Godrej is storming the consumer electronics and appliances market with new products designed to meet the unique needs of Indian consumers. Can it take on the Koreans?
For a category that’s dominated by multinational corporations — Korean chaebols LG and Samsung together lord it over almost 40 per cent of the market — it will always be a tough fight. Niches are not easy to find, the research and marketing firepower of multinational corporations is difficult to match. Menezes takes pains to explain that innovative strategies have got the company where it is today. “Everything we do holds relevance to consumers in India, and we try to meet their unique needs more often than not,” says he.
Thus, for each category a unique need is identified and the product is developed keeping that in mind. Take the case of Godrej refrigerators. Conversations with customers brought out that rusting of appliances is a common problem. To tackle that, Godrej Appliances introduced ZOP (zinc oxide protection) technology that provides rust-free warranty of 10 years. The technology is used both in direct cool refrigerators and the frost-free models.
Similarly, in air-conditioners the problem users faced, more than the cost of the machine, was the hefty electricity bills that followed. Here, Godrej Appliances launched air-conditioners with i-TREC technology — inverter technology for reduced electricity consumption. The company claims that it saves power by 30 per cent and cools 50 per cent faster. Importantly, this segment has been doing exceptionally well for the company, so much so that it plans to soon increase its range of 18 models to 30 and beyond. “We have seen growth of over 500 per cent in this segment, while the industry average is about 173 per cent,” claims Menezes.
Right time, right products
Godrej Appliances has chosen the right time to make a splash in the segment. Prosperity — in cities as well as villages — is on the rise and consumer electronics have become more affordable. Consumers have begun to move up the value chain across categories. This shows in the faster growth in sales of items like LCD TVs, frost-free refrigerators and fully-automatic washing machines. There is another factor the company can count on: Its strong brand equity. Even rivals admit that the Godrej brand is very strongly entrenched in smaller cities and towns. Its recent success with Godrej No. 1 soap — it has become the third-largest brand in the market after Hindustan Unilever’s Lifebuoy and Lux — shows its strength in the rural market.
But sector experts say that Godrej’s current portfolio is loaded heavily with refrigerators and air-conditioners, while the biggest segment of the consumer electronics market is television. While refrigerators and air-conditioners together account for 80 per cent of Godrej Appliances’ volumes, washing machines are no less important with 15 per cent of volumes coming from this category. Overall, it has a share of 7 per cent of the market which is estimated at around Rs 33,000 crore. It is a figure Godrej wishes to increase to double-digits shortly. To begin with, the appliance maker has realised that its washing machines need to be more effective. So it has introduced Force 4 and Turbo Brush technology in its fully-automatic machines.
But the big thing will be televisions. Godrej Appliances recently launched a range of LED and LCD televisions. It hopes to achieve a sales turnover of Rs 300 crore from its entire range of TVs from four states — Andhra Pradesh, Kerala, West Bengal and Maharashtra — in one year’s time. At present, the annual television market is estimated at around Rs 15,000 crore in value and 13 million units in volumes.
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But in a market that’s crowded with over 16 brands, and one where multinational goliaths hold fort, what is Godrej’s strategy? “We are doing little things differently,” Menezes responds. First is the advanced backlight technology in the LED TVs which enhances the movement of every pixel, which in turn enhances picture quality with more depth and clarity. For now, it has launched only in four states. Here, the total television market is 1 million units. With the Eon range, Menezes is hopeful to achieve a market share of 10 per cent in the next 12 months and be among the top three players. This, he hopes, will culminate into Rs 5,000 crore in revenues in the next five years.
According to GodrejAppliances executives, the LCD and LED markets are in a flux with prices coming down and technology evolving. As a result, newer sub-segments are emerging. Its product portfolio will straddle television sets from Rs 18,500 to Rs 62,000. Meanwhile, the Godrej CRT TVs will be priced between Rs 5,600 and Rs 9,300.
Designed to compete
However, breaking into this market is not going to be easy. Already, market leaders like Samsung and LG are working at break-neck speed. Most recently, Japan-based Akai announced its intentions to get into this space in India. Aware of this, the team at Godrej Appliances has worked overtime to ensure success. It spent no less than seven months interacting with over 2,500 consumers. Design was given special emphasis. Following that, mock designs were presented to people and feedback was tracked. “Design and aesthetics form an integral part in buying decisions,” says Menezes. From that it emerged that consumers in the South preferred loud colours, their northern counterparts meanwhile were more into embellishments, while those in the West were keen on sober colours.
But there’s another reason why the company is so keen on growing in the television space. At present, much of its volumes rely heavily on refrigerators and air-conditioners, both weather-dependent products. Typically, sales soar in the summer and dip dramatically in other seasons. “We need more stability,” says Menezes. Another pertinent reason for promoting televisions has to do with the vulnerabilities in the commodity markets as both air-conditioners and refrigerators are metal intensive. “This insulates us from the weather as well as the volatility in the metals market,” he adds.
Everybody knows that the LGs and the Samsungs of the world have massive ad budgets to back them. Typically, these companies spend about Rs 50-80 crore in a year on marketing alone. Godrej Appliances, in turn, will shell out a fourth of it this year. “That’s why we do things that have more visibility and tie-up with properties that will generate more buzz,” says Godrej Appliances Vice-president (sales & marketing) Kamal Nandi. To underscore his point, Nandi cites an example. In 2009, Godrej Appliances tied up with Eros International to launch Godrej Aladin Make A Wish offer where three biggest wishes of the Indian consumers could be granted on purchase of any of its appliances. “Here we bought media at one-third the cost. We spent Rs 4 crore and managed visibility of Rs 12 crore,” he adds. Further, the company also vouches for disruptive communication to get their consumers’ interest. Thus, it disrupted the evening news on a regional channel while advertising for its television brand. It also created hype by coming out with vandalised hoardings and so on.