See 15-20% sales hike in festive season: Whirlpool

Whirlpool Corporation is not expecting to see historically high bump ups in sales that it used to see during the festive season as consumer sentiment remains weak, says company Vice President-Corporate Affairs and Strategy-Asia South Shantanu Dasgupta. It expects a sales hike of around 15-20 percent, against the 30-40 percent it saw in 2009-10.

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He sees around 10 percent increase in advertising spend on promotional offers this festive season.

Below is the verbatim transcript of Shantanu Dasgupta's interview on CNBC-TV18

Q: Historically how much of bump up does Diwali provide as we head into the festive season, what kind of bump up can we expect in sales?

A: It differs from year to year. In these current conditions we are not expecting a huge bump up because the prevailing conditions or the purchasing conditions, the buyer sentiment is still very low but there will be a bump up. It is not going to be the heady 30-40 percent bump up that we saw in 2009 and 2010. It is going to be probably in the region of about 15-20 percent.

Q: How does promotional offer compare with last year, did you have to offer a discount which is higher than normal?

A: Year on year there would be some impact of inflation. There is an expense behind the products that you buy and you give away free with consumers. There is a certain amount of media expenditure that you incur and there is a lot of on ground activity that takes place. So, there is a slight increase in the expenditure that we are entailing or the amount that we are spending this year in promoting our festival campaign, but that is pretty much in line. I wouldn't say that it is an extra amount that is spent to overcome any of the weakness in the market. It's a promotion package that has been put together and designed to stimulate sales and we are doing it quite efficiently.

Q: Given the increased promotional offers, will the ad cost go up in this quarter, for instance what will it look like in Q3 if you had to compare it on a quarter-on-quarter basis?

A: Part of that expenditure would have been captured in September and October and part of it would have been in November so I wouldn't be able to give a very accurate comparison but I would imagine it could go up by about 10 percent or so.

Q: H1 was weak for the company in terms of revenues as well as margins and for two consecutive quarters your revenues degrew, margins have been under pressure. Could you tell us why and when will the situation improve going forward?

A: July to September is generally a dull period for appliance sales and add to that the fact that there has been high inflation and pressure on consumers' wallet, so buying sentiment has been awfully weak. That's on the demand side.

The other has been the pressure on cost because that has been quite unrelenting and when you look at the depreciation of the rupee against the dollar and against any of the currencies that we trade with has impacted cost as well. So, we offset some of it through price increases and price increases also have negative impact on demand. So, while we have offset partially some of the impact on cost through pricing, we have not been able to completely cover up for price increase and as a result margin has been impacted.

So, we have issue with topline which is reflecting in a decline of about 3-4 percent in net revenues and the EBITDA margin is impacted because of high cost, part of it is offset by prices but not entirely.

Q: To protect margins going forward can you push through some pricing increases after this festive season?

A: I must beg your pardon for not being able to talk about forward pricing because I am bound by company policy to not talk about pricing going forward. I just gave you a comment on pricing that we did take in the last quarter but we were not able to completely mitigate the impact of the cost.

But we are now looking at festive season and we are looking more at demand, we are looking at stimulating demand so we have got campaign running, we have set good consumer offer in place, there is a lot of displays and merchandising activity happening on the ground to be able to attract consumers to our products. There are some new products that we have launched. So, all in all at this point of time the focus is on driving topline with the support of some advertising campaign that we have put out.