Consumer Durables NOVEMBER 2011 - IBEF

1 1 For updated information, please visit www.ibef.org

Consumer Durables NOVEMBER

2011

2 2

Contents

Advantage India

Market overview and trends

Growth drivers

Success stories: Videocon, LG, Samsung

Opportunities

Useful information

For updated information, please visit www.ibef.org


2011

3 3

Consumer Durables

For updated information, please visit www.ibef.org ADVANTAGE INDIA

Advantage India

NOVEMBER

2011

Advantage India

• Growth in consumer durables likely to accelerate as disposable incomes and adoption of plastic credit rise

• Additionally, increasing electrification of rural areas would augment demand

• Rural markets expected to grow at a CAGR of 25 per cent from USD2.1 billion in FY10 to USD6.4 billion in FY15

• Huge untapped rural markets—only 2 per cent penetration for refrigerators and 0.5 per cent for washing machines

• Sector attracted significant investments even during global recession

• USD1 billion worth of investments in production, distribution and R&D in the next few years

• 100 per cent FDI allowed in the electronics hardware-manufacturing sector under the automatic route

• Duty relaxation, schemes such as EPCG, EHTP to provide tax sops

Market size- USD12.5 billion

FY15E

Market size- USD2.9 billion

FY03

Source: Corporate Catalyst India, FY15E - estimate for financial year 2015. Based on growth estimates by Corporate Catalyst India, Moneycontrol , GEPL capital

Notes: FDI – Foreign direct investment, FY- Indian financial year (April – May), USD- US Dollar, EPCG- Export Promotion Capital Goods Scheme, EHTP- Electronic Hardware Technology Park

Growing demand Opportunities

Increasing investments Policy support

4 4

Contents

Advantage India


Growth drivers


Opportunities

Useful information



2011

5 5 For updated information, please visit www.ibef.org MARKET OVERVIEW AND TRENDS

The consumer durables market is split into two segments


2011

Consumer durables

Consumer electronics

(brown goods)

Televisions Audio and video systems

CD and DVD players

Personal computers

Laptops Digital cameras

Electronic accessories Camcorders

Consumer appliances

(white goods)

Air conditioners Refrigerators

Washing machines

Sewing machines

Electric fans Cleaning equipment

Microwave ovens

Other domestic appliances

Source: Electronic Industries Association of India, Corporate Catalyst India, Aranca Research


Evolution of the Indian consumer durables sector

MARKET OVERVIEW AND TRENDS


2011

• Closed market

• Increased product availability, increased media penetration and advertising

• Liberalisation of markets • Influx of global players

such as LG and Samsung • Shift in focus from

promotion to product innovation

• Increasing availability

and affordability of consumer finance provides impetus to growth

• Low penetration of high-end products such as air conditioners (<1 percent)

• Companies look to consolidate market share

• Indian companies such as Videocon gaining global identity

• Increasing penetration of high-end products such as air Conditioners (>3 percent)

• Introduction of new aspirational products such as High Definition TVs (HDTVs)

Source: Financial Express, Appliance Magazine, Aranca Research

Introductory stage

Mid and late 1990s

Liberalisation stage

Early 2000s

Growth stage

Late 2000s

Consolidation Stage

1980s and early 1990s


Consumer durables revenues have been growing at a healthy pace … (1/2)

→ The consumer durables market recorded revenues of USD6.3 billion in FY10

→ During FY03-10, the industry expanded at a CAGR of 11.7 per cent

Size of consumer durables market




2011

2.9 3.2 3.5

3.8 4.2

4.7 5.2

6.3

0

1

2

3

4

5

6

7

FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10

USD billion

Notes: FY – Indian Financial Year (April-March), USD– US Dollar CAGR – Compound Annual Growth Rate


Consumer durables revenues have been growing at a healthy pace … (2/2)

→ Urban markets lead the revenues, accounting for two-thirds of the total sales in India

→ Rural and semi-urban markets are growing at a remarkable pace over the last few years on account of high sales in products such as TVs, washing machines and water purifiers

Composition of consumer durables market (FY 2010)




