How small appliance brands made it big

The branded brown goods market has expanded in a significant way over the last decade. Even in gloomy economic conditions, growth in this industry has slowed, but not slipped to a negative terrain. That is thanks to the small-ticket nature of these goods – consumers don’t cut back on these purchases during economic stress.

Several players in this industry have established their brands strongly in the last ten years. Their revenues have grown multifold. Sample these numbers:

TTK Prestige, which sells the ‘Prestige’ brand of pressure cookers, has seen its top-line rise from under Rs 100 crore in the early 2000s to more than Rs 1,350 crore in 2012-13 – an average annual growth of 22 per cent. Bajaj Electricals, which sells kitchen appliances ranging from gas stoves to electric cookers, has seen its sales grow from Rs 83 crore in 2001-02 to Rs 1,239.8 crore in the last year. Similarly, Gandhimati Appliances, which owns the ‘Butterfly’ brand of kitchen appliances, was generating revenues of Rs 20-30 crore in 2002-03. Last year, its sales reached Rs 807 crore.

Most players in the listed small appliances space have seen their sales grow at an average annualised rate of 15-20 per cent in the last decade.

There are several factors underpinning this growth.

One, demographic trends. The country’s rapid urbanisation, which saw an increase in the number of nuclear families and thus nuclear households, led to higher ownership of these appliances. Reports have it that the average household size has reduced from 5.6 in 1991 to 4.9 in 2011. Also, more women have joined the workforce in this period. Female participation in the organised sector has increased from 17.8 per cent in 2001 to 19.9 per cent in 2009. More women taking up jobs means there has been an increase in disposable income of families and improved affordability. This saw consumers shifting from unbranded goods to branded ones for appliances such as electric fans, coolers, heaters and cookers. It is estimated that the share of unorganised players in the small appliance space has reduced from over 70 per cent in the early 2000s to 45-50 per cent now.

Innovations

The industry’s growth was also buttressed by players who expanded the market by creating new products. To cite a case, in the early 1990s, Maya Appliances, the company that owned the ‘Preethi’ brand of mixer-grinders, introduced the two-jar concept – one jar for wet grinding and the other for dry grinding. This was a major change then and it introduced mixer-grinders to most South Indian kitchens. Recently, in the microwave oven market, TTK Prestige created ripples by launching the microwave pressure cooker – a first-of-its-kind product in the country. Induction cookers, which have capitalised on the LPG cylinder shortage, are a similar phenomenon.

Innovation apart, the marketing efforts of players also helped create awareness among consumers. It is the successful marketing by players such as Faber, Fisher & Paykel and Hettich that created a market for high-end kitchen appliances in the country. Many multinational companies have entered the Indian brown goods space in the last decade. Some of these however took the joint venture route to set foot in India and they helped their Indian partners with design and marketing ideas. Some recent deals worth mentioning are Groupe SEB’s acquisition of 55 per cent stake in Maharaja Whiteline in December 2011, Philips’ acquisition of Maya appliances in January 2011 and Sequoia Capital’s acquisition of Stovekraft, which owned the ‘Pigeon’ brand, in 2010.

Efforts by players to expand geographies by penetrating into tier-II and -III markets and by introducing products at lower prices for these markets have also paid off. This move, in fact, was the one that helped players see exceptional growth as this coincided with rising rural incomes.

Positive Outlook

With the penetration of branded household appliances still not very high, there are plenty of opportunities for players to grow. In the last two quarters, even as white goods-makers reported a significant drop in volumes, small appliance makers were comfortably doing business.

Their sales volume growth has moderated but it’s still better than their peers in the high-value segment.

The increase in competition and the rise in prices of imported inputs have been squeezing margins, but as revenues grow, players may be able to sustain profit expansion.

>rajalakshmi.sivam@thehindu.co.in

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