Korean durable brands outwit Indian giants

15 Feb,2012

By Rajiv Banerjee & Ravi Balakrishnan

 

There’s frenetic activity inside the corporate office of a leading consumer durable brand. As the financial year hurtles to an end, the head of marketing is racing against time, tying up operational plans for the 12 months of the new fiscal. This involves meetings with the board and also key dealers to keep the network abreast of the gameplan.

 

The excitement among the marketing team at the consumer durable maker is palpable, and not just because of the strategy being crafted. 2012-13 may well be the year in which, after a long time, Indian consumer electronics and white goods makers stand more than just a fighting chance of taking on their more successful Korean rivals.

 

“When the Korean brands were behaving like Indian companies, they were doing very well. The minute control moved out of this country to Korea, it’s all changing,” says the marketing head, who wishes to remain anonymous.

 

This change in the Rs35,000 crore durables and electronics segment in India – where possibly after more than a decade, the incumbents (the Koreans) seem vulnerable – is not lost on rival brands. Specifically, the indigenous brands like Onida, Godrej, Voltas and Videocon, which once ruled the roost but were thrown off the perch as Korean brands LG and Samsung caught the Indian consumer’s imagination and her share of wallet.

 

Today, according to market estimates, Samsung and LG together have a dominant combined share of 34 per cent in ACs, 45 per cent in refrigerators and an equal combined share in washing machines (semi-automatic category). But in the ACs, from the period January-December 2011, Samsung’s market share fell from 19 per cent to 11 per cent.

 

Similarly, LG slid from 28 per cent to 23 per cent, but Voltas jumped from 12 per cent to around 17 per cent in the same time frame. In the CTVs segment, Videocon is running almost neck to neck with leader of the pack LG with Samsung in the third position. And the year ahead may well be comeback time for the domestic camp.

 

Sure, the growth rate for the industry dipped to 8-9 per cent against the projected 14-15 per cent in 2011. But that’s not fazing the Indian warhorses, a few of whom are blueprinting big-bang entries into new categories. Godrej Appliances, which has a presence across categories like refrigerators, washing machines, air conditioners and microwave ovens, is running pilot projects in small geographies in the area of consumer electronics, according to Kamal Nandi, VP, sales & marketing, Godrej Appliances. Those in the industry aware of the developments indicate that Godrej is giving colour televisions a serious thought although Nandi refuses to elaborate on the nature of the pilot project.

 

Similarly Voltas, say rivals who are aware of the matter, is readying for a more aggressive play in air conditioners (ACs) to close the gap with LG; this after overtaking rivals like Samsung and Carrier. “In the last 3 to 4 years, one can see the comeback of Indian brands both at the shelf level, as well as in the minds of the consumer. Brands like Videocon and Godrej have gone through major identity revamps. Accurate positioning or not, but it has certainly brought back the buzz for them in the home appliances domain,” says Deba Ghoshal, head of marketing at Voltas.

 

In many ways, the Indian brands today are doing what the Korean brands did when they entered India way back in late 90s. The Koreans mapped the strength and weaknesses of each Indian player across categories and then went about eating into the share of established brands like BPL and Onida in colour TVs, and Godrej and Videocon in appliances. Sensing that they were no match for the product strength of the Korean brands, the Indians manufacturers changed their strategy.

 

“They tactically withdrew from categories where they thought that they will not be able to match the product strengths of their Korean counterparts. However, they did not let go of their core competencies. Instead of spreading themselves too thin, they maintained focus on their main categories,” says a senior marketing professional from one of the Indian consumer durable brands.

 

A brand like Onida resorted to re-branding in an attempt to project a more youthful image, and in the process moving away from its iconic ‘Devil’ (Neighbours’ envy, Owners’ pride) advertising.

 

“I wouldn’t say the campaigns from the last couple of years were path-breaking but we want to be a little unconventional to appeal to young nesters, which is our defined target group,” says Anand Ramadurai, head of marketing at Onida.

 

Over the years, to withstand the Korean onslaught, brands like Onida decided to focus on regions and consolidate the space there. “In markets like Mumbai, we are relatively weak since the cost of doing business is very high. But the south is a strong market across categories, as is Gujarat, and the north is strong in air conditioners,” explained Mr Ramadurai.

