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Special Columns
Arindam Chaudhuri, Editor-in-Chief, 4Ps B&M Chief Consulting Editor's Desk
Rajita Chaudhuri
K.K.Srivastava Guest Column
K.K.Srivastava

This Time it’s more than the Colas!
After FMCG, auto, real estate and telecom, now it’s the time for consumer durable players in the country to enter the slugfest!
 
Summer in India looks a lot different this year, at least when it is about the so called ‘short’ commercial breaks, which always hit your road just when you’ve got too engrossed with your daily soap or cricket match on the idiot box. Strangely, the colas are nowhere to be seen – at least relatively. Instead, there are a number of celebrities posing with refrigerators or demonstrating the features of air conditioners, TVs too. Yes, there’s a war brewing north, south, east and west of centre, and it’s worse than last year.

The reason is quite obvious. Encouraged by the reviving economic conditions in the country, manufacturers of consumer durables in India have enormously increased their marketing budgets to makes sure that no stone is left unturned to woo the consumers. The size of their budgets is spectacular, if not numbing. For example LG India, the subsidiary of the Korean consumer durable major, has earmarked a total of Rs.1,000 crore (Rs.700 crore for Marketing and Rs.300 crore on R&D) for this year alone. The company confirms its strategy of placing the Indian market on its priority list.

The rejoinder is not so dissimilar in the case of Whirlpool, which has geared up for massive below-the-line (BTL) activities and is currently hosting various events (like in-store demonstrations, point of sale materials, trade and consumer promotions et al). In terms of marketing though, the figure is nowhere close to LG’s behemoth power. As per Whirlpool, it has plans to shell out around Rs.60-70 crore during this year with the focus of trebling the sales volume of its ACs.

Even Hitachi India, a major in the air conditioner segment, has raised its marketing spends by nearly 35% as compared to last year and is aggressively escalating its presence in Tier II and Tier III towns through a 25% to 30% expansion in its distributors network. But the question is, what’s so different this year that was not there the previous year? Why is there a more than significant jump in various marketing expenditures of players?

 
As per latest reports, the Indian AC and refrigerator markets are expected to surge to 3.2 million units and 6.2 million units respectively by the end of 2010. Considering the buying patterns witnessed in India, a major chunk of the sales would take place in summers, that is, during the April-June quarter. This makes it imperative for the durable players to ramp up their production levels in both the product categories and set higher growth targets for this quarter. Moon Bum Shin, MD, LG India, says to 4Ps B&M, “For ACs, we have a current production capacity of 1.3 million, which we intend to scale it up to 1.5 million with an investment of Rs.80 crore.” He further adds that his company is now targeting to generate a revenue of Rs.3,000 crore from the refrigerator category this year.

Samsung India, which has recently lifted its production capacity, also is confident over doubling its AC sales this year. Ravinder Zutshi, Dy. MD, Samsung India shares, “As of now, we have a total production capacity of 1.2 million units per annum for split ACs in India. This capacity expansion has been possible with an investment of $10 million. So, now we expect sales volume to double to around 1 million units this summer.” Talking about the refrigerator segment, Kamal Nandi, Vice-President (Sales & Marketing), Godrej Appliances tells 4Ps B&M, “Generally, we sell around 4.5 lakh refrigerators during this period. But because of the upbeat growth rates, we are not only targeting 40% growth this year, but also ramping up our production levels by 1.5 lakh refrigerators during this season.” Another plan, which is high on the agendas for the durable brands in the country, is to enter into newer product categories (like commercial air purifiers, built-in kitchens and networked home appliances et al). One of the major players, which is taking up this plan seriously is Haier India (the Chinese durable major). With a marketing budget of Rs.100 crore, the company is now aggressively focusing on newer product categories like deep freezers and commercial ACs besides its other range of products. Similarly, LG is focusing on the Home Entertainment segment and is in the process of unveiling a series of ultra-slim CTVs and full LEDs.

No doubt, there are enough reasons for the consumer durable majors to bask in the summer tide. But then, one thing that acts as a roadblock is the pricing of the products, which always has been the key in the Indian market. At the same time, considering the rise in raw material costs and excise duties, a marginal hike in prices in both the categories (3% in case of refrigerators and 4-5% in ACs) is unavoidable across the board. As per experts, given an optimal level of advertising, it is finally price leadership – or the offering of cheaper priced products – that will win the game for these consumer durables. The logic behind this is that the Indian consumer seems to be having no brand loyalty when it comes to a premium products, and would any day choose a cheaper product given acceptable quality. The war is just about to start – and it’s anyone’s game!
Neha Saraiya           
 
 
 
 
 
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