The Hindu Business Line : The cold war

That they work for air-conditioner companies and are surrounded by them is no comfort to these executives. This summer promises to offer hot competition with more than a dozen big brands sweating it out for a share of the household AC market. Projected to sell over two million units (Rs 3,600 crore in value terms) in 2007, India is now considered to be one of the hottest markets for air-conditioners.

While this can be attributed to the changing lifestyles of the burgeoning middle class, current socio-economic factors, handy consumer credit and market competition, one cannot ignore a gradual and substantial (almost 40 per cent, allowing for inflation) drop in prices from six years earlier and the expanding range of models boasting improved technology.

The drop in price because of lower duties also helped the organised players increase their share in the market to around 80 per cent from just over 40 per cent a few years ago.

This year, though the penetration level is expected to be around 2-3 per cent, the market is likely to grow by over 25 per cent across categories, say industry sources. "That too, as people in urban areas prefer mid-priced air-conditioners to economy models, the demand for split air-conditioners will exceed that for the conventional window model and will be in the ratio of 55:45," says B. K. Shankar, Associate Vice-President, Vivek's, a leading consumer electronics retail chain in the South.

This summer, the AC market is all set to witness a few new players and numerous new models to choose from.

The selling proposition

While many players are planning to pitch their products on the technology platform, such as health, pure air and ease of operation, quiet performance and so on, some seem to focus more on `energy efficiency' and looks.

However, in some quarters there is a feeling that though "truly energy-efficient" models would be beneficial to the consumer in the long run, the consumer is not yet prepared for the higher prices they entail.

According to industry sources, the critical components that are used in energy-efficient models are slightly more expensive and would hike the end-prices by at least 8-10 per cent.

According to R. Zutshi, Deputy Managing Director, Samsung India, the company introduced a new series of split and window ACs this year. The `split' range comes with features such as `good sleep', ultra tropical rotary (UTR) compressor and `double micro plasma ion' to ensure cool, pure air and restful sleep for the user.

The window AC range too has been enriched with all these and more features such as filter check display mode and fluorescent remote control, he says.

The `good sleep' technology, claims the company, is the result of a study on the sensitive sleep patterns of humans. This mode keeps the skin's temperature at optimal level during the three stages of dormancy — falling-asleep stage, sound-sleep stage and waking-up stage — thereby facilitating 82 per cent longer deep-sleep. Furthermore, it saves up to 30 per cent energy as compared to conventional cooling, explains Zutshi.

That apart, the UTR compressor features a high torque motor that can operate under heavy loads and starts up even in low voltage conditions. The overload protector in the motor helps suppress internal heat build-up and prevents damage, it is claimed.

With the introduction of the new series, Samsung now has a range of nine split AC models in the price range of Rs 21,990 - Rs 40,000 and seven window air-conditioners in the 1.0-tonne to 2.0-tonne segments priced from Rs 14,990 to Rs 23,000.

"We expect that split ACs would contribute at least 50 per cent by volume to our total AC sales," states Pradeep Tognatta, Director - Sales, Samsung India. "Our strategy to grow our market share is to strengthen our product offering through differentiation, expand our sales and service network for ACs by 50 per cent as well as support the new product launches with some advertising campaigns," he adds.

"With all our plans, we are targeting a 50 per cent jump in our sales volumes and 26 per cent market share this year," says Zutshi.

BEE-ING prepared

Another major player in the Indian market, LG Electronics India Ltd has launched BEE-certified air-conditioner models, claiming to be the first to do so.

"We have launched 4- and 5-`star' models in split ACs as a voluntary participant in the Bureau of Energy Efficiency's star rating programme. However, `good health' will continue to be our platform," says Ajay Bajaj, Business Group Head - Air-Conditioners, LGEIL.

Commenting on the `energy-efficiency' initiative, Bajaj says, "Energy efficiency is a vital element for all products as they help in saving electricity and directly give benefits to the user. We at LG are committed to making our products as energy-efficient as possible through various endeavours and thus ensuring perfect cooling and power saving."

Quoting an ORG Marg survey, he says LG's market share was 33 per cent in 2006. "We are expecting to touch 34-35 per cent this year. With new additions LG claims to have over 100 models in all three segments — window, split, floor-standing or tower.

