A few years ago, Groupe SEB tried and failed to break into India’s fast-growing home appliances market. Its premium, imported products were no match for the value-for-money offerings from local manufacturers.
“We had failed to understand the Indian market,” says Frederic Verwaerde, the soft-spoken member of the executive committee of Groupe SEB, the world’s largest home appliances company.
The $5.2-billion giant now believes it has solved that problem. A year ago, SEB bought over 55 per cent stake in Harish Kumar-promoted Maharaja Whiteline Industries. The idea was Maharaja’s mass products would add strength to its existing portfolio of premium brands such as Tefal, Rowenta and Moulinex.
However, this time around, the company has been stumped by another problem: A brewing boardroom battle with its partner, Harish Kumar. Last week, Kumar was removed as the executive chairman and managing director of the company and replaced by Verwaerde for failing to meet the company’s' financial targets. An old hand in the business, Sunil Wadhwa, was inducted as the new CEO.
Kumar, a veteran of many corporate battles, came into the limelight after he took his joint venture partner, Electrolux, to court. He is not going to take his removal from an executive role lying down.
“I have a two-year term as managing director and chairman, which ends only in December 2013,” he told Business Standard.
Clearly, the battle is far from over and SEB will have to move quickly to resolve the problem if it doesn’t want its India plans to fail again. This time, the French appliances company means serious business. It wants to make up for the lost time and has set sights on becoming the number one player in the country.
More From This Section
“At the moment, we are number three in the ranking (behind Bajaj Electricals and Usha). We want to move to the second spot in about three years, and then to the top in the next five years,” says Verwaerde.
To achieve these goals it needs complete control over managing the company. And, that could be one reason why Kumar and SEB have been at loggerheads.
Verwaerde plans to own 100 per cent stake in the company but Kumar was not willing. Earlier, during negotiations, Verwaerde rejected the alternative of a 50-50 joint venture with management control, which Kumar had initially offered.
To expand its India presence, SEB is already looking beyond Maharaja. “We might also look at other acquisitions in India. That is our strategy of growth in developing markets,” says Verwaerde, adding he was also open to the idea of increasing his stake in Maharaja.
SEB’s grouse has been that Maharaja, under Kumar, didn’t move fast enough. It now wants to move in quickly and re-launch the whole Maharaja range next Diwali.
SEB is aware of its weaknesses. While Maharaja is a well-known brand, quality is often suspect. So, the company wants to fix the problems in the next few months. “We have made full assessment of the Maharaja brand. It has solid and sound products. The brand needs to be consolidated. There is a need to improve quality so that they would meet our customer requirements. There might be investments if we need to enhance capacity as well,” says Verwaerde.
SEB also wants to bring its flagship global brand, Tefal, into the country again. It is looking at the potential of manufacturing some of the products in the country which would make them more affordable. Through local manufacturing, SEB says it could save as much as 20 per cent on cost, which can help the firm generate volumes. It could also bring products from its Chinese operations. The new bosses say its new range could also include haircare products.
The company is also looking at expanding its distribution network. While Maharaja has strong distribution in the north (over 450 dealers) it needs to expand its geographical reach across the country.
The French company also sees potential for exports from India, especially for mixers and grinders which India produces in large volumes at very attractive prices. “We have plans to export from India, primarily to the West Asian markets,” said Verwaerde.
But, its success could well depend on how it deals with a minority partner.
Sounak Mitra contributed to this article