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Indian Consumer Durables Industry-Outlook

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The industrial sector grew in moderation during FY08 at 8.5% on the back of a
comparatively higher growth of 11.5% during the previous fiscal. The country’s
real GDP grew by 9% during FY08; lower than 9.6% in the previous FY.
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The key growth drivers for the Indian consumer durables industry:
• Rise in disposable income: The demand for consumer electronics has been rising
with the increase in disposable income coupled with more and more consumers
falling under the double income families. The growing Indian middle class is an
attraction for companies who are out there to woo them.
• Availability of newer variants of a product: Consumers are spoilt for choice when
it comes to choosing products. Newer variants of a product will help a company in
getting the attention of consumers who look for innovation in products.
• Product pricing: The consumer durables industry is highly price sensitive, making
price the determining factor in increasing volumes, at least for lower range
consumers. For middle and upper range consumers, it is the brand name,
technology and product features that are important.
• Availability of financing schemes: Availability of credit and the structure of the loan
determine the affordability of the product. Sale of a particular product is determined
by the cost of credit as much as the flexibility of the scheme.
• Rise in the share of organised retail: Rise in organised retail will set the growth
pace of the Indian consumer durables industry. According to a working paper
released by the Indian Council for Research on International Economic Relations
(ICRIER), organised retail which constituted a mere four percent of the retail sector
in FY07 is likely to grow at 45-50% per annum and quadruple its share in the total
retail pie 16% by 2011-2012. The share will grow with bigger players entering the
market.
• Innovative advertising and brand promotion: Sales promotion measures such as
discounts, free gifts and exchange offers help a company in distinguishing itself from
others.
• Festive season sales: Demand for colour TVs usually pick up during the festive
seasons. As a result most companies come out with offers during this period to cash
in on the festive mood. This period will continue to be the growth driver for consumer
durable companies.

Major hurdles and challenges plaguing the Indian consumer durables sector:
• Threat from new entrants, especially global companies: The domestic consumer
durables sector faces threat from newer companies, especially from global ones who
have technologically advanced products to offer.
• Rivalry and competition: Presence of a large number of players in the domestic
consumer durables industry leads to competition and rivalry among companies.
Threat from rivalry and competition poses a threat to domestic companies.
• Potential markets remaining yet untapped: A large segment of the domestic
market, mostly the rural market is yet to be tapped. Tapping this yet untapped and
unorganised market is a major challenge for the Indian consumer durables sector.
• Threat from substitute products/services: The domestic consumer durables
industry is plagued by threats from substitute products. Easy accessibility to
theatres/multiplexes, especially in urban areas has turned off the viewership from TV
to a large extent. With the advent of a horde of FM radio stations, radio sets have
now substituted TVs.
• Customer power with respect to availability of choice: The availability of a wide
product line on account of most products being homogeneous, poses a threat for
companies operating in the consumer durables sector. Customers have the choice of
both domestically produced and imported goods, with similar features.

Marketing and Strategy


Last Updated: June 2009

With market liberalisation, increasing consumerism and the entry of more foreign
players, Indian markets are seeing revolutionary changes. The Indian consumer is
rapidly evolving and is spoiled for choice by a host of international brands selling
their products at competitive prices.
According to a study by the McKinsey Global Institute (MGI), India's middle class will
swell by more than ten times—from its current size of 50 million, to 583 million
people—by 2025. And over 23 million Indians—more than the present population of
Australia today—will be counted as billionaires. By 2025, India will also become the
5th largest consumer market, surpassing Germany, moving up from the 12th position
it occupied in 2007.
In the seventh annual Global Retail Development Index (GRDI) conducted in 2008,
India stood second as the most attractive destination for retail investment. It is
estimated that the Indian retail market will increase from US$ 330 billion in 2007 to
US$ 427 billion by 2010 and US$ 637 billion by 2015. Organised retailing comprises
just 4.6 per cent of the currently estimated Indian retail market. However, this
segment grew nearly 40 per cent in 2007 and is estimated to increase to 22 per cent
by 2010.
Rural Market: The Next Big Opportunity
The rural market offers great untapped potential. In 2008, the rural market grew at an
impressive rate of 25 per cent compared to the 7-10 per cent growth rate of the
urban consumer retail market. Further, according to international consultancy firm
Celent, the rural market will grow to a potential of US$ 1.9 billion by 2015 from the
current US$ 487 million.
Today, the rural market accounts for a hefty share in most market segments—55 per
cent of LIC policies, 70 per cent of toilet soaps, 50 per cent of television, fans,
bicycles, tea and wrist watches.
Also rural India is less affected by the global slowdown. Consequently, an increasing
number of marketers are targeting it across fast moving consumer goods (FMCGs),
cars, two-wheelers and consumer durables.
FMCG is clocking over 20 per cent demand in rural markets, ahead of the 17-18 per
cent growth coming from urban India.
Nokia plans to tap the growing rural market with 93 million subscribers. It is tying up
with various micro finance institutions. Moreover, it is trying to reach into rural areas
with ‘showrooms on wheels’ and ‘Rural care on the go’— marketing and servicing
vehicles, respectively.
Brand Extensions
In a bid to garner higher market share and sustain long-term growth, FMCG
companies such as Coca-Cola, Nestle, PepsiCo, Dabur, Marico and Godrej have
adopted a brand extension strategy amid negative factors such as high inflation and
the global financial crisis.
According to marketing research company IMRB, the FMCG companies launched
251 products (223 variants and 28 brands) in calendar year 2007 as against 191
(173 variants and 18 brands) in 2006. The industry pegs the number of variants and
extensions launched in 2008 to be in line with 2007.
Nestle launched a record number of variants in 2008—from its Maggi Cuppa Mania,
Maggi Pichkoo to Maggi Bhuna Masala. Dabur too unveiled a pudina variant of its
popular Hajmola brand apart from extending its Gulabari skin-care range.
In terms of categories, brand extensions in personal-care, household-care and
processed foods drove growth in the FMCG sector.

