Small is big for consumer durable firms

Given the slowing sales of the high- and middle-end segment products this year, consumer durable companies such as Videocon, Philips and Godrej are reworking strategy to grow their small appliance business.

Last year, their focus was on high-end products. This shift to the low-end segment, they believe, will help them maintain their sales growth from Tier-II & Tier-III cities, while simultaneously helping them penetrate into rural areas.

Home appliances account for over Rs 5,000 crore (Rs 50 billion) of the Rs 32,000 crore (Rs 320 billion) consumer durable business and is growing at a rate of 10-12 per cent.

Videocon Industries has defined new home appliances as a new growth area. The company will soon launch its range of water purifiers under the Kenstar brand. It has also ventured into power inverters and batteries, with the launch of its 'UPS-H' product range under the Videocon brand, which will have three variants. It plans to pursue a target of Rs 250 crore (Rs 2.5 billion) in 2009 and aims to double its revenue to Rs 500 crore (Rs 5 billion) by 2010 and further to Rs 1,000 crore (Rs 10 billion) by 2011 for the NHA category.

"We can also grow through categories such as mixer-grinders and make the small appliances division touch Rs 1,000 crore (Rs 10 billion) by 2011," K R Kim, its vice-chairman and chief executive officer recently told Business Standard.

Philips, which so far has been perceived and considered as a premium brand catering to only upper-class customers, is now trying to widen its appeal, adding new products to suit the needs at the lower end, keeping affordability in mind.

"Kitchen appliances will be a key focus area for us in 2009. We plan on launching some entry-level domestic appliances before Diwali. This will include entry-level electric irons and mixer-grinders, to name a few," said Mahesh Krishnan, VP and sales organisation leader (India), Philips Consumer Lifestyle.

"Our focus would be on untapped rural markets, growing trends of urbanisation, the need for replicating a cinematic experience at home, personal grooming, emerging trends of eating and drinking healthy and our recession-proof domestic appliance business," Krishnan added.

Godrej Appliances, too, is concentrating on the lower end of the spectrum. "It is important to have the right products in the lower end, since the bulk of demand for the category comes from first-time buyers in Tier II & Tier III towns, who haven't been directly hit by the recession. There is also sufficient cash flow in these areas," said George Menezes, COO of Godrej Appliances.

Industry experts believe that despite a slower growth rate for the industry, low penetration levels for domestic appliances is an untapped opportunity for appliance makers. Brand expert Harish Bijoor believes home appliances have a huge first-time purchaser's base, as well as a sizeable replacement market.

"The rural set-up is now opening up to home appliances as a way of life, especially for the low-end products," he says, adding, "There also is a big replacement market for small home appliances as consumer lifestyles change, giving a big opportunity for appliance makers to tap into."