Refrigerator Sectoral Analysis

7/28/2019 Refrigerator Sectoral Analysis

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SECTORAL ANALYSIS

OF

REFRIGERATORS

Presented by:

Sheetal Kumbhare


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A chilled glass of water, a large mug of beer, a tall glass ofrefreshing laaemonade, a nice bowl of cold salad and abig helping of a frozen dessert.

Summer dreams are made of these.

But ever imagined what would happen to those dreams if

not for a big, vertical, rectangular box called therefrigerator?


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SECTORAL ANALYSIS OF

REFRIGERATORS


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History

Before the invention of the refrigerator,

ice houses were used to provide coolstorage for most of the year.At the start of the 20th Century iceboxes were used to store the food

products.The first refrigerator to see widespreaduse was the General Electric "Monitor-

Top" refrigerator introduced in 1927 .Gradually with the development oftechnology different types of refrigeratorsare manufactured and today it is one of

the most common household .


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Ice boxes


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Monitor-toprefrigerator of GE


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Refrigerators have been manufactured in India since1950s. Till

the 1980s, players like Godrej, Kelvinator, Allwynand Voltas

controlled almost 90% of the market.

Earlier, the white goods sector was categorized as a

luxury goods industry and was subject to oppressivetaxation and licensing.The situation changed after theliberalization of the Indian economy in the early 1990s.Post-liberalization, a number of foreign companies

entered the market and many domestic players alsodiversified into refrigerators. BPL and Videocon whoalready had a presence in the consumer electronicsmarket, leveraged their strengths to enter the durablessector.


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Present ScenarioIn India, refrigerators have the 2nd highest

aspirational value of all consumer durables, withthe exception of televisions. This accounts forthe high growth rate of the refrigeratormarket.

Refrigerators are presently being manufacturedin two basic designs which are referred to asDirect Cool (DC) and Frost Free (FF) refrigerator.

The direct cool segment continues to dominateIndian refrigerator market compared to more

expensive frost-free models. The growth in thissegment though marginal, has been driven byfactors like availability oflow priced models asdue to competitive pricing and agrowing middleclass.


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OVERVIEW

Indian refrigerator market is valued at Rs4000 crore Refrigerators hold only 16% of consumer durable market

that is valued at around Rs. 20,000-25,000 crore inIndia. Its market is growing at the rate of 7-8% annually. Refrigerators constitute the second largest product

segment within the Indian consumer durables sector in

India, with an estimated annual turnover of Rs 39 bnduring FY2005 with an estimated sale of 4.1m units.Projected sales for the year 2007-2008


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INDIA V/S GLOBALThe penetration of household refrigerators inIndia, the fifth largest consumer durable in termsof penetration, is 13% compared to well over :

90% in Malaysia, Australia, Singapore, HongKong and Korea;

around 80% in Thailand;close to 40% in Philippines and Chinaand 20% in Vietnam and Indonesia.

When you compare the annual commercial salesof AC and refrigeration equipment in the US atUS $ 200 per capita and in China at US $ 3per capita with a dismal US $ 0.25 per capitain India.


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SWOTStrengths1. Presence of established

distribution networks in bothurban and rural areas2. Presence of well-known brands3. In recent years, organized sectorhas increased its share in themarket vis a vis the unorganized

sector.

Weaknesses

1. Demand is seasonal and is highduring festive seasonal2. Demand is dependent on goodmonsoons3. Poor government spending oninfrastructure4. Low purchasing power ofconsumersOpportunities

1. In India, the penetrationlevel of white goods is lower ascompared to other developingcountries.2. Unexploited rural market3. Rapid urbanization4. Increase in income levels, i.e.increase in purchasing power of

consumers5. Eas availabilit of finance

Threats

1. Higher import duties on rawmaterials imposed in the Budget2007-082. Cheap imports fromSingapore, China and otherAsian countries


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Types of refrigerators :On the basis of technology the refrigerators areof two types :

(a) Direct cool(b) Frost free

Direct cool refrigerators are the low

range/price products and frost freerefrigerators are the premium products withadvanced features.