Marketing and Strategy


Last Updated: June 2009
Media and Communication Channels
Word-of-mouth remains the most important influence in the buying decision of the
Indian consumer—a fact confirmed by 85 per cent users who participated in a recent
global Nielsen Internet survey. Among the top ten countries that attach maximum
importance to the recommendation of the fellow consumer, India ranks fourth while
Hong Kong tops the list.
Newspaper (77 per cent) is the second most trustworthy advertising medium while
television ranks fifth at 65 per cent. For the Internet users, online opinions are at the
third position with a 73 per cent vote.
There is an 82 per cent rise in the number of brands advertised on television during
2008 compared to 1999, according to a new survey by AdEx India, a division of Tam
Media Research. Print ad volumes has seen rise of 2.2 times between 1999 and
2008.
According to Radio Audience Measurement data, 49 per cent listeners access radio
from their mobile phones. Fostered by its increasing popularity, private FM is
especially emerging as a preferred communication channel for the marketers in
India.
Moreover, digital media advertising (internet, mobile and digital signage) is expected
to emerge as the medium of choice for advertisers. Of the available media, it was the
fastest growing segment in 2008. Its better return on investment and the comparative
ease with which its efficacy can be measured will ensure that the trend continues,
say analysts.
Rising interest in social networking in 2008 has made brands think seriously about
online advertising. According to a FICCI-PwC report, it is expected to touch US$
212.91 million in 2011 from the current US$ 58.1 million.
Companies such as HUL, Tata Tea, Titan, HDFC among others are using peer-to-
peer network on sites like Facebook or Twitter to spread product reviews and create
a buzz around the brand.
Brand Consciousness
A Nielsen Global Luxury Brands study (March 2008) reveals that India has the third
highest brand-conscious population in the world—with only Greece and Hong Kong
ahead of it. Thirty five per cent of Indian consumers, who participated in the survey,
showed inclination towards buying branded products.
This rise in brand consciousness has engineered a noticeable change in the luxury
landscape in India. Growing at an annual average rate of 26 per cent, India has been
identified as a significant driver in the global luxury market.
Packaging and Design
Both packaging and design are increasingly being seen as potent marketing tools for
product differentiation and communication with the consumer. Convenient packaging
assures consumers of the product quality and helps boost sales. The recent Asian
Paints campaign marks a new trend among advertisers, who are now looking to
attract consumers with try-vertising—or mainstream advertising that encourages
them to try the sample or smaller-sized product—while also building brand image.
Rural Market
Last Updated: May 2009

