Panasonic has a long way to go in playing catch-up in market share. But the company believes it is off to a good start
For many of us the brand Panasonic conjures up images of batteries and home audio systems. This is precisely the perception that Panasonic wants to change. It now aspires to be a household brand that straddles most — if not all — segments of the consumer electronics industry in India. And this ambition is evident in the aggressive product launches and high decibel advertising surrounding the brand in the last two years.
In 2010-11, the consumer lifestyle division of the company recorded a turnover of Rs 1,700 crore (the overall turnover of the company was Rs 3,200 crore, which includes its business-to-business division and turnover from the recently acquired Anchor Electricals and Sanyo). With the size of the consumer electronics market pegged at Rs 45,000 crore per year, this translates into a market share of just under 4 per cent. Across categories, its market shares stand in single digits.
| NUMBERS COUNT Panasonic’s share across segments (consumer lifestyle division) in per cent | |
| Segment | Market share |
| Television | 8.5 |
| Air conditioner | 8.5 |
| Digital camera | 4.5 |
| Refrigerator | 2.0 |
| Washing machine | 2.0 |
| Healthcare | NA |
| Personal grooming | NA |
This surely is nothing to write home about for a company that has been in India since 1995, as long as the chaebols have been around. But experts say in the first leg of the journey in India, the focus was missing. Panasonic retailed under the National-Panasonic brand — National being the brand used by Panasonic Corporation (formerly Matsushita Electric) to sell home, personal and industrial appliances, a brand name that was phased out in Asia, the last market it was used in, around 2004 — operating through a limited product window that included CRTVs (cathode-ray televisions), LCD televisions, plasma televisions and some kitchen appliances. This changed when Daizo Ito was placed at the helm of Panasonic India in 2008.
The new focus on India becomes evident when one considers the categories the company has entered into over the last two years. Today, the brand straddles flat panel televisions and home entertainment, home appliances (air conditioners, washing machines, refrigerators and small cooking appliances) and beauty products.
More From This Section
Aiming high
But Panasonic still has a lot to prove. The battle for shares in the fiercely competitive consumer electronics market is going to be tough. Panasonic wants to compete in a space where the Korean companies LG and Samsung have cemented their position with aggressive pricing and a wide range of products. And their targets are no less ambitious. LG, for instance, is targeting revenue of Rs 20,000 crore in 2011 and expects its India operations to overtake its sales in Korea in the next four years. Compatriot Samsung is also aiming to double its revenue from India to Rs 48,000 crore, according to reports, in the next three years. If that’s not enough, Japanese companies like Sony and the US-headquartered Whirlpool are stepping up their efforts for leadership in certain segments. Not to be left behind, Indian street fighters Videocon and Godrej have upped the ante with feature-led products backed by never-before after-sales.
Panasonic India Head (sales and marketing) Manish Sharma, who is spearheading the rebound, is aiming for the company’s turnover to touch Rs 22,000 crore by 2015. Going forward, the company is betting on flat panel televisions (sold under the Viera brand), that bring in over 40 per cent of revenue, to be the largest driver of growth, while air conditioners (25 per cent contribution) and digital cameras (10 per cent contribution) will be the other two focus areas. The remainder of its portfolio — which includes washing machines, refrigerators, small appliances, personal grooming and system sales — still bit contributors, will get a bigger thrust at a later stage.
Panasonic’s focus on televisions can be explained by the fact that the market for consumer electronics in India is skewed towards televisions, which account for 60 per cent of the total sales. The catch here is that more than 60 per cent of the market is accounted for by CRTVs, a segment Panasonic exited globally a few years ago, and in India last year. For LG, for example, close to 50 per cent of its India revenues from television come from CRTVs.
That does not worry Panasonic. “Our objective is to upgrade the lifestyle of Indian people. The idea is to appeal to people who aspire to buy an LCD but can afford a CRT,” says Sharma. Thus, to woo the potential flat panel consumer, it launched a 32 inch television in mid 2010 that was 15 per cent cheaper than the average flat panel. It managed to keep the price low by skimping on features like HDMA ports which consumers do not typically use. Panasonic’s strategy may well work in the long term — a CRISIL 2010 report indicates, in the television market, the growth of LCDs, LEDs is going to be faster, and the low priced CRTVs are going to dwindle gradually.
Taking a page from the books of its Korean rivals, Panasonic has learnt that dumping international products in India is not going to cut ice with the Indian consumer. As the head of one of the product lines at LG points out, local innovations have been the largest reason for its success in India. So, in LCD televisions, Panasonic rolled out its first India-specific innovation last year called the Sound of India, which “places huge emphasis on bass as Indians love it”. “We also added the USB port to the television as our research revealed Indians like watching movies without connecting a DVD player.” Going forward, the television portfolio will continue to see more India-specific innovations with the next round of launches slated for April next year.
This is not to say that the premium end of the market will not deserve attention. When it comes to unveiling products, Panasonic has a two-pronged approach to the Indian market — local innovations to drive volumes and bringing in international ranges to drive the aspirational image of the brand. According to a senior hand at LG, straddling different price points — from entry level, to mid and premium — has helped it maintain leadership across almost every segment of the consumer durables market. Panasonic would do well to follow a similar strategy. Thus, for the premium segment, it has rolled out close to 23 models in April this year. “We are developing applications like moneycontrol.com, bigflix.com to justify the use of internet on televisions, vis-a-vis on smart phones,” says Sharma. In plasma televisions, Panasonic is the leader with 50 per cent of the market.
