CAUTION AHEAD

STEEP INFLATION AND FALTERING DEMAND HAVE HIT CONSUMER GOODS MAKERS HARD IN THE PAST THREE YEARS. THERE SEEMS TO BE LITTLE RESPITE AS A FRESH INFLATION SURGE AND UNEVEN SPREAD OF THE MONSOON COULD DISRUPT THE FIRMS' RECOVERY

- ARNAB DUTTA

THERE WAS A SENSE of euphoria among consumer goods makers at the end of 2020. Lockdowns to check the spread of Covid-19 had just been eased, unleashing a deluge of pent-up demand that consumers predominantly channelled towards goods because most services were shut.

Recalling those days, Kamal Nandi, the Business Head and Executive Vice President of Godrej Appliances, says that though the crucial summer season had been washed away, sales of essentials from refrigerators to washing machines had shot through the roof by October. And it wasn't just urban customers loosening the grip on their wallets. A large mass of the urban workforce that was forced to migrate back to the hinterland also flocked to shops and online portals.

But that euphoria didn't last. Consumers clamped down on discretionary spending because of steep inflation and job and income uncertainty in the years that followed, and this was exacerbated by the Russian invasion of Ukraine, which pushed inflation up further. Unseasonal rains this summer and the uneven spread of the southwest monsoon have made matters worse. The renewed rise in inflation has added to their woes. Together, these factors slowed demand across the universe of consumer goods-from home appliances to snacks, shampoos and personal computers.

The consumer goods market's experience best encapsulates this. After growing about 25-40 per cent year-on-year in the second half of 2020, firms are now finding it hard to remain in the black. The unseasonal rains earlier this year in North India, coupled with elevated prices, compressed demand for air conditioners and refrigerators in the June quarter by at least 5-10 per cent.