The Indian growth story is now spreading itself to India's hinterlands. Rural India,
home to about two-thirds of the country’s 1 billion population, is not just witnessing
an increase in its income but also in consumption and production.
The interim Budget's focus on extending the National Rural Employment Guarantee
Act (NREGA) to all states with a US$ 5.83 billion outlay for 2009-10 would benefit
the rural economy. The rural economy got a further boost with the farmer loan waiver
of US$ 13.86 billion and the ambitious Bharat Nirman Programme with an outlay of
US$ 34.84 billion for improving rural infrastructure.
Additionally, the rural economy has not been impacted by the global economic
slowdown, according to a recent study by the Rural Marketing Association of India
(RMAI).
The study found that the rural and small town economy which accounts for 60 per
cent of India’s income has remained insulated from the economic slowdown.
Moreover, rural incomes are on the rise driven largely due to continuous growth in
agriculture for four consecutive years.
According to a McKinsey survey conducted in 2007, the rural India market would
grow almost four times from its existing size in 2007, which was estimated at US$
577 billion.
Furthermore, high-end brands like Tommy Hilfiger are also bullish on small towns.
Small towns currently contribute around 20 per cent of the brand’s sales. This could
go up to one-third in two years’ time.
FMCG
Rural consumers spend around 13 per cent of their income, the second highest after
food (35 per cent), on fast moving consumer goods (FMCG), as per a RMAI study.
The FMCG industry in India was worth around US$ 16.03 billion in August 2008 and
the rural market accounted for a robust 57 per cent share of the total FMCG market
in India.
Moreover, according to an ASSOCHAM study, FMCG sector in rural areas is
expected to grow by 40 per cent as against 25 per cent in urban areas.
Most FMCG companies are now working on increasing their distribution in smaller
towns and focussing on marketing and operations programme for semi-urban and
rural markets.
Industry analysts state that the increased consumption is also the result of a growing
middle class base in these markets. The total number of rural household is expected
to rise to 153 million in 2009-10 from 135 million in 2001-02, suggesting a huge
market.
Retail
The rural retail market is currently estimated at US$112 billion, or around 40 per cent
of the US$ 280 billion retail market. Major domestic retailers like AV Birla, ITC,
Godrej, Reliance and many others have already set up farm linkages. Hariyali Kisan
Bazaars (DCM) and Aadhars (Pantaloon-Godrej JV), Choupal Sagars (ITC), Kisan
Sansars (Tata), Reliance Fresh, Project Shakti (Hindustan Unilever) and Naya Yug
Bazaar are established rural retail hubs.
Pharmaceuticals
According to a report by McKinsey, the rural and tier-2 pharma market will account
for almost half of the growth till 2015. The tier-2 market will grow to 44 per cent by
2015, amounting to US$ 8.8 billion.
This growth will be further augmented with the government allocating US$ 2.35
billion for the National Rural Health Mission (NRHM) in the interim budget 2009.
Telecommunication
A Gartner forecast revealed that Indian cellular services revenue will grow at a
compound annual growth rate (CAGR) of 18.4 per cent to touch US$ 25.6 billion by
2011, with most of the growth coming from rural markets. Also, a joint Confederation
of Indian Industries (CII) and Ernst & Young report reveals that of the next 250 million
Indian wireless users, approximately 100 million (40 per cent) are likely to be from
rural areas, and by 2012, rural users will account for over 60 per cent of the total
telecom subscriber base in India.
Mobile phones in rural India also grew by close to 13.72 per cent to reach 70.83
million in April-June 2008. CII also estimates the number of subscriber addition in
rural areas to exceed the additions in metros by 2012 as about 120 million new users
are expected to adopt wireless telephony in rural areas as compared to about 62
million in the metros.
Automobiles
Passenger car and two-wheeler companies are driving on rural roads to push sales.
While growth in urban markets has been flat or negative, the rural markets are
booming, insulated from economic downturn. Rural markets' share in Maruti's overall
sales during April-January 2009 has gone up to 8.5 per cent from 3.5 per cent in the
same period last year.
Mahindra & Mahindra is also bullish on the rural and semi-urban markets, with its
utility vehicle, Scorpio clocking 60-65 per cent sales from the rural markets as
against 20 per cent earlier. TVS Motor also registered around 50 per cent of its sales
from the rural and semi-urban markets.
Consumer durables
A survey carried out by RMAI has revealed that 59 per cent of durables sales come
from rural markets.
Many leading consumer durable companies are now increasing their presence in
rural India. Recently, LG has set up 45 area offices and 59 rural and remote-area
offices. Samsung has also rolled out its 'Dream Home' road show which was to visit
48 small towns in 100 days in an effort to increase brand awareness of its products.
Road ahead
The development of rural infrastructure is an important priority for the government
and out of the total projected investment of US$ 283.83 billion to be incurred by the
centre and the states in the Eleventh Plan, US$ 80.82 billion would be spent entirely
towards improvement of rural infrastructure.
According to international consultancy firm Celent, rural markets in India will grow to
a potential of US$ 1.9 billion by 2015 from the current US$ 487 million. Rural
markets are growing at double the pace of urban markets and for many product
categories, rural markets account for well over 60 per cent of the national demand.
Exchange rate used:
1 USD = 49.82 INR (as on April 2009)