 

Other marketers chose their areas of comfort and protected that turf. For instance, Videocon maintained a strong presence in consumer electronics – its market share according to estimates in CTVs stands at 26 per cent. Godrej focused sharply on the direct cool refrigerator category (overall in refrigerators, Godrej stands at 15 per cent). And Voltas consolidated its presence in ACs with a market share of around 17 per cent at the end of 2011. “In many sub-categories, Indian brands have successfully protected their turf, and lead the market,” observed Mr Ghoshal of Voltas.

 

At the same time the focus of the Korean brands is getting diffused somewhat as they get more serious about mobiles and tech products. For Indian manufacturers, it’s an opportunity to go in for the kill. Sure enough, Onida, Videocon and Voltas are pushing further into home appliances and ACs.

 

Apart from stable pricing and better dealer margins, where Indian brands are trying to emulate the Koreans is faster go-to-market. Implementation, the players realise, is the key to instilling confidence in the trade that the companies mean business.

 

“We are trying to break into the MBOs (multi-brand outlet) in Mumbai as well and are present in Vijay Sales and Reliance Digital where we were not there at all a month or two ago,” said Mr Ramadurai. “The recent campaign from us has certainly brought in the numbers, both from brand volumes as well as from a market share perspective,” added Mr Ghoshal.

 

However, there are challenges ahead for Indian players. Nabankur Gupta, founder of Nobby Brand Architects who has worked with Videocon and Philips in the past, says Indian business houses, by typically chasing volumes, run the risk of entering the zone of commoditisation. They neglect the fact that many of the lower-volume, higher-end products add value – not just to the bottom line – but to the brand’s image.

 

The Koreans and Japanese brands, says Mr Gupta, still rule in the premium, innovation- led space across categories. His take on the Indian brands is as follows: Videocon has regained number one position as a consumer durables group but not as a brand. Onida has totally lost out on appliances.

 

“They are concentrating on TV and have held their own in terms of volumes but there’s very little innovation. It’s an also-ran brand. They still go on basis of old loyalties and pricing and a lot of dealer push,” reckons Mr Gupta. Mr Ramadurai of Onida counters that Onida is definitely not a price warrior. “What we do is launch products that are innovative in some manner. Being an Indian company, our insights are seen to be better.”

 

Another area of concern for the Indian brands, market observers feel, is the lack of investment in technology; where Koreans and the Japanese brands have proved to be miles ahead.

 

“In the conventional products like CRT TVs, Indian brands may stake a claim with an advantage on cost. But MNC brands have been able to invest in technology across smart TVs, LEDs, home theatres and mobile. Without investment in tech and manufacturing, Indian brands cannot dominate the market,” said Vijay Narayanan, head of marketing at Havells and formerly with Korean brand, LG.

 

Finally, if Indian brands are to make their very own great leap forward, brandbuilding has to become a year-long pan-India affair rather than sporadic bursts around the festive season. According to Mr Ramadurai, Indian companies that are listed on the stock exchange cannot splurge on communications as they are accountable to shareholders. The cost of high spends that don’t quite show up on the bottom line and on margins can wreak havoc on the stock price.

 

“Most multinationals in durables are not listed here and so can afford to make losses and make it up someplace else. Haier was extremely aggressive year before last and Toshiba was a year ago. They come and go in cycles but we can’t do that,” shrugs Mr Ramadurai.

 

One option is a greater reliance on the more cost-effective digital media. It’s an area that Onida confesses to just starting to get its feet wet. It’s currently evaluating options of e-tailing and harnessing its presence on social media.

 

Rebranding, pushing the trade and distribution may allow the Indian players to narrow the gap with rival Koreans. But there’s one camp that is slowly but surely making its presence felt as well – the Japanese. Even if Indian brands are successful in dethroning the Korean brands, rest assured the Japanese will be snapping at their heels.

 

Source:The Economic Times

Copyright © 2012, Bennett, Coleman & Co. Ltd. All Rights Reserved

 

Post a Comment 

Comments are closed.

Videos