LGIL has earmarked Rs 12 crore for advertising for the year. "We will spend close to 90 per cent of that for the summer campaign," he said.

Last year, the company signed on Bollywood actor Abhishek Bachchan to endorse its air-conditioners, which, according to Bajaj, improved top-of-mind brand recall among consumers. "The endorsement holds good for this year too," he said.

Lloyd claims that its range of air-conditioners are powered by `Crystal Wave Technology'. Sanjeev Wadhwa, Vice-President - Sales and Marketing, Fedders Lloyd Corporation, explains that it means four filter checks that kill bacteria up to 99.43 per cent to give germ-free air. "As people are more design-conscious, we have come out with models that have panels of different colours. The company has six models in window ACs, nine in split and two in the floor-standing series and are priced in the Rs 12,000 - Rs 60,000," says Wadhwa.

The company has set aside Rs 20 crore to market air-conditioners during the season this year.

Carrier, a big player in the light-commercial segment, is planning to sharpen its focus on residential products. It has also obtained BEE certification ranging from three to five stars for its models. "Our products are priced very reasonably in the range of Rs 20,000 to Rs 40,000," says Zubin Irani, Managing Director, Carrier Air-Conditioning & Refrigeration Ltd.

According to him, Carrier develops technology on global platforms and introduces products simultaneously in India along with the rest of the world.

"Our new products have a new and modern aesthetic appearance that customers will really like. The new Estrella window AC is supplied with three colour grills that customers can change even after the unit is installed. This allows the customer to change the grill within 30 seconds depending on the colour of the walls, curtains or her mood on that day," says Irani.

Home-grown brand Godrej offers its AC range under the tagline `Stylish Outside, Smart Inside'. The brand seems to bet big on its premium-end EON range that comes with "I-Sense" technology. "This AC has two sensors. One in the main unit and one in the remote. These sensors continuously exchange data with each other so the air-conditioner automatically adjusts the temperature condition around the remote control that is with the user in the room, instead of that around the indoor unit mounted in the room. The result of this is perfect cooling where you need it the most," explains Kamal Nandi, Vice-President, Godrej Appliances.

"However, our I-Sense technology will be the backbone of our communication this year, and we plan to invest Rs 10 crore in a complete 360-degree ad campaign this year," says Nandi.

According to him, the range also has an improved technology that reduces the electricity consumption and increases the rate of cooling. Godrej, endorsed by Bollywood star Preity Zinta, has priced its products in the range of Rs 15,490 to Rs 45,990 for split models and Rs 10,990 to Rs 22,990 for window models.

Godrej too is also in the process of getting its models tested at the accredited lab and "will comply with the BEE labelling norms as and when it is implemented". The brand has 4 per cent market share and hopes to double it this year.

Whirlpool India, till now a "small, dormant" player in air-conditioners, is planning to change the complexion of the AC business from this year onwards, says the company's Vice-President (Marketing), Shantanu Das Gupta. Eyeing a 10 per cent market share in 2007, the company has introduced several new models in both window and split ACs. Like the other market players, and in line with its own promise of innovativeness, Whirlpool's MagiCool range of ACs include features that promise energy efficiency (up to 30 per cent saving in power consumption).

The company will focus on establishing its salience among the target market, boost advertising with 20 per cent more expense including a TV campaign featuring brand ambassadors Kajol and Ajay Devgan and reach out to more retailers, says Das Gupta. Prices are "value-for-money and competitive", starting from Rs 12,500 and going up to Rs 30,000. There are six new models in various capacities and types; so far, there have only been four.

Das Gupta says the AC market, growing at a CAGR of 25 per cent every year, may well overtake the refrigerator market by 2008. "Growth will continue at this rate as penetration is very low. The fall in prices over the years has also spurred growth," he explains. The AC market was estimated at Rs 3,000 crore in 2006, the number of units sold 1.6 million. The refrigerator market size stood at Rs 4,300 crore.

Spring has arrived, literally and figuratively for the AC market - as the days get hotter and disposable incomes rise, the big chill of old is thawing, finally.

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The cold war