Trade and Economy > Consumer Markets > Urban Market

Indian Economy Urban Market


Overview
Last Updated: May 2009

Trade and External


Sector
According to a study by the McKinsey Global Institute (MGI), Indian inco
FDI are likely to grow three-fold over the next two decades and India will bec
the world's fifth-largest consumer market by 2025. In the given scenario
urban markets will continue to fuel the Indian economy for quite some tim
come.
FII Moreover, expenditure by the middle class accounts for the bulk of India
urban consumer expenditure. About 61 per cent of total urban income co
from households that can be classified as middle class—earning betwee
US$ 1,493 and US$ 9,955 a year.
Further, India is likely to see rapid urbanisation, with around 45 per cent
Domestic Investments Indians living in urban areas by 2050, up from 30 per cent in 2007-08,
according to a study co-authored by National Council of Applied Econom
Research's (NCAER) Rajesh Shukla and Future Capital Research's Roo
Indian Investments Purushothaman.
Abroad
Retail
According to a report by McKinsey, India's overall retail sector is likely to
Agriculture grow to US$ 419.93 billion by 2015.
According to global real estate consultant, CB Richard Ellis, India has m
up to the 39th most preferred retail destination in the world in 2009, up f
Manufacturing 44 last year. The turnover of the organised retail segment in India is peg
at around US$ 8.1 billion. It is expected to reach US$ 51 billion by 2010
Infrastructure Retail opportunity is slated to rise by about US$ 160 billion in India in fiv
years. In urban India, modern retail is likely to grow from the current 9.6
cent of total retail to 26 per cent in the next five years, as per Technopak
Ports
Advisors.
Consumer Durables
The Indian consumer durables market seems to be relatively untouched
Power the economic slowdown. The consumer durable goods output witnessed
2.5 per cent rise in durables output in the first quarter of 2009, according
report by the Development Bank of Singapore (DBS).
Colour televisions have seen an increase in sales, growing 2 per cent to
Railways million units in January-March 2009, according to the figures released b
ORG-GFK.
Whirlpool is on the expansion mode and is targeting a 22 per cent share
Roads the US$ 423.28 million washing machine market in India by the end of 2
and is launching a range of new products with an investment of US$ 4 m
for the same.
Moreover, a large number of hi-technology durables are expected to floo
Services US$ 4.03 billion Indian durables market in 2009. Samsung, LG, Haier an
Videocon are among companies planning new product launches in the
coming months.
Consumer Markets Automobiles
Improved consumer spending sentiment, revival of bank lending with
Marketing and
relatively low interest rates and new models have resulted in automobile
Strategy
companies registering positive car sales during the first four months of 2
Indian consumers, mostly in metropolitan cities, are shifting to the premi
compact segment from the entry mid-sized sedan segment. The market
Rural Market saw the launch of new cars including Maruti’s Ritz, Mahindra & Mahindr
Xylo and Skoda India’s New Laura.
Further, the premium compact car segment will be abuzz over the next y
with launches expected from almost all other car makers — Hyundai Mo
Urban Market Honda Siel Cars, Toyota Kirloskar, Fiat Auto, Volkswagen India and Ford
India.
FMCGs
Union Budget 2009-10 Across urban markets, there has been a tremendous growth in the sales
value-added and aspirational products. These products are expected to
the FMCG industry to grow by 16 per cent during 2008-09, against 14.5
Railway Budget 2009- cent during 2007-08.
10 Most FMCG companies have come up with reduced pack or SKU (stock
keeping units) of soaps, shampoos, beverages, biscuits and even butter
boost consumption and increase affordability for consumers. Earlier the
Economic Survey strategy was positioned mainly for rural markets, but now it has panned
2008-09 across towns and cities as well.
Luxury Products
According to a FICCI-Yes Bank report, the luxury products market in Ind
estimated in excess of US$ 500 million and is likely to grow at a CAGR
per cent to reach US$ 1.2 billion by 2010. The market is expected to dou
by 2015, touching US$ 2.5 billion.
While many brands like Armani, Dolce & Gabbana, Louis Vuitton, Salvat
Ferragamo, luggage brand Piquadro, Marks & Spencer, La Perla, Jimmy
Choo and Toy Watch have already forayed into India, some brands are
waiting for the government to allow 100 per cent foreign direct investme
retail.
DKNY is looking at setting up exclusive retail stores in the country. Louis
Vuitton also plans to open stores in Kolkata, Chennai and Hyderabad in
next 3-5 years.
Direct Selling
The direct selling market in India will benefit from the global recession w
the segment posting 20 per cent growth annually to reach an expected U
1 billion by 2012.
Leading direct selling companies like Amway India and Oriflame Cosme
are planning to cover more areas in the country.
E-commerce
The increase in the personal computer and Internet penetration along w
the growing preference of Indian consumers to shop online has given a
tremendous boost to e-tailing–the online version of retail shopping. Seve
online retailers are reporting good business in categories like travel, art,
books and music. E-tailing in lingerie and fresh fruit businesses is also d
well.
According to TRAI there were 5.45 million broadband subscribers in Ind
December 31, 2008, up from 5.28 million in November 2008.
Road Ahead
The Indian consumer remains one of the most upbeat globally. The Niel
Global Consumer Confidence study, conducted by Nielsen, a market
research company revealed that Indians are "the most optimistic lot glob
who think that their country will be out of the economic recession in the
twelve months."
In fact, it is widely believed that the Indian market will fuel the growth of
multinational companies in the coming years. While most leading compa
are cutting costs in the US and Europe, they see India as a strategic ma
which can fuel their growth.
Exchange rate used:
1 USD = 50.22 INR (as on April 2009)
1 USD = 49.15 INR (as on May 2009)

