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 industrys 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 Goods Kitchen Appliances / Brown Goods Consumer 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 WHIRLPOOL OF INDIA MIRC ELECTRONICS PANASONIC VOLTAS BPL LIMITED ELECTROLUX SAMSUNG HOOVER LG ELECTRONICS EUREKA FORBES SONY BLUESTAR BAJAJ ELECTRONICS REFRIGERATOR, AIR CONDITIONER REFRIGERATOR, WASHING MACHINES TELEVISION TELEVISION REFRIGERATOR, WASHING MACHINES REFRIGERATOR, TELEVISION VACCUM CLEANER, REFRIGERATOR VACCUM CLANER, REFRIGERATOR, T.V, MOBILE PHONES VACCUM CLEANER WASHING MACHINES,REFRIGERATOR.T.V.,MOBILE PHONES VACCUM CLEANER TELEVISION, MOBILE PHONES, DVD PLAYER AIR CONDITIONER GEYSERS, ELECTRIC FANS

NOKIA

MOBILE PHONES

Key Success Factors

Strong Distribution Network

Manufacturing Edge
Market Positioning and Branding

Innovation in Advertising and

Promotions Attractive 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 TVs

Split ACs
Mobile phones

Key Consumer Durables

Share by volume Color TV sets 30% Refrigerators 18% ACs 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
TVs

DVD Players
Refrigerators Washing Machines ACs 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) 4Ps 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
TVs

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 TVs with built-in

DTH satellite receiver

BlueStar
Indias 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.