2011

33%

67%

Rural

Urban


Consumer electronics- key products



2011

Colour TVs (CTVs) • CTVs are the largest contributors to this segment; market size estimated at 18

million units in 2010. During this period, 21-inch CTVs dominated the market with a 65 per cent share

Liquid crystal displays (LCDs)

• LCDs are perceived as high-end products • Indian LCD market in 2010 was about 3.2 million units • The price decline due to relatively low import duty on LCD panels and the

introduction of small entry-size models have triggered growth in LCD sales

Digital video discs (DVDs)

• The Indian DVD market was estimated at 6.2 million units in 2009 • The organised market accounts for 80 per cent of the total DVD market

Direct-to-home (DTH)

• The set-top box (STB) market is growing rapidly, due to the expansion of DTH and introduction of the conditional access system (CAS) in metros

• During 2010-2012, the subscriber base is expected to grow from 23 million to 42 million, making India the largest DTH market in the world

Source: Electronic Industries Association of India, Corporate Catalyst India, India Infoline, TV Veopar Journal 2011, Business Line, Aranca Research


Consumer appliances- key products



2011

Refrigerators • The Indian refrigerator market was estimated at 6.5 million units in 2010, the

largest in this segment • Reduction in prices and high demand for frost-free segment are driving growth

Air conditioners (ACs)

• ACs are perceived as high-end products, current penetration stands at 3 per cent • Split ACs are driving growth in the market

Washing appliances

• Washing machines are the second largest contributor to this segment after refrigerators; total market in 2010 was 4.7 million units

• Fully automatic washing machines are garnering an increasing share of the market due to reduction in prices

Electric fans • This is a highly penetrated market • Electric fans are an essential utility for more than six months of the year in most

parts of the country

Source: Electronic Industries Association of India, Corporate Catalyst India, TV Veopar Journal 2011, Aranca Research


Key players in the consumer durables sector … (1/2)

*This list is indicative.


Company Product category

ACs, refrigerators and specialty cooling products

ACs and cooling equipment

Refrigerators, ACs, washing machines, microwave ovens, DVD players, digital-imaging products

and audio-visual products

ACs and refrigerators

TVs, audio-visual solutions, computers, mobile phones, refrigerators, washing machines,

microwave ovens, vacuum cleaners and ACs

LCDs, washing machines, DVD players, ACs, microwave ovens, mobile phones, projectors and

display products


2011


Key players in the consumer durables sector … (2/2)

*This list is indicative.


Company Product category

TVs, home theatre systems, DVD players, audio products, personal care products, household

products, computers and phones

TVs, home theatre systems, DVD players, mobile phones, digital cameras and camcorders,

refrigerators, ACs, washing machines, microwave ovens and computers

TVs, projectors, DVD players, audio systems, home theatre systems, digital cameras and

camcorders, computers, video-gaming products and recording media

TVs, DVD players, microwave ovens, refrigerators, washing machines, ACs and power backup

solutions

Refrigerators, washing machines, microwave ovens, water purifiers and power backup solutions


2011


Major trends in the consumer durables sector

Increasing presence of organised retail

• Emergence of speciality retailers, such as Croma, Next and eZone, is intensifying competition

• Companies are setting up exclusive stores or single-brand retail outlets

Expansion into new segments

• Companies are venturing into new product segments, such as high-definition televisions (HDTVs) and smartphones, buoyed by rising consumer incomes and easy availability of credit

Increased affordability of

products

• Advancement in technology and higher competition are driving price reductions across various consumer durable product segments such as computers, mobile phones, refrigerators and TVs


Focus on energy-efficient and environment-

friendly products

• Leading companies have introduced star-rated, energy-efficient ACs and refrigerators

• Companies also plan to increase the use of environment-friendly components and reduce e-waste by promoting product recycling


2011

14 14

Contents

Advantage India


Growth drivers


Opportunities

Useful information



2011

15 15 For updated information, please visit www.ibef.org GROWTH DRIVERS

Strong demand and policy support driving investments


2011

Strong

government

support

Large domestic

market

Growing demand

Inviting Resulting

in

Growing demand Increasing investments Policy support

Higher real disposable incomes

Easy consumer credit

Growing consumer base

Setting up of EHTPs

Increasing liberalisation,

tariff relaxation

Policy sops, favourable FDI

climate

Expanding production and

distribution facilities in India

Increased R&D activity

Providing support to global projects

from India

Notes: EHTP- Electronic Hardware Technology Park, FDI- Foreign Direct Investment, R&D- Research and Development