Consumer Markets
Last Updated: May 2009

As rapid socio-economic changes sweep across


India, the country is witnessing the creation of many
new markets and a further expansion of the existing
ones. With over 300 million people moving up from
the category of rural poor to rural lower middle class
between 2005 and 2025, rural consumption levels
are expected to rise to current urban levels by 2017.
According to a study by the McKinsey Global Institute
(MGI), Indian incomes are likely to grow three-fold
over the next two decades and India will become the
world's fifth largest consumer market by 2025,
moving up from its position in 2007 as the 12th
largest consumer market.
The next decade belongs to Indian and Chinese
consumers as Asian consumers will continue to
splurge owing to improving economic conditions,
forecasts the new economic outlook report by
Canadian Imperial Bank of Commerce (CIBC) in
Toronto released on May 25, 2009. Also, households
will be confident that their newfound wealth is not
ephemeral, allowing them to reduce precautionary
savings.
Moreover, approximately 315 hypermarkets are
expected to come into existence in tier-I and tier-II
cities across India by the end of 2011, riding on the
boom in organised retail sector, says a joint study by
consultancy firm KPMG and industry body,
ASSOCHAM.
Marks & Spencer and Reliance Retail joint venture is
planning to open 35 more stores over the next five
years. It already has 15 stores in India.
Carrefour SA, Europe’s largest retailer, has said it
may start wholesale operations in India by 2010 and
has initiated discussions with more than 600
suppliers as part of the plan. It aims to open its first
cash-and-carry in the National Capital Region (NCR).
Rural Consumers
FMCGs have seen over 20 per cent demand in rural
markets ahead of the 17-18 per cent growth in urban
India. According to AC Nielsen, mainstay categories
like hair oils, toothpastes, shampoos, skin creams
and lotions, and even candies saw more growth in
rural markets than urban.
The overall number of rural households is estimated
to grow to 153 million in 2009-10 from 135 million in
2001-02. Further, as per an NCAER report,
compared to urban areas, the ‘lower middle income'
group in rural areas has nearly doubled. This major
consumer base accounts for 41 per cent of the Indian
middle class having access to 58 per cent of the total
disposable income.
The mobile boom has now also hit rural India.
According to a report jointly released by the
Confederation of Indian Industry (CII) and Ernst &
Young, of the next 250 million Indian wireless users,
around 100 million (40 per cent) are expected to be
from rural areas.
FMCG
The FMCG sector has been registering double-digit
growth in sales since the last couple of years.
Currently estimated at US$ 17.42 billion, it is the one
of the most promising sectors in India.
Despite the economic recession, the industry is
expected to register a value growth of 14 per cent in
the fourth quarter of 2008-09 as compared to the
corresponding period last year.
Amway, the US-based direct selling FMCG major,
plans to make India its sourcing hub as its Asian
business has surpassed the total turnover that it
witnessed in other parts of the world. Of Amway's
global business, India clocked a turnover of US$
227.32 million in 2008, registering a year-on-year
growth of 40 per cent.
The food and beverages (F&B) market in India holds
great potential. AT Kearney estimates the market
sales of F&B retailing in India at US$ 135 billion and
growing at 10-15 per cent annually. The Ministry of
Food Processing Industries is also planning to double
the market size of the food processing industry to
US$ 165.1 billion by 2009-10 and trebling it to US$
271.8 billion by 2014-15.
The Indian market researchers RNOS's report on the
cosmetics market in the country predicts annual
growth of nearly 7 percent between 2009 and 2012.
Defining the cosmetics market as comprising of skin
care, hair care, colour cosmetics, fragrances and oral
care, RNOS said it is currently worth US$ 2.5 billion.
Luxury Products
With the rapidly increasing number of millionaires in
India, the market for luxury brands is growing
annually at a compound average growth rate (CAGR)
of about 35 per cent.
According to a FICCI-Yes Bank report, India is set to
become a manufacturing hub for global luxury brands
over the next four to five years and the manufacture
of luxury items in India can grow to US$ 500 million.
The luxury products market in India likely to grow at a
CAGR of 28 per cent to reach US$ 1.2 billion by
2010. The market is expected to double by 2015,
touching US$ 2.5 billion.
The latest entrant is DKNY which will set up exclusive
stores in India.
Consumer Durables
A combination of changing lifestyles, higher
disposable income, greater product awareness and
affordable pricing have been instrumental in changing
the pattern and amount of consumer expenditure
leading to robust growth of consumer durables
industry.
A flurry of hi-technology durables are expected to be
introduced in the US$ 4.09 billion Indian durables
market in 2009. Samsung, LG, Haier and Videocon
are among companies planning new product
launches in the coming months. Airconditioner (AC)
and refrigerator sales spiked 30-35 per cent in April
compared to same month last year.
Automobiles
Presently, India is the second largest two-wheeler
market in the world, the fourth largest commercial
vehicle market, the 11th largest passenger car
market and is expected to be the third largest
automobile market by 2030.
Global auto makers are still bullish on India.
Describing India as one of the promising emerging
markets Toyota Motor Corporation is going ahead
with its US$ 655.60 million second plant at Bidadi,
near Bangalore.
To drive sales, Daimler Motors, Skoda Auto and
Volkswagen, are entering the US$ 4.50 billion auto
loan market in the country. Indian auto majors, Bajaj
Auto, Tata Motors and M&M are already offering
loans through their own finance subsidiaries.
Growth of E-commerce
As broadband connectivity grows in India – according
to the Telecom Regulatory Authority of India (TRAI)
India had 4.73 million broadband internet connections
at the end of August 2008 – online purchasing is
growing. According to a global online survey by A C
Nielsen, a staggering 78 per cent of Indians (who
access internet) make purchases online, with credit
cards being the preferred mode of payment.
Consumer Confidence
The Indian consumer remains one of the most upbeat
globally.
The Nielsen Global Consumer Confidence study,
conducted by Nielsen, a market research company
revealed that Indians are "the most optimistic lot
globally who think that their country will be out of the
economic recession in the next twelve months." India
was at the top of the survey with 114 points, a
remarkable 30 points above the global average of 84.
LG plans to set up Rs 500-cr unit in South

