Storm in a chimney

Barely five days after Electrolux announced its entry into built-in kitchen appliances, of which electric chimneys are an integral part, the Rs 52-crore Pune-based Faber India Heatkraft Industries has decided to slash the price of its entry-level kitchen chimney by Rs 2,000 from the current Rs 4,990.

Similarly, Faber's second-level chimney will be sold at a price of Rs 4,490 and the prices of its decorative kitchen chimneys have been slashed from Rs 15,000 to Rs 9,000.

The entry of biggies has made the relatively smaller players in the still-nascent electric chimney industry revisit their price strategy. Banking on the mass market, Faber Heatkraft, where the Italian parent Faber has a 75 per cent share, says it's not so much competition but the potential volumes market that has led the company to lower prices.

"The time is now ripe for bringing down the prices as consumer awareness for electric chimneys has been created," says Pralhad Bhutada, managing drector, Faber Heatkraft. Consequently, Faber is coming out with an aggressive ad campaign.

Ajay Kapila, vice president, sales & marketing, Electrolux India, is happy. "We have hardly entered the market and rivals are already cutting prices. That is good news."

Supplying a combination of hoods and hobs, Kapila expects this market to grow at 30-40 per cent. Electrolux India has already made a projection of garnering a 10 per cent marketshare in the very first year. "My gut feel is that we will be able to grab 15 per cent but our financial projection is 10 per cent," says Kapila.

Priced at Rs 25,000 for a combination of hood and hob, Electrolux is targetting SEC (socio-economic class) A & B to start with. But just the hood will cost Rs 6,990.

Making a beginning in the northern market, Electrolux plans to introduce the new category in the top 10 cities by mid-2005. Electrolux has started with six models of Oxigen hoods and four models each of Nutrition hobs cook top range with a price range of Rs 25,000-50,000.

Enjoying a near monopoly in the organised market, Faber claims more than 50 per cent share in the electric chimney market even today. But the going will be tough, what with Electrolux's brands Oxigen hoods and Nutrition hobs joining the bandwagon alongwith other imported brands like Kaff and Glen.

Bhutada agrees that things will not remain easy with more players coming in but he says it's the mushrooming imported products that will worry him rather than the entry of organised players.

In fact, in the organised market, Faber has entered a sales-and-distribution tie-up with Whirlpool, which will launch its product range in April this year.

"Whirlpool's products will be high-end and there is no chance of its models cannibalising Faber products," says Bhutada. He also says that Faber's distributing network will come in handy for Whirlpool and together they will be able to supply a whole range of products.

Another Italian brand, Kaff, which fully imports its chimneys and sells around 2,500 pieces a month, says competition will build up. "This will only help all of us devise new strategies and penetrate smaller towns," says PR Shankar, regional head, Kaff.

"As competion is hotting up, awareness is also being created." Kaff has a wide range of hoods starting at Rs 6,200 and going up till Rs 74,000.

Again, Faber says that not only does it have the price and distribution advantage but also that of technology. For instance, its baffle filter technology, for which it obtained a patent in 2003, has an efficient suction system and does not clog with spices, which are typical to Indian cooking.

He also claims that baffle filters are easy to wash, have a longer lifespan and, therefore, command a premium. Its entry-level baffle filter is priced at Rs 9,000 and the company has no intention of slashing its price.

However, Electrolux also is totally updated as far as technology is concerned. "Electrolux's Oxigen hood, which comes with Oxi-Filter, absorbs heavy grease particles, thereby ensuring non-sticky walls and slabs," says Kapila.

To maintain Faber's stronghold, Bhutada is hoping to replace exhaust fans totally with chimneys in millions of homes in the coming years. "In 1997-98, when Faber launched the product, convincing customers was difficult. But now awareness has been created and with slashed prices Faber's chimneys will replace the exhaust fans," says Bhutada.

Industry estimates suggest that the current market size of electric chimneys is 1,25,000 pieces per year but these players expect it to rise to 10 million pieces a year by 2010. Currently, there are around 20 players in the market.

Banking on these figures, Kapila suggests that there is no need for any player to cut prices and there is enough space for all players.

"There is no cause for panic at this stage. All of us can retain our pie in this growing market," he says. So is Kapila getting nervous that Faber's low-price strategy may actually work? One will have to wait and see which direction the fumes are headed.