Direct cooling ones are mostly single door

refrigerators and frost-free refrigerators aremostly double and multiple doors.


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Also on the basis of capacity the refrigerators

are of different types:Mini (50 to 100 ltrs)- Right for a bachelorSmall (170 to 200 ltrs)- Right for a couple

and a small kitchenMedium(200 to 450 ltrs)- This is for nuclear

household, not too small nor too big.Large (450 to 800 ltrs)- This is for big home

and big budget


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Direct Cool71%

Frost Free

29%

Category Wise Market Share(Units)

Categoy Wise Market Share

(Revenue)

,Direct Cool

57% ,327.37

,Frost Free

43% ,246.74


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Product HierarchyNeed FamilyConvenience

Product FamilyConsumer Durables

Product LineRefrigerators

SKUs165ltrs, 180 ltrs, 200 ltrs, 350 ltrs

BrandsLG, Whirlpool, Samsung, Godrej, Kelvinator

Product TypeDirect Cool, Frost Free

Product ClassHome Appliances


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MARKET SHARE ANALYSIS

2001-06


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Performance MeasuresParameters Rerigerator Industry LG Samsung Whirlpool BPL

God

rej

Purchase exp. At the

store 61 60 54 65 66 58

Billing process 55 58 49 58 52 60

Delivery process 57 53 56 57 59 58

Product usage &

performance 65 64 66 73 63 62

After sales service 68 76 64 64 67 63

Customer schemes

and promotion 47 44 47 44 49 49

Advertising & comm. 53 59 53 53 49 52


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Customer Satisfaction IndexCustomer Satisfaction Index

46 47 48 49 50 51 52 53

LG

Samsung

BPL

GodrejWhirlpool

Videocon

Electrolux

CSI Score

CSI Score


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MARKET SHARE OF VARIOUS BRANDS IN 2006-07

30%

16%25%

29%

LGSAMSUNG

WHIRLPOOL

OTHERS


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Loyalty Segment

0% 20% 40% 60% 80% 100%

Samsung

LG

Videcon

BPL

Godrej

Whirlpool

Electrolux

Industry Average

High risk

Trapped

Accesible

True loyals


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MAJOR PLAYERSrefrigerator industry has become highly competitive as a number of brands have entered

the market and the consumer has a wide choice.

Company BrandsBPL Limited BPL

Videocon International Limited Videocon, Electrolux , Kelvinator and Allwyn

LG Electronics India Limited LG

Samsung India Electronics Limited Samsung

Whirlpool of India Ltd WhirlpoolGodrej & Boyce Mfg. Co. Ltd. Godrej

Voltas Limited Voltas


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Market players taken for analysis

LG Electronics Whirlpool India Samsung


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REFRIGERATORS

-Your key to healthier lifestyle


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COMPANY HISTORY Established in 1997, LG electronics India Pvt. Ltd

operates in India through a wholly ownedsubsidiary LG electronics, South Korea.

LG set up a state-of-the art manufacturingfacility at Greater Noida. This facilitymanufactured Color Televisions, Washing Machines,

Air-Conditioners and Microwave Ovens. During theyear 2001, LG also commenced the homeproduction for its eco-friendly Refrigerators andestablished its assembly line for its PC Monitors atits Greater Noida manufacturing unit.

Besides all this, LG India is one of the very fewcompanies in the country that has an internalEnergy, Environment, Safety and HealthDepartment. This function caters to activities likeEnergy Conservation, Environmental Issues, WorkPlace Fire and Safety as well as OccupationalHealth for the benefit of the employees.


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LG India has also been taking on a slew ofinitiatives as a part of Corporate Social

Responsibility. LGEIL is proud to haveadopted about 24 villages around ourGreater Noida facility. LG extends FreeMedical Care, which comprises of free

check ups and a free distribution ofmedicines on a daily basis. Its positioning statement is high volume

and lower margin.