The Economic Times: August 25, 2009

Chennai: LG Electronics India (LGEIL) is scouting for a suitable location in the


South, possibly Hyderabad or Chennai, to house a new facility. “Transport is a critical
factor in the home appliances segment. We are looking at setting up a facility in the
South to augment production of our home appliances products,” LGEIL MD MB Shin
told ET during a recent visit to its plant at Noida.
To be operational in the first half of 2010, the new plant will focus on home
appliances, mainly washing machines, refrigerators and air conditioners. The
investment could be around Rs 500 crore, Mr Shin said.
This comes even as the company expedites the process of strengthening capacities
at its Noida and Ranjangaon (Pune) plants, which are nearing full capacity and will
be sufficient to cater to expected rise in demand only till 2011 even with the current
capacity enhancement, he said.
Incidentally, competitor Samsung India, too, has a facility at Sriperumbadur near
Chennai, where it manufactures a range products, including colour televisions,
refrigerators, ACs and washing machines. In India, the company is also looking at
entering new product categories, bringing some from its international portfolio, such
as water and air purifiers, dishwashers, driers and refrigerators with freezers at the
bottom.
These would be launched during the second half of next year and would be imported
from Korea, Mr Shin said. Its air-conditioner business, which accounts for 10% of the
company’s annual turnover, is also due for capacity upgradation. It churn out eight
lakh units a year, while total production capacity stands at 13 lakh units. By the end
of the year, capacity will be enhanced to 20 lakh units, LGEIL business group
marketing head (AC division) Ajay Bajaj told ET.
Next year, the company is looking at launching ‘’designer’ ACs in the 1.5 tonne-2
tonne category. To be priced at 5-7% higher than regular ACs, these will come with
designer patterns instead of monochrome colour schemes currently available. LG
experimented with designer ACs in the top-end segment with its art cool series
launched last year (priced upwards of Rs 50,000).
LGEIL posted a turnover of Rs 10,700 crore last year (as of December 31, 2008) and
hopes to end this year at Rs 13,000 crore. In the next five years, Mr Shin expects
LGEIL’s turnover to be in the $9-10 billion range, with exports accounting for 30%, up
from 15% currently.
It had a 30% growth in turnover in the first half compared to the same period last
year, Mr Shin said. He went on to add that the company had set aside a marketing
and R&D budget of Rs 600 crore for 2009.
LG has a 27% share of the room AC market, followed by Samsung and Voltas at
17% each, as per GFK-ORG data. In the washing machine category, the company
has a 24.5% share, followed closely by Samsung at 23%.
India records highest growth for LG Electronics

The Hindu Business Line: June 24, 2009

Clocks 18% driven by increase in AC, refrigerator sales.