Income growth will drive consumer durables demand

→ Multiple drivers are leading to a growth in the Indian consumer durables sector

→ Significant increase in discretionary income and credit availability lead to shortened product replacement cycles and evolving lifestyles where consumer durables, such as ACs and LCD TVs, are perceived as utility items rather than luxury possessions

→ Growth in middle and upper sections of the population is also driving demand for consumer durables

Per-capita GDP growth

Source: IMF, Aranca Research


2011

Real GDP growth projections

Source: IMF, Aranca Research

4.6%

6.9% 7.6%

9.0% 9.5%

10.0%

6.2% 6.8%

10.1% 7.8%

7.5%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

0

10

20

30

40

50

60

70

2002 2004 2006 2008 2010 2012F

GDP constant prices (INR trillion) Annual growth rate-RHS

2.1%

2.8%

5.1%

6.4%

7.5% 8.0% 8.3%

4.6% 5.2%

8.8%

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

2001 2003 2005 2007 2009

GROWTH DRIVERS

Notes: Growth projections have been taken from the IMF


Policy support aiding growth in the sector

GROWTH DRIVERS

Customs duty relaxation

• IT/Electronics sector the first in India to be allowed complete customs exemption on certain items used for manufacturing electronic goods

• The peak rate of basic customs duty is 10 per cent • Imports of parts of printers and drivers have been exempted from special

additional duty of 4 per cent

Reduced central excise

• The mean rate of excise duty is 10 per cent • Components and accessories of mobile handsets and PC connectivity cables are

exempt from excise

Encouragement to FDI

• 100 per cent FDI is permitted in the electronics hardware-manufacturing sector under the automatic route

Source: Department of Commerce, Government of India ; Corporate Catalyst India, Aranca Research Notes: FDI - Foreign Direct Investment, EPCG- Export Promotion Capital Goods scheme,

EHTP- Electronic Hardware Technology Park Scheme

EPCG, EHTP schemes • EPCG allows import of capital goods on paying 3 per cent customs duty • EHTP provides benefits, such as duty waivers and tax incentives, to companies

which replace certain imports with local manufacturing


2011


Recent Investments by key players

GROWTH DRIVERS

Source: Company websites, The Hindu, Economic Times, Business Standard, Aranca Research

Notes: R&D- Research and Development


2011

2009

• Jun 09: LG doubles the annual R&D investment outlay to USD83.3 million

• Nov 09: Samsung allocates USD100 million for capacity expansion at existing plants

• Dec 09: Panasonic designates USD300 million investment to consolidate position in AC segment

2010

• May 10: LG earmarks around USD85 million for upgrading Indian plants

• Sep 10: Haier invests to open 75 new retail stores (called Experience Centres) in India in 2010

• Nov 10: Samsung inaugurates USD75 million manufacturing facility in Chennai

2011

• Feb 11: Whirlpool announces USD25 million investment in FY11

• Apr 11: Hitachi allocates USD400 million to set up R&D centre in Bangalore

• May 11: Panasonic establishes its first R&D centre in India in Gurgaon

19 19

Contents

Advantage India


Growth drivers


Opportunities

Useful information



2011

20 20 For updated information, please visit www.ibef.org SUCCESS STORIES: VIDEOCON, LG, SAMSUNG

Videocon: The Indian behemoth … (1/2)


2011

→ Third largest consumer durables company in India

→ Holds about one-fourth market share in the consumer durables market

→ Leads the market in colour TV, refrigerator, washing machine, and microwave oven segments

Market share in consumer durables (FY10)

Source: Company website, ISM Capital, Aranca Research

25%

75%

Videocon

Others

21 21 For updated information, please visit www.ibef.org SUCCESS STORIES: VIDEOCON, LG, SAMSUNG

Videocon: The Indian behemoth … (2/2)


