What to expect from the consumer goods sector in 2023? Arvind Singhal explains

“In 2023, most consumer goods companies will track the growth of the economy. There is nothing like a base effect. There is nothing like demand compression, where because of Covid, all the neutralisations already happened by December of last year. In the consumer durables category,, mid-single digit growth numbers would be my call for the rest of the calendar year,” says Arvind Singhal, Founder & Chairman, Technopak Advisors

We have been chatting with a couple of managements and they are telling us that fans as a category have seen a bit of a slowdown post Diwali. In the rural end, it has been a lot more tepid than what urban sales have been?
My own sense is that the last four months have been very good for a number of consumer goods companies other than FMCG. Lots of weddings have taken place, lots of celebrations have taken place and that would have also given a boost to the consumer durable sector, whether it is white goods or brown goods.

Having said so, in 2023, most consumer goods companies will track the growth of the economy as such. There is nothing like a base effect. There is nothing like demand compression, where because of Covid, all of those neutralisations already happened by December of last year. I personally feel when one looks into consumer durables as a category as a whole, mid-single digit growth numbers would be my call for the rest of the calendar year. Some categories, some companies might actually touch double digits but on the whole, for the industry to hit a double digit growth would be a tough call this year.

Why is that, why this slowdown, is it largely coming in from the rural tepidness or do you think urban as well will witness a bit of a slowdown?
I think it is not a slowdown as such. The growth rate would be normal here, not on steroids at 12%, 15%, 18%. The fact of the matter is that we still are seeing very high inflation levels. We are also seeing that middle class incomes have been significantly dented across industry. Wage hikes and income generation as such has been moderate, in the range of single digit hikes, which barely catches up with inflation.

Now under this circumstance, onc cannot assume that consumers will have an unending availability of capital. I think mid-6-7-8% growth rate for refrigerators, washing machines or even TVs would be my expectation for this year. It will be in track with the economic growth rate of about 6% to 7% in real terms and maybe about 10% in nominal terms.

The management comments on the channel and on public domain, whether it is Bajaj Electricals or from MNCs show they are not very happy. While you are sounding okay, the companies are not really sounding excited or charged up about demand trends or visibility for 2023. Where is the disconnect here? Company managements are the last one to cry and complain?
It is probably setting expectations from the investors who are expecting 10%, 20% growth rates. Most people are not excited and if the reality is going to give closer to 6-7-8% for most, the management is basically trying to say that when we were hoping for a very bumper growth at least in this year they do not expect that happening simply because it is dependent upon the growth of the economy as such.

It is no longer dependent upon the supply side matters or any Covid pent up demand so on and so forth. I do not think there is a disconnect between companies giving guidance of 6-7-8% and what is largely going to happen in India over the next 12 months from an economic perspective.