Hyderabad: For South Korean consumer electronics major LG Electronics, India
could graph the highest growth rate in terms of sales compared with its other
markets in the last five months, beating global trends of slackened consumer
spending due to recessionary fears.
LG Electronics India Ltd (LGEIL) clocked a growth rate of 18 per cent in the last five
months compared with the corresponding period of 2008, mostly driven by increase
in sale of products in the refrigeration and AC segments, according to Mr Moon B.
Shin, Managing Director. “We are now aiming at a 25 per cent growth in our turnover
for 2009 to touch about Rs 13,000 crore. Last year (2008), we had achieved a
turnover of Rs 10,730 crore,” he told presspersons on the sidelines of the launch of a
new LG Shoppe here recently.
The company is poised to roll out new models in LCD and GSM handset categories
in the next three to six months in the domestic market.
Ramping up R&D
As part of its efforts to make the LG products more India-specific, LGEIL is in the
process of ramping up its R&D activities. “Our R&D spends in India at present is
about Rs 200 crore. We are scaling up these spends to Rs 400 crore in the next
three years.
“The primary focus of our R&D here is to design products to suit consumer needs in
India, for which we are carrying out comprehensive surveys,” Mr Shin said.
Export thrust
As India gets more globally competitive in terms of manufacturing electronic
products, LGEIL is scaling up its exports of products manufactured in the country.
Mr Shin said LGEIL’s export turnover at present was $350 million.
“We are targeting a 10 per cent growth in our exports initially. For this, we may have
to set up an additional greenfield capacity three years down the line. As of now, our
existing facilities can meet the demand,” he pointed out.
Without being specific, he said the greenfield facility could be located somewhere in
the South, either in Tamil Nadu or Andhra Pradesh.
He felt that manufacturing operations in India could be stepped up as the domestic
component manufacturing industry gets more competitive.

Durables makers to invest Rs 1,000 cr

Business Standard: June 19, 2009


Kolkata: Will spend on promotions, raising capacity and R&D on expectations of a
revival in demand.
Hopes of a healthy rise in demand have spurred consumer durables firms such as
LG, Samsung, Whirlpool and Godrej & Boyce to line up investments amounting to
about Rs 1,000 crore over the next few months for product launches, research and
development (R&D) and for upgrading capacity at their existing manufacturing
plants.
Each of these companies is investing anywhere between Rs 100 crore and Rs 500
crore. Godrej & Boyce, for instance, will invest around Rs 100 crore in its plants at
Punjab, Maharashtra and Uttaranchal. The funding will be through internal accruals.
"March and April have been very good for the industry. We have overcome three
issues — liquidity crunch, credit crunch and lack of confidence. The confidence is
returning," Godrej & Boyce's Chief Operating Officer (appliance division) George
Menezes said.
LG India, on its part, plans to invest Rs 500 crore in R&D activities as well as on
advertising home appliances this year.
"LG is looking to double the amount of investments done in R&D to Rs 400 crore and
spend Rs 100 crore on advertising and marketing of home appliances," LG
Electronics India's Managing Director Moon B Shin said. Currently, LG has
manufacturing units at Greater Noida (near Delhi) and Ranjangaon in Pune, which
would be expanded in the next three years. The company may set up another unit by
2012 as a part of its plans to augment manufacturing capabilities, Shin said.
Whirlpool had recently effected a 4-5 per cent price reduction in its refrigerator
offerings, which is expected to help boost sales. The company would invest more
than Rs 300 crore in product development and promotion over the next three years.
It expects a 10 per cent top line growth during the current fiscal, while the same
would touch 25 per cent during the year 2010-11.
Samsung, too, has planned an investment of Rs 100 crore to increase the capacity
of its Noida facility. The company is looking to strengthen its portfolio with a new
range of air conditioners, refrigerators and washing machines.
The Consumer Electronics and Appliances Manufacturers Association (CEAMA)
estimates the size of the industry at Rs 30,000 crore. However, the penetration level
of various appliances in India is fairly low. Refrigerator use is about 18 per cent of the
total population, washing machine 6 per cent, air-conditioner less than 2 per cent
and microwave ovens about 1 per cent, which translates into a great potential to tap
new consumers.
Major players in this segment — LG, Panasonic, Onida, Samsung, Godrej & Boyce
and Whirlpool — have individually introduced a host of new technology and star-
rated products across washing machines, refrigerators, televisions and air
conditioners this year.
While Samsung introduced 47 new products in these categories, Godrej & Boyce
introduced 13 new air-conditioners and direct-cool range of refrigerators this
summer.

Samsung to focus on R&D


Business Standard: June 04, 2009

New Delhi: To establish its leadership position in the Rs 32,000-crore Indian


consumer durables space, Korean firm Samsung is all set to sharpen focus on
research and development (R&D) to support both domestic as well as global
consumption.
“Our investments in the R&D area give us the edge in the marketplace — globally
and in India. Samsung invests 8-9 per cent of its global sales in R&D every year and
our software centres in India – at Delhi and Bangalore – are working to support
global projects in addition to working on the needs of Indian market,” Samsung
India’s Deputy Managing Director R Zutshi told Business Standard.
In the last couple of years, for instance, the company developed the ‘Easy View’
range of Flat TVs for the Indian market, semi-automatic washing machines with
Samsung’s patented ‘Silver nano technology’ and stabiliser-free refrigerators.
“In fact, we have even applied for a patent for the ‘Cool PackTM’ feature found in
Samsung refrigerators, that was developed here in India,” said Zutshi.
Given Samsung’s aim to grow its R&D capability, 50 per cent of the total manpower
of Samsung India is now involved in R&D and product innovation.
“If we include our Delhi and Bangalore R&D centres, we have over 50 per cent of our
manpower working on R&D and product innovation,” Zutshi said. The company’s
Delhi R&D centre has over 1,000 employees, while the Bangalore R&D centre has
more than 2,300 employees now.
Samsung has two software development centers at Noida — Samsung India
Software Centre (SISC) for development of software pertaining to digital media
products and Software Engineering Lab (SEL), which is involved in developing
telecom software.