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Its vision was to become a 'Health Partner'for its consumers worldwide and thereforeformulated its corporate philosophy to

make peoples' lives better, convenient andhealthier like refrigerators have the 'PNSystem', which preserve the nutrition infood.

The company has achieved a turnover of

Rs 7500 crore in 2005. LG India has also been taking on a slew ofinitiatives as a part of Corporate SocialResponsibility. LGEIL is proud to haveadopted about 24 villages around our

Greater Noida facility. LG extends FreeMedical Care, which comprises of freecheck ups and a free distribution ofmedicines on a daily basis.


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LG REFRIGERATORS Special feature to preserve nutrition withgreen ion door cooling refrigerators. LG refrigerators has been rated 5 star by

Bureau of Energy Efficiency (BEE). Recently they have launched the first TV-

Refrigerator in India


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TYPES OF PRODUCTS SEGMENTS IN

REFRIGERATOR

1. FROST FREE REFRIGERATORS

2. DIRECT COOL REFRIGERATORS3. SIDE BY SIDE DOOR REFRIGERATORS

TV-DIOS REFRIGERATORS


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FROST FREE REFRIGERATORS

Frost forms when water vapor hits the cold

coils. The water vapor condenses - turns toliquid water. When the water condenses ontothe coils, it immediately freezes and formsfrost.

After certain intervals, the timer turns on

the heating coil which is wrapped among thefreezer coils. The heater melts the ice off thefreezer coils. When all of the ice is gone, thetemperature sensor senses the temperaturerising above 32 degrees Fahrenheit and turns

off the heater. 280 471 litres are available. There are 9 models available in this segment.


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Called as Intellocoolrefrigerators

TARGET:

Middle and middle upperclass people.

PRICE:The price range varies

between Rs.14450 toRs.39880

CDV: 4 /5 STAR Rating (BEE) Works without Stablizer Intello Compressor


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DIRECT COOL REFRIGERATORS

Called as INTELLO COOL Available in the range of 175litresTo 270litres.

There are 14 models in thissegment.

TARGET:

Middle and middle upper classpeople.

PRICE: The price range varies between

Rs.6500 to Rs.11800

CDV: 4 /5 STAR Rating (BEE) Works without Stablizer Intello Compressor


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SIDE BY SIDE REFRIGERATORS

Two doors side by side. One side refrigerator andother side freezer with through the door ice /water dispensers.

580 750 litres are available. There are 5 models available in this segment. Refrigerator with TV & Radio is also available.

TV-DIOSLG India launched the Worlds First TVRefrigerator TV DIOS with a 13-inch hi-definition TFT LCD TV installed at the center of itsdoor. The 600 litres TV DIOS also has a built-in

radio tuner providing access to FM stations and issupported by built-in speakers. It has anastounding silver nano-antibacterial and nano-carbon deodorizing technology.


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Called as Intellocoolrefrigerators

TARGET:Middle Upper and Upper /premium class people.

PRICE: The price range varies

between Rs.59900 toRs.130000

CDV: 4 /5 STAR Rating (BEE) Works without Stablizer Intello Compressor Dispenser


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PROMOTION / MARKETING STRATEGY

Like the marketing of FMCG products, LG's marketingwas heavily dependent on advertising.

Its ad spend to sales ratio at 5-6% of sales was veryclose to that of FMCG giant HLL.

PROMOTION: The campaign, 'Cricket First,' which featured captains of

the 14 teams participating in World Cup 2003,

highlighted the spirit of cricket with a tagline, 'Captainsof Cricket World, for the Captain of ConsumerElectronics and Home Appliances.'The companyannounced that it would spend around Rs 400-500million on advertising during the World Cup.

ADVERTISING: Abhishek Bachchan, the brand ambassador for LG

promotes the LG INTELLO COOL range ofrefrigerators.


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Threats to the companyDespite the fact that refrigerators haveimmense utility to housewives and providea solution to avoid food wastage, the

penetration level is still below 20% and itsmarket is growing at a very small pace.This may be because:

People in small towns and rural areas do

not consider it as a necessary product andare unaware of its utility value.

