The Hindu Business Line : A question of durability

A host of consumerdurables brands areentering the Indianmarket despite thesluggishness in somecategories. Catalystlooks at where theiroptimism springsfrom and whetherthey will endure.

IF you thought you were already spoilt for choice when it came to buying a new refrigerator or colour television (CTV), then sit back and take a deep breath. There is more to come. At least five new consumer durables brands are set to aggressively occupy store shelves in the coming months. This, despite major categories such as washing machines and refrigerators in the over-Rs 19,000-crore consumer durables segment seeing negligible or even negative growth rate.

While it does not seem to have deterred the new entrants, it may be tough going, as in addition to the slow growth, only a handful of players have a predominant market share. For instance, in the CTV category two years ago, the top four brands in India had a collective market share of less than 50 per cent. At present, the combined market share of the top four brands stands at over 70 per cent, says an official from the Consumer Electronics and Television Manufacturers Association.

The above data reflects consumer reluctance to experiment with new or lesser-known brands, preferring to go in for the more established ones. Despite this, the new brands seem keen to battle it out. The brands that aim to consolidate their position in consumer mindspace this year and early next year include the Chinese brands Haier and TCL, and the Koreans — Anchor Daewoo and Hyundai (which is being marketed by Videocon). There are rumours of the China-based Konka seeking a re-entry into the Indian market.

Analysts also point out that the number of homegrown, regional players is increasing. Even the prominent among them, such as Beltek and Maharaja, are in the process of expanding to newer categories. Interestingly though, most market analysts believe that the Indian market has enough `space' for the entry of new competition, especially when compared to the West.

"India is a growing market with huge potential. It will take some time for these entrants to build presence and equity in the Indian market. The current negative or little growth is no reflection of the potential that lies in this market. The key is that the sooner they enter the more time they get to establish their brands and subsequently, be competitive with other established players," says Anang D. Jena, Business Head, Synovate India.

Agrees R. Ravi Shankar, Senior Vice-President, TNS India. "The Indian consumer durables market is growing. Several segments in the upper end of the market are being targeted by all the manufacturers, examples being upgrades into the 29-inch category and the flat screen in all sizes of CTVs. Music systems, refrigerators, washing machines, air-conditioners - all these segments are also bound to grow at a rapid rate in absolute terms over the next few years," he says.

Interestingly, grabbing a foothold in the premium end of the market seems to be one of the major focus areas for most entrants. This is in a bid to build a premium and technology-savvy image around the brand. Chinese brand Haier, for instance, is positioning itself as a premium brand and has to a great extent shaken off the negative image associated with Chinese products.

Says T. K. Banerjee, President and CEO of Haier India, "Our brand has been well received in the market. The past three months have been a period of consolidation as we went pan-India only in July and very recently entered the CTV category. We have a presence across price points. For instance, in the CTV category, we have 16 models though our focus is more on the flat TVs."

The company is targeting sales of Rs 300 crore in its first year of operations (July 2004-June 2005). Banerjee adds that building the brand is the company's topmost priority at present.

"Brands such as Haier and Anchor Daewoo are trying to cultivate an upmarket image in the eyes of consumers. Besides, they have also beefed up distribution. Another factor that will help in acceptance of these brands is the retailing phenomenon where durables' retailing chains are now pushing `store brands.' These brands are likely to also benefit from the chains' image. Care is also being taken to set up proper after-sales service networks. This is going to go a long way in reassuring consumers," says Sakina Pittalwala, Vice-President (Qualitative Research), Synovate India.

Seeing potential, Anchor Daewoo, a joint venture between Daewoo Electricals of Korea and Anchor Electricals, has set ambitious targets for itself and aims to garner a turnover of Rs 700 crore in the next calendar year. "We are aiming to be the fastest growing durables company next year and among the top 10 in the country next year. Our products range across price segments from the entry level to the premium segment, including those such as plasma TVs. Our strength is that we are manufacturing everything on our own, unlike a few others in the category," says Anil Chopra, National Sales Head, Anchor Daewoo. The company has already spent about Rs 250 crore on manufacturing and is planning to spend Rs 100 crore more to create new capacities.

Meanwhile, Chinese player TCL, which is reportedly planning a high-pitched comeback, will adopt a multi-brand strategy. TTE Corp, the 67:33 joint venture between Chinese electronics major TCL and Thomson, would be using TCL to address a lower price point while Thomson will be used to target the premium end of the market. The company is learnt to be in the process of expanding its distribution network in the country.

At the retail end, dealers say consumers are not wary of going in for relatively new brands. B. A. Srinivasa, Director, Viveks, the consumer durable retail chain, says the advent of new brands of televisions will deepen the market for CTVs and ensure greater penetration. "The Chinese brands, especially, are adopting the Korean way of capturing the Indian market; they would like to be present in the whole spectrum of the market and brands like Haier have the strength to take on the Korean brands. They would look at gaining market share in the first three years of their presence and later look at profits," he says.

Agrees Pittalwala. "Also, consumer attitudes towards brands appear to be undergoing some change. With quality on par and an even more attractive price, consumers appear to be willing to look at lesser-known brands as well. Consumer lifestyles are changing and there are many more demands on the income of the individual. At the same time, the consumer is also in acquisition mode, which means that he or she needs to have all the latest gadgets. In that light, if the quality is acceptable and the price is right, the resistance to a new brand is lower," she says.

The question, of course, arises whether the emergence of the new brands would dent the market share of the Korean majors LG and Samsung.

Says Salil Kapoor, Head (Marketing), LG Electronics, "More competition only results in the growth of the market. The new brands will take some time to establish themselves ... consumers won't shift immediately. We feel competition for us would be more from the manufacturers - players who have invested in manufacturing - rather than the licensee brands."

Brand building, of course, will play a big part in a market which is increasingly acquiring the hues of the FMCG industry. "These brands are likely to rake in a significant amount of sales once they start introducing their volume models. This will definitely put pressure on the other well-entrenched players. However, the key would be first to establish `brands' and their `equity' as quickly as possible — how soon they can connect with the Indian consumers and how they do it, will only be a matter of time," says Jena.

The already crowded consumer electronics segment, though, is definitely in for increased action in the coming year.

"The market is heading towards being dirty and cut-throat as it is world over. Very few players will have a profitable existence, notwithstanding the initial bluster and whatever glib logic they may have. It could get tough for the LGs and Samsungs of this world as well with so many nibbling at the edges," says Francis Xavier, Managing Director of Francis Kanoi Marketing Research.

Not that the consumer is complaining. Apart from more choice, increased competition would mean a dip in prices as well!

(Reporter Associate: Vinay Kamath)

Picture by Shaju John

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