‘LG will strive to protect its market leadership'

It was for breakfast on a humid summer morning in Chennai last week that BrandLine met Soon Kwon, the man at the helm of the Rs 16,000-crore consumer durables and electronics giant LG Electronics India. It's almost six months since he took over as the Managing Director of the company and it took three attempts to pin him down to an interview.

India is not new to Kwon. As global marketing head of LG Electronics, he has visited India four times. He finds India a very interesting and “peculiar market with different types of consumer categories and consumption patterns. And globally for LG, India is the fastest growing market,” he says, laying stress on the definite article.

For LG, it has been smooth sailing so far. In the last five years, it has moved up in consumer perception as a ‘premium' brand from what it was known for - ‘value-for-money'. Today, be it a high-end 3D LED TV or direct-cool refrigerator, LG enjoys good brand recall in the market. However, “the biggest challenge ahead is that LG needs to make the brand even more compelling to retain its market leadership in some product segments and its market share intact in other - and grow further,” says Kwon.

He took over at a time when the country's economy started looking up again and as a result, the competition in the market place is becoming fierce.

Over to the breakfast table:

Thanks to the initiative of your predecessor, Moon B. Shin, LG is now perceived as a high-end brand by the Indian consumer. How are you going to take it forward?

Yes. In terms of branding, LG has a fairly good position. However, we have a feeling that consumers still don't perceive our products as high-end ones. So we need to work on changing that by making our communication strategy even more effective – the way we communicate with our consumers and channel partners. In terms of market leadership, we have the highest market share in most of the product categories in the consumer durables segment, and we're a close No 2 in the rest. We will strive to protect our market leadership through newer products, technologies and more effective communication.

What's your take on your key competitor in the market – Samsung? There is a general perception that Samsung has always been the first to bring in new technology …

(Interrupts emphatically) It's incorrect. Samsung has been progressing well. But in terms of technology innovation, I don't think any one of these companies is far ahead of the other.

In some areas, some product categories, Samsung is ahead of us, and in some, we are ahead of Samsung. We are almost neck-to-neck in the race. For example, LG brought in newer technology in 3D TV through our Cinema range, where you need to wear a very light pair of glasses that weighs around 16 gm (as against the usual 60–65 gm) and does not contain any electronic components or batteries.

Which product category do you think you have to work at?

Mobile phones. We have to strengthen our business in that segment. We are planning to bring in more smart phones. Today's market statistics clearly show that 10 per cent of the sales comes from the smart phones category, so we have plans to introduce more new models in that.

Traditionally, LG has been strong in the northern belt. Though, in the last few years you have managed to establish Brand LG in the Southern markets way better, you still have a long way to go to gain a comfortable market share. What will your strategy be to improve the situation further?

If you look at the growth potential of this geography, where massive urbanisation is happening, we expect the demand from the rural markets to grow much faster than that of the urban markets. We will have a dedicated team to identify potential markets and the right products and promote the brand. As a company, we want to defend our market share in every corner of this country. In fact, currently Tamil Nadu and Kerala alone contribute 13-14 per cent of our overall sales and the entire South contributes 28 to 30 per cent.

Your investment plans for the year 2011?

Yes. We are planning to invest Rs 1,500 crore this year. Of this Rs 800 crore will be spent on expanding our production capacity and India-specific R&D, and the remaining Rs 700 crore will be spent on marketing and enhancing brand visibility. Currently our facilities are running at full capacity in all product categories – excluding air-conditioners, as it is more a seasonal product. With the demand from rural markets expected to grow at a much higher pace in the years to come, and more brands coming into the market, we have to prepare for a more competitive market place than ever before – be it in terms of our products, in terms of manufacturing and in terms of the people we invest in.

What is modern retail trade's contribution to your overall sales?

Though we anticipated strong growth in the modern trade area, the result was not so — even for consumer durables. The total contribution of this segment was only 4 per cent last year. On the other hand, the contribution of the traditional regional-based retail chains reported good growth. However, we want to focus on both these channels.

What about LG Shoppes?

Though sales at the Shoppes have been growing steadily, we do not want to focus more on this.

There is a general opinion among consumers that durable manufacturers have to improve their after-sales service quality…

Actually, LG is second to none in terms of after-sales service. But if you ask me whether it is good enough and we are happy about it, I would say no. We have to strengthen our service network further, for sure. Apart from over 1,000 franchisee service outlets, we have 10 direct service centres across the country, which caters to almost 25-30 per cent of service requirements. We are planning to at least double this count during the current year.

What's your 2011 turnover target?

For 2010, LG India posted a turnover of Rs 16,000 crore. Our target for the current year is Rs 20,000 crore, and we are well on track.

We will grow much further in consumer electronics and home appliances and even mobile phones. However, there could be limitations in some years for growth. So that's why we want to extend our business to business-to-business and smart phone areas.

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