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With 25 per cent of its expected sales of Rs 2,300 crore in FY 2011 to come from Southern India, Godrej Appliances plans to set up a new manufacturing plant for its air-conditioners, washing machines and fridges either in Karnataka or Tamil Nadu.
Mr Kamal Nandi, Vice-President, Sales & Marketing, Godrej Appliances, says the plant should get cracking by 2013. Mr Nandi says given the growth in the South, it makes sense to set up a plant in the South for logistical reasons as well as for a quicker response to the market. “Today, it takes 10-15 days for goods to reach South from our plants up North and we need to carry huge inventories because of that, and that costs us,” he explains.
Godrej, the largest division of the closely-held Godrej & Boyce Manufacturing Ltd, has two plants, one in Mohali and the other in Pune. Together they have a capacity to make 2.5 million refrigerators a year, five lakh washing machines and two lakh air-conditioners. Unwilling to hazard a figure on the new plant's capacities, Mr Nandi said the land to build would be finalised soon. “We will build and expand year on year rather than set up a huge plant to begin with,” he adds.
Sales
Asked if the contribution of the South to its sales would surge in the coming year, Mr Nandi said it would be only marginal. While Karnataka and TN showed robust growth, both Kerala (because of the slowdown in remittances from the Gulf) and Andhra Pradesh (due to various disruptions in the State) did not have the same momentum now as the other two states.
The growing affluence in the South is manifesting itself in many ways, he points out. For example, while the ratio of purchase between the more expensive split ACs and window ACs is equal in the North and 72:28 in favour of splits on an all-India basis, in Tamil Nadu it is 90:10. The AC market has been the fastest growing among durables, with a CAGR of 29 per cent and overtaken fridges in value – the AC market is worth Rs 8,000 crore a year to a Rs 7,500-crore market for fridges.
New model launched
Mr Nandi was in Chennai to launch Godrej's new Eon range of air-conditioners which are all 5-star-rated and meet the maximum energy saving rating specified by the Bureau of Energy Efficiency. Mr Nandi says there's a surge in consumer demand for efficient ACs and this year 30 per cent of the industry sales will be from five-star-rated ACs, double that of last year. Of the 41 models Godrej will launch this year, he points out that 29 models will be 5-star-rated. “The price difference between a rated AC and a non-rated one has shrunk; moreover, the buyer will recover the additional cost in two years through savings on power,” he says.
Referring to industry study figures, Mr Nandi said Godrej has a share of 9 per cent in ACs, 18 per cent in fridges, 9.5 per cent in washing machines (of a Rs 3,000-crore-a-year market) and a 7 per cent share in microwaves (of a Rs 1,000-crore market). It has forayed into the colour TV market with a launch in two States and expects to take it national this year.
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