Other focus areas
Air conditioners is the second area where Panasonic is betting its money on. Here too, there are players like Samsung, LG, Voltas and Videocon that have built strong portfolios and brand equity over the years. Rather than going the whole hog, Panasonic will concentrate only on the split air conditioner segment, owing to a global decision to exit the windows AC business last year. Sharma explains, “Until a few years back, window ACs dominated the air conditioner market; but the trend is slowly reversing and split air conditioners are getting popular.” According to industry estimates, of the 3 million ACs sold in 2011, 60-70 per cent are split. With 40 models of split air conditioners, the company hopes to storm the market. “Last year, our AC sales grew 130 per cent, which is four times the industry growth rate.”
This segment too will see its share of local innovations. It has developed the India-specific Cube AC, which was launched last season. Sharma says at Rs 16,900, it was only about Rs 1,500 higher than a window AC. “Many consumers buy a split AC not only because it is silent but also because it is a status symbol,” explains Sharma. “It has surpassed expectations and already contributes to 30 per cent of our total AC sales, and you can expect similar innovations to hit the market next year,” he notes. To address the needs of premium consumers, the company has launched Eco Navi, a global innovation for consumers who are willing to invest a little more initially to save on energy costs later.
Gaining a foothold in digital cameras — the third pillar of its business — will perhaps be the most difficult. While the company is launching several entry-level models, Japanese compatriots like Nikon, Canon and Sony already have a stronghold in the 2.68 million units market. For Panasonic, the focus on digital cameras (retailed under the Lumix brand) serves a broader purpose. “Our products will target the youth of the country and ensure Panasonic is a brand in their consideration set,” says Sharma. Like cameras, Sharma is also counting on personal grooming products to position Panasonic as a youth brand.
Unlike other segments, Panasonic is treading cautiously in refrigerators. A CRISIL 2010 report points out that the direct-cool segment will continue to retain its dominance in the refrigerator market, which is in contrast to the trend in other appliance segments, where products with newer technologies are witnessing higher growth. Panasonic has done well by keeping its faith in direct-cool refrigerators, a segment which is almost obsolete across the world. It has tied up with Value Appliances to make direct-cool refrigerators, which constitute 70 per cent of refrigerator sales in India. “We introduced three models four months ago and will introduce another five models this year,” says Sharma.
For the record, for both LG and Samsung, refrigerators are the largest contributors to the business after televisions. In frost-free, Panasonic will bring in its international range. “Our differentiation here is that, unlike most competitors, all our frost-free refrigerators have a bottom freezer which is preferred by Indians to store vegetables.” In washing machines, the semi-automatic ones will be locally manufactured while the fully automatic machines will be imported.
The product mix, to a large extent, explains why 60 per cent of the company’s sales come from the top 11 cities. However, once the entire range of direct-cool refrigerators and semi-automatic washing machines hit the market, Sharma believes, the revenue mix will be less skewed towards the urban areas. Also, with Panasonic launching products that are priced across the spectrum, penetrating deeper into the market will be easier.
Reaching out
Besides product innovations, Panasonic has a lot of catching up to do in terms of reach. Like its peers, Panasonic is counting on exclusive brand shops, which currently bring in 18 per cent of its sales, to reach out to consumers. “We currently have 140 brand shops and are growing faster than our rivals,” claims Sharma.
Sharma says he has noticed a slow change in the mindset of distributors and dealers. “Traditionally, stocking depended on the rebate offered. Thus, it was the distributors’ headache to put in the money and effort to sell. Today his stock is our stock, so the scenario has changed. Brands that can ensure sell-out from counter to consumers will be the winners,” says Sharma. “We have a Panasonic preferred partner programme where we support our sub-dealers to improve the ambience of their stores. We provide them with good display stands, in-shop training assistants etc,” says Sharma. About 2-3 per cent of the sales turnover is earmarked for this activity.
Panasonic is also putting a lot of emphasis on after-sales service. “We want to increase the number of service centres as quickly as our retail footprint,” says Sharma. It had 250 service centres last year and is taking the count to 400 this year. Panasonic recently set up an experience zone in Mumbai which displays its entire product portfolio in India (including both consumer and professional businesses). Last year, a 22,000 square foot experience zone, Lifescape, focused on the consumer products division, was set up in Gurgaon (near Delhi). “Here we showcase products that are not available in the market. For example, a massage chair or a water heater. We want consumers to realise we are a complete brand,” says Sharma.
“In multi-brand retail, the retailer/distributor often pushes products depending on margins; this is not the case in exclusive brand outlets. India is not a replacement market for consumer electronics, and hence you need to allow first time buyers to experience the product. Thus, experience zones can help drive visibility,” notes Purnendu Kumar, vice-president, retail and consumer goods, Technopak.
At a time when other players in the segment are wooing consumers with high-decibel advertising, Panasonic can ill-afford to remain idle. It has earmarked Rs 400 crore for communication this year. “In India, sports and Bollywood have a huge following and these two will be the two pillars of our communication,” says Sharma. In the last two years, the company has roped in Ranbir Kapoor for Viera televisions, Katrina Kaif for home appliances and Diya Mirza for Eco Navi air conditioners. For categories like digital cameras and personal grooming appliances, Panasonic will pursue a regional specific strategy — the youth, the company feels, relates more closely to such a strategy. It has thus roped in Jacqueline Fernandez, Koyel Mallik and Kajal Agarwal to promote such products.
As a late entrant, Panasonic has its task cut out. “Generally, it is a challenge to dislodge consumers from brands they have been loyal to. The Indian middle class consumers do not like to experiment much and rely heavily on word-of-mouth and history of after-sales service. Panasonic has to invest significantly in these,” points out the head of a rival firm.
The biggest challenge for Panasonic lies in the fact that its sales are skewed towards televisions and air conditioners. The company brass believes this might change once the new facility in Jhajjar, Haryana, is up and running. It is investing $300 million (Rs 1,400 crore) for this facility, which will manufacture air conditioners and washing machines.