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Consumer stocks have been the centre of attention in the stock markets for over two years now. But with prices rising and higher interest rates expanding loan repayments, will the Indian consumer remain unaffected?

We ran an analysis of listed companies in consumer segments such as auto, apparel, jewellery, FMCG and so on over the past four quarters to figure out whether all is well with consumer spending.

We found that while some sectors maintained the tempo of sales growth, others saw growth in the March '11 quarter slowly taper off towards the end of the year.

And yes, Indian consumers did change their buying patterns. They cut back sharply on big-ticket purchases and discretionary products. Essentials remained resilient, with companies even managing to push through price increases without hurting demand. Here are four key trends.

BIG-TICKET ITEMS HIT

Consumer durable companies clocked a collective revenue growth of 13 per cent in the March '11 quarter over the year-ago period. That growth dwindled to 1 per cent by the December '11 quarter. Sales of air-conditioners and refrigerators took the heaviest blow. A mild summer was said to be the key reason for the poor showing of the AC market.

For instance, Hitachi Home, which is in the premium AC category, saw an 8 per cent sales drop in the six months ended December '11 compared with the same period a year ago. A similar decline showed up in the AC sales of Blue Star.

Similarly, car sales took a hit with the September and December 11 quarters seeing a decline in the number of cars sold compared with the year-ago periods. Rising prices of essentials and monthly loan obligations already squeeze disposable incomes. Further, a good part of big-ticket purchases is made through financing schemes. With high interest rates, consumers may be more wary of taking on high-cost debt to fund discretionary purchases.

Among other big-ticket products, high gold and diamond prices put off consumers. Gold jewellery sales volumes fell to single digits for national retailers Titan and Gitanjali towards the end of the year. The growing popularity of investment schemes such as Exchange Traded Funds could have also diverted attention from jewellery.

People seem to have clamped down on air travel within the country too. Growth in domestic flight passengers fell from a high 21 per cent in the March '11 quarter to just 10 per cent by the December '11 quarter.

Apparel may not be big-ticket, but clothing sales for listed players took a hit. The primary reason was that branded garments became a lot more expensive over the past year. This was caused by a new levy of excise duty on branded apparel, besides a rise in input costs.

Given that branded clothing isn't essential, consumers were willing to scale down or push back buying. The vast unorganised market provided plenty of low-cost options to turn to. Brands may also hold less importance with clothes than other categories such as jewellery or durables or even personal care, where authenticity and quality come into play.

The December '11 quarter for apparel makers was especially poor. For instance, Lawman and Killer brand owner Kewal Kiran, which used to routinely post 30 per cent-plus growth rates, saw a sharp decline to a 2 per cent growth in the December '11 quarter.

SPLURGING ON THE SMALL

As consumers had to cut back on high value items, they seem to have turned instead to smaller-value products or services to satisfy the desire to indulge. Pizza maker Jubilant FoodWorks, for example, held on to its 40 per cent-plus sales growth rates. Revenues for multiplexes too did not see a sharp slowing in growth rates over the past year. PVR, for instance, reported a healthy growth in footfalls in both the September and December '11 quarters.

Consumers appeared unwilling to compromise on personal care with healthy spending in categories such as skin care, shampoos and hair oils. For instance, Marico and Dabur's...
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