Non-availability of power.


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OPPORTUNITIES Untapped market of rural India can be explored.RURAL & URBAN PENETRATION IN INDIA 2005

CRITERI

A

RURAL

HOUSE

HOLD

000

PENETR

ATION

%

URBAN

HOUSE

HOLD

000

PENETR

ATION

%

TOTAL

HOUSE

HOLD

000

PENETR

ATION

%

REFRIGE

RATORS

11014 8% 29515 48% 40529 20%


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RURAL MARKETING LG India- tripled the number of its retail &

distributor outlets in rural areas from 2004to 2006

It also tapped local forms of entertainmentlike annual haatsand fairs and made hugeinvestments in infrastructure for distributionand marketing.


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Rural Marketing - Promotion Support initiatives of LG

Mobile Van at Kasargod


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Exhibition at

RajamundryCookery Classes at different

locations for Rural

Housewives


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1000 In Store

Demonstrators at Dealer

counters in Rural Cities

Road Show at Satna


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History


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History 1911: founded by Louis Upton

1987: Whirlpool tied-up with SundaramClayton Ltd. of India to form TVSWhirlpool Ltd.

1995: Whirlpool Corp. acquired majorityof stake in the TVS Whirlpool Ltd.

1996: Whirlpool Washing Machines Ltd.and Kelvinator India Ltd. mergedtogether to form Whirlpool of India Ltd .


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2003: A new mission statement of

"Everybody creating loyal customersfor life" was adopted.

2006: Whirlpool Corporationacquires Maytag and become theWorlds largest white goods company.

S t f Whi l l


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Success mantra of Whirlpool :

Know a customer

a Be a customerServe a customer

Who are the customers

How to treat them

How to add value

How to create brand loyalty

To share cust.

Knowledge &

insight

Creating customer

touch-point value

Sharing empathy

l l f l l


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Whirlpool is transforming into a completelycustomer-centered company where thecustomer lies in the core of every of ourfunctions .

The transformation is made up of fiveelements:

Market leadership through customer loyalty Innovation Diversity with inclusion and core competencies Passion for customer excellence Operational excellenceWhirlpool has swiftly moved from being a World

Class Manufacturer to a World Class Marketerusing the brand-building framework.

d


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Vision and mission The pervasive vision of Whirlpool is

Every Home, everywhere,with pride, passion and performance .

This rests on the pillars of innovation,operational excellence, customer-centricapproach and diversified talent.

Market share and growth rate: Currently Whirlpool commands 25% of the

domestic refrigerator industry and tryingto achieve 27% by this year.

S t ti f k t


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Segmentation of market :The segmentation variables for

refrigerator market are Age/ lifecycle stage Marital status: eg: Refrigerator is a

very necessary household for newlymarried people. Social class and income.

Occupation: eg: Instant cool featureis convenient for working womenfamilies.

T ti d iti i


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Targeting and positioning:Whirlpool is targeting the women of

every Indian families and accordinglyit has successfully positioned itself asthe best home-maker in the world.

The positioning statement is You and whirlpooltheworlds best home maker

The USP for the frost free segment isits 6th sense cooling system whichautomatically adjusts the level of

cooling .

P od cts


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Products The products in refrigerator category

includesDirect cool :Low range products.

Product variants are named as

Genius.Frost control :Medium range products.Product variants are named asfusion.

Frost free:Premium and high capacityproducts. Product variants are namedas Professional, ice bergs ,

masterminds and delight.


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Whirlpool refrigerator Fusion is


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Whirlpool refrigeratorFusionisavailable in two models which isdesigned to operate even with an

irregular power supply, which is acommon problem in many Indiancities.Whirlpool has introduced new

Delight frost-free refrigerators ineight models in 230-L, 260-L and300-L capacities. A unique feature

is LED lighting, a white light that isevenly distributed and optimallypositioned to enable the contentsof the refrigerator to be clearly

visible even when it is fully loaded.


