As India is one of the few growing markets, the Japanese firm is nurturing it with much customisation.
India, with its cluttered market space and fickle consumers, once again figures prominently in the viewfinder of the global consumer electronics and durables giant Panasonic. The brand’s “re-entry,” as described by its 40-year-old Managing Director, Manish Sharma, has a two-point agenda, backed by what he says are “correct strategies”.
The agenda is to reposition the brand as the ‘most trusted’ one; and to create top-of -mind recall among young consumers, and to be the market leader by 2018.
India, after all, is not unfamiliar turf for Panasonic, as it has been present for several years. The brand entered India in 1995, in its earlier avatar as the brand ‘National’. Its product portfolio was very small then, with a range of audio products, bulky CRT TVs and mobile phones. Then in mid-2003, it brought in its air-conditioners, and they did well too.
But, soon after that, Japanese parent Panasonic Corporation decided to get out of the window air-conditioner market. India at that time was a big window market, and split a very small segment. “We also got out of the mobile phone category as the parent decided to restrict its mobile handset business to the Japanese market alone,” explains Sharma.
These events really brought the brand’s India growth story pretty much to a standstill. “It was a global call, and we could not help it,” explains Sharma.
Now, with Panasonic incurring ‘never-before’ kind of losses in most other markets, it has realised that India is one of the very few regions still on the growth path and offering great potential.
It then focused on re-building the brand here through celebrity endorsements – for the first time. It roped in Ranbir Kapoor to endorse its consumer electronics products and Katrina Kaif for home appliances – and decided to spend 10 per cent of its revenues on marketing.
The result: The brand managed to gain a good amount of aided recall, “which is good”. But top-of-the-mind recall is something “we are yet to build”, admits Sharma.
Sharma has chalked out an elaborate plan to reach there. Panasonic knows it is not going to be an easy task, that too in a market where two Korean behemoths dominate alongside dozens of other serious contenders.
His three-pronged plan: focus on product range, pricing and retail footprint. It intends to enter new categories with India-specific-products – a big lesson it learnt from its earlier experience; price them affordably and also by providing easy loans to consumers; and drive growth in tier-II and tier-III towns, which are yet to be tapped to a large extent - by enhancing its retail footprint.
Panasonic believes that the international models which are introduced here are actually suitable for the premium markets or the metros. Though a large share of revenue comes from these markets, the growth is actually coming from smaller towns now. “That is why we are focusing on the smaller towns,” he explains.
Learning from consumers
He says the first such India-specific product was an LCD TV range. A couple of years ago, it introduced an LCD TV under the campaign, ‘Sound for India’. This range was developed on consumer insights such as a need for a set that could belt out loud music, with a higher bass, and needed to be affordable too. It then designed and rolled out a 32-inch TV, which was priced at Rs 27,000 when most other brands were priced at about Rs 32,000. “There was a considerable price gap and it was a hit.” More importantly, it enabled the brand to gain a foothold in tier II markets.
Those TVs had only one USB port, as consumers in smaller cities were not expected to plug in more than one gadget at a time, and “we passed on the cost advantage to the consumer”. Then, it introduced 24-inch LCD TVs – when others were 32-inch and above, he points out.
Later came its home theatre range, priced under Rs 10,000, when the then entry-level price was over Rs 12,500. Then its Cube AC, an innovative cross-over product between window and split models, sporting “almost a window price tag”.
In the personal grooming product category, it introduced a new range of hair dryers. One of the learnings Panasonic had was that consumers believed hair dryers damage hair. It designed one with a new feature it called HPT (hair protective temperature). “It blows air at the right temperature which is actually suitable for the hair. And it was priced at Rs 595,” says Sharma.
With these products, Panasonic started to penetrate the market deeper. Last year turned out to be very favourable for Panasonic, when its air-conditioner sales grew over 100 per cent, albeit on a smaller base, when most other players, including the Korean ones, registered a dip in sales.
In terms of market share, it was close to 13 per cent. “We started off with about 6.5 per cent a couple of years ago, we had sort of doubled last year,” says Sharma. In the flat panel TV segment, Panasonic claims to have about 10 per cent market share right now. With a little over five million units a year, the flat panel TV market is growing at 75-80 per cent. And, in other categories such as refrigerators, washing machines and digital cameras too Panasonic has been gaining market share.
It is now looking at developing more products which are suitable to India and can drive growth especially in the mass categories. Soon to be launched are its water purifiers another rapidly growing market. Panasonic will bring in RO (reverse osmosis), UV (ultraviolet) and alkaline water purifiers that can be connected to taps.
The company closed the year 2011 with close to Rs 3,200 crore in sales. Considering the fact that 30-35 per cent of its sales is from Tier II cities, and major cities make up the rest, Panasonic plans to drive growth from smaller towns, while retaining its focus on urban markets too.
“So we are developing products which are suitable for tier II markets and also enlarging our base in bigger cities which can absorb advanced top-end products, such as Smart TVs, front-loading washing machines, side-by-side refrigerators and inverter technology-based air-conditioners,” he elaborates.
Panasonic has decided to take the total number of large-format brand shops to 200 by the end of the current year from the current 135, and to set up 100 small-format exclusive Panasonic outlets.
Including multi-brand outlets, it is looking at about 9,500 retail points across India, “which is actually good enough to cover a reasonably good part of Tier II towns”. Out of these 9,500 shops, approximately 3,000 would be through direct partners and the balance would be serviced through distributors. “This is how we are approaching all the three aspects of rebuilding the brand Panasonic in India,” Sharma says.
In FY 2012-13, as a group, it’s looking at a Rs 10,000-crore turnover. Out of this, the consumer products division is expected to notch up Rs 5,500 crore. And Sharma is very confident that by 2015 Panasonic will garner a sizeable share of the Indian market. According to him, the brand gaining acceptance from consumers and trade partners. “Maybe we are late, but not too late. So, it’s a sure shot this time.”
Panasonic will surely claw its way back to the consumer mind space and gun to be the market leader by 2018, says a gung-ho Sharma.