Climate Woes Force New Biz Models

How consumer goods companies address weather disruptions with climate prediction models, AI and real-time data.

- AJITA SHASHIDHAR

THE FESTIVAL OF COLOURS, Holi, celebrated towards the end of March, marks the onset of summer- that time of the year when air-conditioner, aircooler and refrigerator manufacturers make a fortune out of the sweltering heat. For most firms, the growth target is well above 20% during summers.

But the summer of 2023 changed all that. Not only did the winter prior to that get extended well into mid-March, the summer months were intercepted by unseasonal rains, leading to a significant drop in temperatures. Thanks to consumers who didn't feel the need to invest in a new air-conditioner or replace the existing one, most brands ended up with huge unsold inventory, dragging sales down 15-20%. Washing machine sales also played spoilsport, leading to an ever larger inventory pile-up.

This year, the story has been different though. Consumer durable manufacturers have seen a 35-40% growth in sales owing to temperatures soaring up to 50 degrees in most parts of the country. But despite the surge in demand, there was an opportunity loss. Excessive heat led to a stock-out of air-conditioners and air-coolers.

While most manufacturers ran out of components, many shipped products directly from the manufacturing line to stores (consumer durables are usually shipped to a warehouse and depending on orders from stockists and retailers sent to different stores).

“Over 40% of air-conditioner shipments have been direct this year,” points out Anil Verma, CEO, Godrej & Boyce. “Last year the summer was bad and this year it was too good (in terms of demand), but the fact is that the needle is shifting drastically. Last year we had a lot of unsold inventory, while this year we are pushing stuff from production lines to dealers,” he adds.