2011

→ One of the largest colour picture tube manufacturers globally

→ During FY05–10, Videocon’s revenues increased at a CAGR of 20.3 per cent, while profits registered a CAGR of 11.8 per cent

Top line and bottom line growth

Source: Company website, ISM Capital, Aranca Research

Notes: FY- Financial Year, CAGR- Compound Annual Growth Rate

0

500

1000

1500

2000

2500

3000

3500

0

50

100

150

200

250

FY05 FY06 FY07 FY08 FY09 FY10

Net Profit Revenue (right axis)

USD Million


LG and Samsung: Compelling success stories … (1/4)


2011

SUCCESS STORIES: VIDEOCON, LG, SAMSUNG

→ Between them, LG and Samsung account for the largest share of the market

→ Both companies entered the Indian market in the mid 1990s

→ LG took the lead – its 2007 revenues (USD2.4 billion) were almost double of Samsung ‘s (USD1.3 billion)

→ However, high growth in mobile phone sales saw Samsung equal LG’s revenues by 2010 (USD3.6 billion)

Revenues

Source: Company websites, Aranca Research

2.4

3.3

1.3

3.3

0

1

1

2

2

3

3

4

2007 2010

LG Samsung

USD billions




2011


→ Before 2005, LG’s strategy was to offer affordable products, while Samsung focused on premium offerings

→ After 2005, the two have expanded the scope of their target markets and offer both functional and high-end products

→ New market development and product innovation have been the key success factors for the companies