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PROMOTION and ADVERTISING

Promotio al a d advertisi g


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Promotional and advertisingstrategies :

Whirlpool spends six to seven times less inpromotion and advertising than thecompetitors like LG .

They have been spending the moneysmartly. Instead of giving ads every day,they are skewing their ads towardsweekends when the customers go to shops

and make enquiries. Their ads are frequently coming on days

such as Dussehra, Karva Chowth,Dhanteras, etc

Also they have done some smart


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Also, they have done some smartnegotiations with the major dailies andmagazines by taking a twelve-month

contract and blocking the primarypositions like front page or back page.

So they deal with competitors withgreater muscle power in terms of moneythrough smart buying and smarterplanning.

Regarding ads. the brand ambassadorsare Ajay Devgan and Kajol

Strategies for the coming festival


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Strategies for the coming festivalseason:

They are promoting the sixth sensetechnology which they are sayingthata womans sixth sensecaptured by technology.

For the coming Diwali season the

message is magicchalao dreamhome sajao
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Samsung India is the hub for Samsungs South West Asia Regional operations.

Responsible for Samsung business inNepal, Sri Lanka, Bangladesh,Maldives and Bhutan besides India.

Headquartered in New Delhi, Samsung India has a network of 20 BranchOffices and 40 Area Sales Offices located all over the country.

" With a total brand value estimated to be US$10.8billion, Samsung nowranks 25th in BusinessWeek's Top 100 Global Brands

Samsung India commenced operations in India inDecember 1995, today enjoys a sales turnover ofover US$ 1Bn in just over a decade of operations inthe country. Samsung has been the "fastest growingbrand in the world.

Samsung (2007-08)


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Samsung (2007 08)Samsung has launched nine new refrigerator models, both frost-free and direct-cool.

Samsung, which is the market leader in the over-350 litre frost-free refrigerator segment, is seeking to consolidate its position bylaunching three new, advanced, feature-rich models in 375 litres,400 litres and 704 litres in the Indian market. The companycurrently has a range of 42 frost-free models priced between

Rs13,000 and Rs 1.5 lakh.

In the direct cool refrigerator segment, the company has extendedthe category by introducing two new models of 180 litres and 195litres.

Expecting to expand refrigerator channel by 25 per cent this year.

Targeting a market share of 18 per cent in the refrigeratorsegment this year from 15.8 per cent last year.

Samsung p ans to reach out to more t er-IIcities Showcasing products in 135 cities this


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g pcities. Showcasing products in 135 cities thisyear against 120 last year.

The South had emerged as a key contributor tothe company's overall revenues.

The share of Southern sales has gone up from

24 per cent to 31 per cent, equaling thecontribution from the Northern States.

In a bid to cash in on the growing interest in

the South, the company has lined up 11`Dream Home' roadshows in the region thisyear. The number of `brand shops' would go upby 30 per cent from 82 currently.

PRODUCTS


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PRODUCTS

MobilePhones

GSMCDMA

TV, Video &AudioTV

DVD

CAMCODER

Audio

Home Theater

MP3

InformationTechnology Products

Monitors

Hard Disk Drive

Optical Disk Drive

Laser Printers

Fax

Home AppliancesWashing Machine

Refrigerator

Microwave Oven

Air Conditioner

Positioning


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Positioning Samsung positions itself as technology leader and not only as a

volume player and a price warrior.

Strategy is value driven, not price driven.

Expecting leadership on the basis of top quality, leading edgetechnology, priced competitively and backed by strong after salesservice,"

Global CEO Yun Yong's vision: "We want to be the Mercedes ofhome electronics.

The drivers this time at Samsung -- in fact, the company has putthese well above the traditional 4 Ps of marketing -- are designand innovation.

"Good designs and innovative technology will be the mostimportant differentiator for Samsung from competition

"If you are able to deliver the latest technology at an affordableprice, the consumer will not be willing to go back to outdatedtechnology

How many customers actually pay attention tob


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y y p ydifferentiation on the basis of technological innovationssuch as Twin Cooling or Silver Nano (for refrigerators),or even one based on design?

