India Economy

‘Breaking into rural markets isn’t easy’

Rajalakshmi Sivam | Updated on November 30, 2013 Published on November 30, 2013

S.Ravichandran

A pressure cooker for the rural market will depress pricing. - S. Ravichandran, MD, TTK Prestige



Small appliance maker TTK Prestige has been a high-growth company in a slowing economy. S.Ravichandran, Managing Director, talks about the company’s strategy for growth in a tough environment where volumes are sagging and costs are spiralling.

Every consumer durable player today wants to be present in the rural market, what has been your strategy?

India is still a highly rural-driven market. But the ability to spend or the willingness to spend on kitchen utensils of convenience is not that high in rural markets. Also, a real rural customer is difficult to reach and difficult to convince to change to modern kitchenware. But again, as the rural income is rising, consumers there are mimicking their urban counterparts, and this is a target (audience) we have to exploit.

First of all, if we make a pressure cooker that is rural-friendly in terms of pricing, it will depress pricing for our brand in the urban market.

This is a major reason why we are unable to breakthrough rural markets with a lower-priced pressure cooker model.

Secondly, if we have to make a low cost pressure cooker, that means it has to be thinner and thinner cookers may be less safe. Also, promotion and marketing in rural markets is not cheap, and execution is also difficult.

At the end of the day, Prestige is a national brand and it is better to start selling at a particular pyramid level and drive up the consumption and get a good profitable sales continuing rather than create imbalances in product pricing. But, we have made inroads into tier-II-III markets through prestige smart kitchen outlets and this is helping us greatly to expand.

What do you think will drive TTK’s revenues in the next three-five years?

New products, product improvements and wherever relevant category expansion will continue to help in growth. Inner lid and value-added pressure cookers, additional categories of cookware and appliances offer huge opportunity. The non-South markets, where our shares are low currently, are significant growth vectors. And, we also intend to grow our export business.

Our patented Microwave pressure cookers will give us large export opportunities and exports as a share of revenues would increase from the current five per cent of total turnover.

Also, we have just begun a massive campaign involving Aishwarya Rai and Abhishek Bachchan which will drive up the brand image and encourage decision making in our favour. India’s economy is, of course, a key driver and sooner we get out of the current difficult situation, the better for us.

How do you manage costs in a rising raw material cost scenario?

A constantly rising top-line and declining expenses ratio is the best that can happen and that is what we have achieved in the last 10 years at TTK Prestige. The growth gives us the muscle to spend on R&D which, in turn, helps us reduce cost.

Here, when we face a situation of rise in raw material costs, we just pass it on because we cannot afford to take it. In a country like India where the average inflation is 5-6 per cent, if you don’t pass on cost increases you will be on a long term decline on profitability, so we pass it on every time.

Price increases to meet raw material hike are a necessity but taking price increases because of increase in other expenses is a crime.

Companies should try to improve profitability through other means and have a control on expenses by distributing expenses over a larger turnover, use R&D and improve technology, etc.

In the last ten years our fixed expenses to sales ratio has come down significantly.

You face stiff competition from organised as well as unorganised players in the induction cooktops segment. What is your strategy to grow in this space?

Unorganised players are on the decline. We will combine value offerings at economy price and differentiate products at the upper end of pricing to straddle the market in induction and other appliances.

In cookware, expansion into the fast-growing anodising and the ever popular stainless steel segments will add to our business.

What are your plans for expanding outside the southern markets?

The new advertising campaign with the celebrity couple will help us in gaining market share in the non-South markets.

Also, in the North and the West where organised retail is expected to grow faster, we are well-entrenched with all major retailers.

Aggressive expansion of Prestige Smart Kitchens will also bring stores closer to customers in suburban areas and smaller towns.

We expect non-South growth at least twice that of South, where the base effect is already high.

Published on November 30, 2013
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