Consumer Durables Industry In India

Ahsan Dileep

Consumer Durables Industry

• Consumer Durables Industry in India to post ~15% CAGR growth over next five years.

• We believe that the consumer durables industry’s growth has been two pronged :

(a) driven by lower penetration in rural markets (b) new innovations and replacement demand

in urban markets penetration in rural markets . (c) new innovations and replacement demand

in urban markets.

Key growth drivers include:

1. Favorable demographics; 64% of the population in working age category

2. Increasing Urbanization, nuclear families

3. Increase in disposable incomes; which drives consumption

4. Increasing affordability coupled with declining prices of products

5. Lower consumer product penetration

6. Availability of new products and technologies,

7. Easy financing schemes and Increase in organized retail

Industry Overview

It is a $5billion industry The products can be categorized as

follows:-White GoodsKitchen Appliances / Brown GoodsConsumer Electronics

Key Industry Dynamics

Industry Size: Rs. 350bn Key Categories: White Goods, Brown goods and

Consumer electronics. Competitive landscape: dominated by Korean

majors like LG and Samsung in most of the segments Margin Profile: Low margin, dependant on volumes Growth opportunities: Lower penetration coupled

with increasing disposable income Segmentation of consumer durables industry

TVs, Refrigerators and air conditioners constitute more than 60% of the market

Market Value Forecast

By 2013, the industry is estimated to be about $5.7billion

Expected to grow at 20%

Top 10 Companies

Nokia LG Electronics Philips Titan Samsung Whirlpool Siemens Sony Videocon Bluestar

PROFILE OF INDUSTRY

VIDEOCON INDUSTRIES REFRIGERATOR,WASHING MACHINES,T.V.,A.C, MICRO WAVE

GODREJ REFRIGERATOR, AIR CONDITIONER

WHIRLPOOL OF INDIA REFRIGERATOR, WASHING MACHINES

MIRC ELECTRONICS TELEVISION

PANASONIC TELEVISION

VOLTAS REFRIGERATOR, WASHING MACHINES

BPL LIMITED REFRIGERATOR, TELEVISION

ELECTROLUX VACCUM CLEANER, REFRIGERATOR

SAMSUNG VACCUM CLANER, REFRIGERATOR, T.V, MOBILE PHONES

HOOVER VACCUM CLEANER

LG ELECTRONICS WASHING MACHINES,REFRIGERATOR.T.V.,MOBILE PHONES

EUREKA FORBES VACCUM CLEANER

SONY TELEVISION, MOBILE PHONES, DVD PLAYER

BLUESTAR AIR CONDITIONER

BAJAJ ELECTRONICS GEYSERS, ELECTRIC FANS

NOKIA MOBILE PHONES

Key Success Factors

Strong Distribution NetworkManufacturing EdgeMarket Positioning and Branding Innovation in Advertising and

PromotionsAttractive Locations

Driving Force

Income growth Availability of financing schemes Increased affordability of products Increasing share of organized retail New variants of products Product pricing

Attractive areas for investment

High-end color TV’s Split AC’s Mobile phones

Key Consumer Durables

Share by volume Color TV sets – 30% Refrigerators – 18% AC’s – 13% Washing machines – 5% Others – 34%

Value Chain Framework

Inbound Logistics Operations Outbound Logistics Marketing and Sales Service

Overview of the top consumer durables companies

Nokia

Finnish multinational communications company

Founder – Fredrick Idestam Founded in the year 1865 at Tampere,

Finland

Products

Mobile Phones Smart Phones

Nokia 1100 handset is the worlds top selling consumer electronics product

Strengths:- Large distribution network Wide product range

Weakness:- Pricing Products not user friendly

LG Electronics Worlds second largest manufacturer of TV

sets Established in 1958 as Goldstar LG was a merger of 2 Korean companies

Lucky and Goldstar HQ – Seoul, South Korea Worldwide sales of $12.4b in second quarter

of 2010 Turnover of Rs13089 crores in India in 2009 Eyes turnover of Rs15000 crores in 2010

Launched in India – 1997 Over 300 employees in India

Products

TV’s DVD Players Refrigerators Washing Machines AC’s Mobiles

Achieves record sales of 2mn DVD writers in 2008

Awards

CNBC Awaaz Consumer Award for Most Preferred Brand – Consumer Electronics and Home Appliances(2008)

4P’s Award for Most Admired MNC in India

Philips Founded in 1891 Founders – Anton and Gerard Philips Initially manufactured carbon filament lamps HQ – Amsterdam, Netherlands Worldwide sales of €23.18 billion 123,800 employees in more than 60 countries Launched in India – 1930 at Kolkata Over 4000 employees

Products

Lighting Devices Medical Systems Domestic Appliances

Some of their inventions

Electric Shaver (1950) Compact Cassette (1962) VCR(1972)

Samsung Worlds largest electronics company Founded – 1938 by Lee Byung-Chull HQ – Samsung Town, Seoul, South Korea Worldwide revenue - $117.4billion Operations in India – Dec 1995 Revenue of $2.2 billion in 2009

Products

TV’s Refrigerators Mobile Phones

Whirlpool Fortune 500 company Established – 1911 HQ – Benton Charter Township, Michigan,

USA Annual sales of $20billion in 2009 Entered Indian market – late 1980 JV with TVS Group Annual turnover Rs1719 crores

Awards

Voted Product of the year in 2009 Award for Best Innovative Product in

Refrigerator category

Siemens Founded in Berlin in 1847 Founder – Werner Von Siemens Revenue worldwide - €76.651 billion Business volume in India Rs11,800 crores 19 manufacturing plants

Products

Hearing Instruments Home Appliances

Sony Japanese multinational conglomerate Founded – May 7 1946 Founders – Masaru Ibuka and Akio Morita HQ – Minato, Tokyo, Japan Started operations in India – Nov 1994 25% market share in India 240 exclusive outlets

Videocon Indian industrial conglomerate 3rd largest picture tube manufacturer Founded in 1979 by Nandlal Madhavlal Dhoot HQ – Aurangabad, Maharashtra, India Annual turnover - $4.1 billion

Products

TV Refrigerator Washing machine UPS / Inverter In 2009 Videocon introduced TV’s with built-in

DTH satellite receiver

BlueStar India’s largest central air conditioning

company Founded – 1943 by Mohan T Advani Annual turnover – Rs 2574 crores Market leader – Commercial refrigeration

equipment

Products

AC Refrigerator Water Cooler

Panasonic Formerly known as Matsushita Electric Co.

Ltd Founded – 1918 by Konosuke Matsushita HQ – Kadoma, Osaka, Japan Net sales of $79.4 billion, for the year ended

march 2010

Awards

Awarded SS IS01 4001:2004 for Environmental Excellence

Strengths

Strong brand equity Good supply chain Innovation

OPPORTUNITIES

The rising rate of growth of GDP, rising purchasing power of people with higher propensity to consume with preference for sophisticated brands would provide constant impetus to growth of white goods industry segment.

 

CHALLENGES

Heavy taxation in the country is one of the challenges for the players.

At its present structure the total tax incidence in India even now stands at around 25-30 per cent, whereas the corresponding tariffs in other Asian countries are between 7 and 17 per cent. 

Poor infrastructure

It is another reason that seems to have held back the industry. Regular power supply is imperative for any consumer electronics product. But that remains a major hiccup in India.