Expanding target markets


```

Premium Segment

Mass Segment

Before 2005

Samsung LG

After 2005




2011


→ In FY10, LG and Samsung comprised of about one-third of the consumer durables and mobile phone markets combined

→ Between the two, Samsung leads the mobile handset and premium flat panel TV market

→ LG has a stronger presence in other consumer durables, including refrigerators, washing machines, microwave ovens, air-conditioners and televisions

Consumer durables and mobile phones: market share


14%

15%

71%

LG

Samsung

Others




2011


→ LG expects India’s share in its global revenues to double to 12 per cent in FY15 from 6 per cent in FY10 ; Samsung anticipates a similar increase from 2.5 per cent to 5 per cent

→ The Korean giants are also looking at India as a manufacturing base for other markets and are ramping up investments accordingly

→ LG currently exports to countries in the Middle East, Africa, Southeast Asia and Europe from India

India’s share in company’s global revenues


0%

2%

4%

6%

8%

10%

12%

14%

FY10 FY15E

LG Samsung

26 26

Contents

Advantage India


Growth drivers


Opportunities

Useful information



2011

27 27 For updated information, please visit www.ibef.org OPPORTUNITIES

Opportunities in rural areas

Source: Corporate Catalyst India, Aranca Research


2011

→ Consumer durables market expected to double at 14.8 per cent CAGR to USD12.5 billion in FY15 from USD6.3 billion in FY10

→ Demand from urban markets is estimated to grow at 7-10 per cent annually

→ Demand from rural and semi-urban areas is expected to expand at a CAGR of 25 per cent to USD6.4 billion in FY15 from USD2.1 billion in FY10

→ By FY15, rural and semi-urban markets are likely to contribute a majority of consumer durables sales

FY10

USD6.3 billion

FY15

USD12.5 billion

Rural 51%

Urban 49%

Rural 33%

Urban 67%


Consumer durable firms to augment investments in coming years … (1/2)


2011

→ Videocon, India’s third largest consumer durables manufacturer, plans USD333 million capex for setting up a LCD manufacturing plant in Chennai by the end of 2011

→ Market leader LG has earmarked around USD292 million for enhancing production capacity and strengthening its LG brand shop network by 2012

→ Japan’s Panasonic plans to invest USD208 million by 2014 in setting up manufacturing units and an advanced R&D centre

→ Samsung, India’s second largest consumer durables maker, plans to invest USD94 million to expand capacity by 2015

→ LCDs are expected to be one of the fastest growing segments, growing at a phenomenal CAGR of 87.6 per cent during 2009-12

USD- US Dollar, LCD- Liquid Crystal Display


Consumer durable firms to augment investments in coming years … (2/2)


2011

LCD TV shipments

Source: TV Veopar Journal 2011, estimates by IHS iSuppli Market Intelligence, Aranca Research

Upcoming investments by major players

Source: Business Standard, Company websites, Aranca Research

1.5

3.3

6.3

9.9

0

2

4

6

8

10

12

2009 2010 2011E 2012E

million units

CAGR: 87.6%

333

292

208

94

42

21

13

0 100 200 300 400

Videocon

LG

Panasonic

Samsung

Havells

Godrej

Onida

USD million

30 30

Contents

Advantage India


Growth drivers


Opportunities

Useful information



2011

31 31 For updated information, please visit www.ibef.org USEFUL INFORMATION

Industry associations … (1/2)

Consumer Guidance Society of India Block 'J' Mahapalika Marg, Mumbai–400 001 Tele fax: 91-22 22621612/2265 9715 E-mail: [email protected] Website: www.cgsiindia.org Retailers Association of India 111/112, Ascot Centre, Next to Hotel Le Royal Meridien, Sahar Road, Sahar, Andheri (E), Mumbai–400099. Tel: 91-22-28269527—28 Fax: 91-22-28269536 Website: www.rai.net.in Consumers Association of India 3/242, Rajendra Gardens, Vettuvankeni, Chennai, Tamil Nadu–600 041 Tel: 91-44-2449 4576/4578 Fax: 91-44-2449 4577 E-mail: [email protected]


2011

32 32 For updated information, please visit www.ibef.org USEFUL INFORMATION

Industry associations … (2/2)

Consumer Electronics and Appliances Manufacturers Association 5th Floor, PHD House 4/2, Siri Institutional Area, August Kranti Marg New Delhi-10 016 Telefax: 91- 11- 46070335, 46070336 e-mail: [email protected] Website: www.ceama.in ELCINA Electronic Industries Association of India (Formerly Electronic Component Industries Association) ELCINA House, 422 Okhla Industrial Estate, Phase III New Delhi -110020 Tel: 91- 11- 26924597, 26928053 Fax: 91- 11- 26923440 e-mail: [email protected] Website: www.elcina.com


2011


Glossary

→ CAGR: Compound Annual Growth Rate

→ Capex: Capital Expenditure

→ CENVAT: Central Value Added Tax

→ EHTP: Electronic Hardware Technology Park

→ EPCG: Export Promotion Capital Goods Scheme

→ FDI: Foreign Direct Investment

→ FY: Indian financial year (April to March) → So FY10 implies April 2009 to March 2010

→ LCD: Liquid Crystal Display

→ R&D: Research and Development

→ USD: US Dollar

→ Conversion rate used: USD1= INR 48

→ Wherever applicable, numbers have been rounded off to the nearest whole number

USEFUL INFORMATION


2011

34

India Brand Equity Foundation (IBEF) engaged Aranca to prepare this presentation and the same has been prepared by Aranca in consultation with IBEF. All rights reserved. All copyright in this presentation and related works is solely and exclusively owned by IBEF. The same may not be reproduced, wholly or in part in any material form (including photocopying or storing it in any medium by electronic means and whether or not transiently or incidentally to some other use of this presentation), modified or in any manner communicated to any third party except with the written approval of IBEF. This presentation is for information purposes only. While due care has been taken during the compilation of this

presentation to ensure that the information is accurate to the best of Aranca and IBEF’s knowledge and belief, the content is not to be construed in any manner whatsoever as a substitute for professional advice. Aranca and IBEF neither recommend nor endorse any specific products or services that may have been mentioned in this presentation and nor do they assume any liability or responsibility for the outcome of decisions taken as a result of any reliance placed on this presentation. Neither Aranca nor IBEF shall be liable for any direct or indirect damages that may arise due to any act or omission on the part of the user due to any reliance placed or guidance taken from any portion of this presentation.

Disclaimer

For updated information, please visit www.ibef.org DISCLAIMER


2011

Consumer Durables NOVEMBER 2011 - IBEF

Documents

Transcript of Consumer Durables NOVEMBER 2011 - IBEF