Krishan Sachdev has a lot on his plate these days, between putting the distribution network in place to support the roll out of the Midea brand of consumer electronic products (including residential and light commercial air-conditioners and select home appliances) in India and drumming up advertising support for the joint venture products.
The sense of urgency in his stride seems inevitable given that Carrier Midea India (a 40:60 joint venture between Carrier and Midea), the company he leads as managing director is a very late entrant in the Rs 34,000 crore consumer electronics and durables industry, according to an Assocham report.
That said, the feisty 50-year-old has a lot going in his favour. By all accounts, Sachdev is a consumer electronics industry veteran having been associated with the industry for a good 25 years. Second, Carrier is almost home for Sachdev who had joined the company in 1987 after a two-year stint in manufacturing while he was with Escorts in Faridabad (near Delhi).
On its part Midea might appear a bit of a surprise package in the country, but it is by no means a pushover. Midea is world’s leading producer of consumer appliances, according to Euromonitor International Consumer Appliances Trade Statistics Database, 2011, with an annual production capacity of 30 million ACs, 32 million microwave ovens, 15 million refrigerators, among a wide range of other ‘living appliances’ across the globe.
The company has been working on its Indian entry strategy for some years now and found a willing partner in Carrier, with which it has operational JVs in five other countries including China, Egypt, Brazil, Chile and Argentina. India is the sixth country where the two brands have come together.
Having crossed the first big hurdle, that is, a new manufacturing facility situated at Bawal, Haryana which started operations in November last year. Spanning approximately 150,000 sq. ft., the plant is one of the country’s largest manufacturing facilities for air conditioners with an initial annual production capacity of 7 00,000, which will be expanded to 1 million units shortly. The facility currently manufactures two air-conditioners brands – Carrier residential and Midea residential and light commercial air conditioners. The microwaves and water dispensers are being imported as of now.
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This plant is a significant milestone for Carrier Midea India. Beginning construction in February 2012, the plant became fully operational in the short span of just eight months. With state-of-the-art technology, it targets increased localisation of world-class technology.
The company has invested Rs 150 crore in the first year itself. With a planned investment of Rs 500 crore over a five-to-six year period, Carrier Midea hopes to corner a significant share in the residential air conditioning and white goods market in India. But the company is likely to face tough competition from market leaders Voltas, LG and Samsung.
While air conditioners are the first line of products (34 models) to sport the Midea badge, microwaves (11 models) and water dispensers (4 models) are the next in line. “Gradually we will bring in Midea’s entire product range in India,” says a company spokesperson. “In India the penetration level for air-conditioners is only 3-4 per cent which is very low as compared to China’s 45 per cent, Singapore’s 70 per cent. So there is a huge scope in the country and we are expecting an average growth of 15 per cent over the next five years,” she says. In the first year, the company hopes to see these three product categories on the shelves of approximately 1,000 outlets across the top 30 cities.
Will the company see some cannibalisation in the AC market since both Carrier and Media are looking to establish a strong presence in the residential segment? “Air conditioners from these two brands are targeted at different segments,” explains Sachdev, adding, “While the Carrier brand is a premium segment brand, Midea is targeted at the mid-premium segment.” The Midea range of residential ACs start at a price point of Rs 20,000, the microwaves at Rs 6,000 and water dispersers at Rs 6,000.
In other words, Midea will lend its strengths in manufacturing and scales of operation in the residential category, Carrier will bring to the table its already established strong distribution in India and consumer awareness in the country. “This dual-brand strategy will help both the brands in specific areas,” says a company executive. “This would help expand market presence in the existing AC segment and also help the foray into the home appliances market.”
The back-end—the factory, the warehouses and the after-sales—will be consolidated to improve efficiency, optimise service delivery and lower costs. The communication and marketing plans are geared to gain visibility through mass media advertising, above-the-line and below-the-line activities.