The sales staff at the showrooms are not able to pointout the key differentiators.

To tackle this issue, last year, the company started the

Samsung Marketing Academy, which conducts regulartraining programmes to educate the sales forces, shop-owners and company employees on the company'stechnology and design, how it is different from whatcompetitors are offering, and how to better explain the

difference to the consumer. By equipping the salespeople to sell knowledge-oriented

lifestyle products, the company is hoping to providecustomers a more informed buying experience, which

will translate into higher sales.


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Technology and Innovations Twin Cooling System- uses two independentevaporators that provide optimum level of coolingto the refrigeration compartment and thefreezer.

The i-Cool System- is an intelligent cooling systemwith three cold air outlets-at the back and on the rightand left sides of the refrigerator interior, resulting in allround cooling action.

Silver Fresh Technology- The Silver ions inside therefrigerator, achieve 99.9% removal of bacteria and createthe perfect environment to keep food super fresh.


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Direct Cool

Frost Free

Side By Side

Di t C l


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Direct Cool

Target : Middle Class

No. of models : 6.Available both in 180/200 ltrs. capacity.

PriceLow price due to high competition

Rs.8,700 to Rs.10,900


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Frost Free Refrigerators


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Category

Frost Free

(Less Than 350 L)

Frost Free

(Greater Than 350 L)

Frost Free

Bottom Freezer)

No. ofModels

6

6

3

Price

Rs.13,000-Rs.22,000

Rs.29,000-Rs.56,000

Rs.38,000 & Rs.56,000

Sid B Sid


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Side By Side

Target: Premium ProductTargetedat Niche Market.

No. of Models: 13

Capacity: 545 Ltrs to 880

Ltrs

Price: Rs. 56,000 Rs.

1,41,000

ENRICHING THE RETAIL EXPERIENCE


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ENRICHING THE RETAIL EXPERIENCE

To display Samsung products in a more lifestyle

ambience and to communicate the productbenefits in a more interactive manner,Samsung India has set up a widespreadnetwork of Samsung Digital Worlds, DigitalHomes and Digital Plazas all over the country.

The Samsung Brand shop network


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g pcomplements the over 8500 retail points forSamsung products located across the length

and breadth of the country. Samsung plansto continue enhancing its penetration levels inthe country to reach out to more and moreIndian consumers

RETAINING CUSTOMERS


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RETAINING CUSTOMERS

Samsung considers 'After Sales Service' as a keydifferentiator for Samsung products. In order to deliverprompt and easily accessible service, Samsung India hasset up a widespread network of company owned aswell as Authorized Service Centers to service itscustomers.

The Samsung Service Plazas, as the Company ownedService Centers are called, are a first in the industry.

.

The Samsung Service Plazas serve as a one-stopshop for Samsungs walk in customers


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shop for Samsung s walk in customers.Customers also get a chance to see the Samsungrange of products and interact with Samsung

product specialists to know more about thecompanys products and services.


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After Sales ServiceSpeed, Smile, Sure is the motto for Samsung Service, as theCompany seeks to satisfy more and more of its customers with

prompt and accurate service. A Service Helpline numbergives access to Samsung Service throughout the country. SamsungIndia organises a Free Service Camp on an All India basis,

every year, for proactively reaching out to customers and servicingtheir Samsung products.

10 second to loose a customer, 10 years to gainthem back forms the guiding principle for Samsung Service

Team as it strives to satisfy the growing expectations of Indiancustomers.


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Promotions

Future Scenario


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Future ScenarioWith easy availability of finance, emergence of

double-income families, fall in prices due to increasedcompetition, government support, growth of media,availability of disposable incomes, improvements intechnology, reduction in customs duty, rise intemperatures, growth in consumer base of ruralsector, the consumer durables industry is growing ata fast pace. Given these factors, a good growth isprojected in the future, too.

The penetration level of consumer durables is very lowin India, as compared with other countries. Thistranslates into vast unrealized potential.


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Demand and Penetration Level of

White Goods In India

Refrigerator Sectoral Analysis

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