% in France, 250% in Japan and 333% in US. Refrigerators also have good potential for growth in view of a meager 2% penetration level. Infact, amongst all segment within the Indian consumer durable segment, penetration levels of TVs is believed to the highest.

Hence, the market has adequate potential. But the need for the hour is a good monsoon, which could spur agricultural production and rural demand.

Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (Research Analyst) bearing Registration No. INH000000537 (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA, Canada or the European Union countries, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

Equitymaster Agora Research Private Limited (Research Analyst)
103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407