Opinion

Do harsh weathers bring smiles to businesses?

Ice cream consumption in Middle East and India
(Last Updated On: April 6, 2023)

Of the several factors that influence a buyer’s behavior and choice, weather has always been one of the biggest influencers.

We have been observing weather’s influence on buying around us e.g., ice cream sales being directly proportional to rising temperatures, umbrella and raincoat sales growing during monsoons, people spending on home appliances such as air conditioners and room heaters during peak summer and peak winter, respectively.

Weather therefore impacts the consumers’ buying methods or channels as well as their product choices. During summers, for instance, offline retail outlets would see higher footfall as compared to peak winters.

Similarly, harsh summers would act as a boon for sellers of air coolers, air conditioners etc., while you would see a spike in demand for dehumidifiers, clothes dryers, and for the food lovers who want to enjoy the rains with healthy ‘fried’ snacks, air fryers and grillers, during the rainy season!

Impact of extreme weather conditions on consumers’ demand

For manufacturers as well as marketers (retailers/ e-tailers), understanding the weather and consumer demand relationship plays a pivotal role in developing the product, pricing, and marketing strategies; drawing insights based on historical demand trends such as most profitable period to market the products, the most effective advertising and selling techniques, and much more.

Leveraging weather intelligence also helps retailers to do better inventory and stock management; the category of products they foresee to be in greater demand, as well as how to conceptualize their displays to attract more footfall.

Demand in cooling systems

The extreme weather conditions in the Middle East have a significant impact on consumer consumption, particularly in the air conditioning market, prompting The National dubbing it, “air conditioning revolution“.

With hot climatic conditions being the norm in the region, the demand for ACs is increasing at a significant rate. Additionally, high urbanization and per capita disposable income are also contributing to this growth. Factor in mega-events in the region, such as the UAE World Expo 2020 and Football World Cup Championship 2022, are also driving the demand for better facilities, resulting in increased construction activities and further boosting the demand for air conditioning.

Climate change challenge

Climate change is another factor that is affecting consumer behavior in the region. The Middle East has experienced several extreme weather events, including high temperatures, which have prompted governments to take action.

For example, in October 2019, the Qatari government installed air conditioning in open-air areas such as streets and markets due to the extreme heat. Qatar has the highest per capita emission of greenhouse gases, which highlights the need for more sustainable consumption patterns in the region.

Saudi Arabia, UAE, Oman, Kuwait, Turkey, and Egypt are among the major countries contributing to the growth of the air conditioning market in the Middle East. Saudi Arabia is expected to hold a significant market share due to its large population and increasing demand for ACs.

The extreme weather conditions in the Middle East are driving the demand for air conditioning, and this trend is expected to continue in the future. The governments in the region need to focus on promoting sustainable consumption patterns to mitigate the impact of climate change and reduce greenhouse gas emissions.

Let’s understand the trend with an example. In 2022, the Indian Appliances and Consumer Electronics (ACE) industry recorded a good 35% growth, on the back of an unprecedented rise in demand for cooling products such as residential air conditioners along with higher festive sales in the second half of the year.

What was interesting to note was that even though manufacturers took a price increase of nearly 10-15% in a span of 1st six months of 2022, the industry registered a cumulative record of domestic sales of nearly 6 million units during that period.

The Indian ACE industry expects 2023 to continue this growth trajectory with a strong summer driving pent-up demand. In fact, with summer season expected to roll in relatively early this year in the northern parts of the country, consumer electronic brands have already started building a bigger inventory, for both components as well as finished products, in anticipation of higher demand for summer appliances and electronics such as air conditioners, coolers, ceiling fans etc.

Brands selling ceiling fans expect higher demand coming up during the anticipated harsh summers for mid-to-premium category, even as consumers will have to pay more for ceiling fans this summer season due to the government-mandated star labeling norms implemented from January 2023. Some of the brands are expecting to nearly double sales of their air conditioners in the upcoming summer.

Interestingly, of the many kitchen gadgets and appliances that one can find in today’s smart homes, ice cream makers are expected to see a good uptick in the upcoming summer. Research shows that per capita consumption of ice-cream in the country is 400 ml and the rate of consumption is continuously increasing, backed by growing popularity for a diverse flavor palette amongst the consumers. For most households, buying ice creams from outside can turn out to be a costly affair and moreover, with the consumers seeking healthier options, investing in ice cream makers can help them make ice creams and sorbets in flavors and with ingredients they prefer.

Like extreme summers, the other end of the season spectrum – winters too offer ample opportunities to the consumer durables brands and retailers to up their game. For instance, in the last week of January this year, one of the electronics retail chains reported that the sale of water heaters had grown 15% and that of room heaters increased 7-8% during the four weeks, over a year earlier.

With winters in various regions in Northern India experiencing prolonged and severe cold waves even in early February, such home appliances as well as kitchen appliances such as soup makers and water kettles continued to see encouraging demand.

Challenges created by extreme weather for supply chain

While each season offers a plethora of opportunities to the sellers to super serve their customers with a wide range of products and services, the flip side of extreme weather conditions is the disruption it causes across the product’s value chain.

For instance, manufacturing facilities located in regions that experience extreme summer or winter conditions or in the flood-prone areas may hamper plant operations such as delayed production, heavy operating costs, etc. due to dealing with disruptions in raw-materials, manpower, power supplies, maintaining the optimal temperature levels to avoid loss due to overheating of equipment, etc. Also, foggy and zero-visibility during winters may result into delayed deliveries and logistical issues in delivering products to the vendors and the end consumers.

Conclusion

We experienced how back in the harsh summer of 2022, the climate change across the globe raised the Fahrenheit with its extreme heat waves across most parts of the globe, leading to a huge increase in demand for various cooling products/ appliances, as well as the increased demand for the electricity to run those appliances. Ironically, the situation remained the same with the reversal of the season!

A significant increase in demand was witnessed for the heating products/ appliances, as well as for the electricity to run those appliances during the harsh winter that followed, resulting in the governments importing costly fuel to keep the electricity supply going.

These challenges have indeed dictated the need to innovate power-saving and eco-friendly/ green technologies to help reduce power consumption. However, with the spring season struggling for its existence, the binary weather conditions of harsh summer and harsh winter are expected to prevail in the coming years. Is it good news for business? Does harsh weather bring smiles to business?

Wait a second before reaching the conclusion.

Let’s not miss the point that the people running those businesses are also consumers! In fact, they have been consumers first and later got engaged in their respective businesses.

Aren’t we all born as consumers by default, and might have started playing the additional roles (of business/ marketer)?

Obviously, harsh weather conditions demanding huge efforts and expenditure from consumers for comfortable living, would not bring smiles to them.

So, how to separate out that “consumer” from the business? Whose interest would be considered first? Doesn’t it sound like a chicken and egg problem?

Ravi Shankar Chaudhary is an experienced global MBA from IIM Ahmedabad with a Harvard Certification in Management Essentials. He has over 15 years of expertise in executive business development, project management, and change management. Currently, he serves as Secretary General of CEAMA and is a board member for Sanford Royce and Electronics Sector Skill Council of India and National Board for Quality Promotion. He has worked with Deloitte Consulting and ParadigmX Advisors DMCC as Director - Strategy, driving successful execution for clients in the Middle East region.