Coronavirus: Firms count losses as summer products face pandemic heat

Fast-moving consumer goods (FMCG) like ice creams and aerated drinks — production and sales have been suspended.
If at this time last year marketers were spending sleepless nights stocking up for surging demand of air conditioners, refrigerators, and colas, this year they are burning the midnight oil to calculate the loss of sales.

As business activities come to a near halt after the country went into a total lockdown induced by the spread of the coronavirus disease (COVID-19), manufacturers of summer products are busy reworking yearly plans.

From large appliances like ACs and refrigerators to smaller items like air coolers and fans and fast-moving consumer goods (FMCG) like ice creams and aerated drinks — production and sales have been suspended. With all non-essential stores shuttered and e-commerce firms postponing deliveries of such items, sales have come to a halt.

Take ACs, for example. According to Krishan Sachdev, managing director of Carrier Midea, while mid-March to mid-April is peak season for AC sales, the total lockdown will surely impact yearly sales. “If this continues beyond mid-April, then it is very difficult to say how bad the ultimate impact will be.” Unlike other years, this time all its factories are shut and employees, including Sachdev, are stuck inside their homes.

According to Kamal Nandi, president of CEAMA and V-P Godrej Appliances, February to June period contribute 60 per cent of the total turnover of the appliances industry. “March and April together form 25 per cent of sales. Due to the current lock down and the dampened consumer sentiments, we have seen a drop of up to 60 per cent in sales this month. If lockdown is extended to mid-April we are expecting similar impact on sales next month too”, he said.

Rohit Mathur, president, fans and pumps at Usha International, said the next few months would be challenging.

Executives at cola majors Coca-Cola and PepsiCo, who have suspended operations at plants, are now estimating loss of sales that will impact their targets for the year. Like ACs, over half of the yearly cola sales happen during the March-July period.

However, the lockdown has also impacted their distribution chains, leaving hundreds of truckers stranded. Additionally, as these items as categorised as non-essential they are also being rejected by many over fears of catching a cold.

“Since summer is the peak period for us, we had already planned our production. We are covered as far as concentrates (raw materials) go for two months at our plants. Most bottling units are also carrying about two to three weeks’ inventory of finished goods. But the biggest challenge right now is shipping goods into the market from our factories,” said Ravi Jaipuria, chairman of Varun Beverages — the largest bottler for PepsiCo India. Jaipuria said, with most consumers staying indoors sales are getting impacted as out of home consumption has stopped.

According to Nadia Chauhan, joint MD & chief marketing officer of Parle Agro, the firm is reviewing the situation on a daily basis and taking proactive steps towards refining its initiatives. Parle has sufficient stock of raw materials and finished products and is working towards seamless replenishment of stocks at the retail level, she said.

Shekhar Agrawal, head of marketing at Havmor Ice cream, estimates that sales will be down at least 15-20 per cent this summer. “The lockdown has collided with the summer season and there is a financial impact due to it. While production is not a challenge, transporting products to the marketplace is. There are no labourers available,” he said.

Other executives of consumer appliance firms and ice cream majors that Business Standard spoke to expressed concerns that the peak season for these items could turn out to be the worst ever. With concerns over the coronavirus disease (COVID-19) outbreak in the country extending till May, many are anticipating a total wash out — with sales dropping below last year for most manufacturers of summer products.

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