Consumers shift focus from camcorders to digicams

Business Standard: June 02, 2009

New Delhi: Consumers in India appear to be shifting their focus from camcorders to
digital still cameras. Camcorder sales remained flat in 2008, recording single-digit
growth rates, according to industry estimates.
As opposed to this, digital still cameras grew by nearly 40 per cent and the category
is likely to maintain a growth rate of around 25 per cent this year.
The reason for the shift is simple. In a slowing economy, consumers appear to be
looking for reliable yet inexpensive products to fulfil their digital needs. Digital still
cameras incorporate high-end technology, allow for shorter films and, yet, are
cheaper than camcorders, reasons an industry observer.
“The digital still camera is growing rapidly in the Indian market and taking share from
the digital camcorder market based on its compact form factor, improvements in
recording capabilities like zoom, editing software, etc, and the consumer preference
for carrying a single image capturing device,” explained R Zutshi, deputy managing
director, Samsung India.
Around 18.5 million camcorders were shipped worldwide in 2008, which was 4 per
cent more than in 2007. However, the increase was mainly due to consumers opting
for sub-$250 (less than Rs 10,000) compact flash camcorders, resulting in traditional
market leaders losing market share and concentrating on digital still cameras.
“Globally, this decline has been happening over the past two years and India seems
to be following the trend,” said Alok Bharadwaj, senior vice-president, Canon India.
Camcorder technology has come a long way. The transition spans from analog
format to digital to DVD recording to hard disk and now to flash memory.
“The technology changes have been really fast and hence the life cycle of
camcorders fell, but the prices did not. A consumer is still skeptical of shelling out
extra money for the same results a digital still camera can give,” said Bharadwaj.
“With the availability of easy-to-use photo and film editing software, along with
video/photo sharing forums, consumers prefer taking shorter clips and stills and
collate them to get a better result,” he added.
Going by the shift in consumer preference, Nikon has already rolled out a high-
definition movie function in its SLRs (single lens reflex camera).
“A new market opportunity has opened up for cameras with such features, as it gives
the consumer good quality for both pictures and videos,” said Hidehiko Tanaka,
managing director, Nikon India.
The company plans to introduce more models with better video shooting options in
both still and SLR categories in the future. However, players such as Sony continue
to remain bullish on the prospects of high-definition (HD) camcorders.
“The trend away from analogue to digital signals was established quite a few years
ago, ushering in the digital revolution. Today, both in still photography and video
recording, the current mantra is HD — that is at the core of the consumer electronics
industry,” said Sunil Nayyar, general manager, sales, Sony India.
He added that the lifestyle migration, the need to capture moments forever,
affordability, accessibility and the retail boom will be some of the factors that will give
a further fillip to both the digicam and the camcorder market.

'LG catching up fast in GSM market'

The Economic Times: May 08, 2009

New Delhi: South Korean mobile phone manufacturer, LG Mobile’s assessment is


that India can overtake China and become its largest market in terms of size and
demand for handsets in the near future. In the background of a sharp economic
slowdown in the US and Europe, the company has identified India as a strategic
market for investment for its GSM and IT verticals, its managing director Moon B
Shin said during an interaction with ET.
Q: How important is India for LG, especially with demand in developed
countries such as the US slowing down? What are your plans for India in the
current fiscal?
A: India is an important market for us due to the opportunities it presents. We have
plans to launch more than 32 new models here, of which six will be touch phones,
while many other models will be 3G-enabled and some of these will also be entry
level phones.
At present, we have about three touch phones and six 3G-enabled handsets already
in the market and we plan to have about 10 models each in both these segments by
the year-end. We are betting big on the touch screen segment and we are targeting
sales of up to six lakh units and a 10% market share in this space alone within the
next six months.
Q: What will be your investments in India this fiscal?
A: We will double our investment this year and the company as a whole will spend
about Rs 400 crore on advertising this year. Additionally, we will invest Rs 200 crore
in R&D to study market dynamics and consumer behaviour here. We are looking at
increasing our headcount in our sales vertical to enhance our presence.
Q: How many of the products you sell here are made here? How have your
sales been so far?
A: Currently, we manufacture mobile phones at two units located in Pune and
Greater Noida and these plants have a production capacity of three million units per
year. About 70% of the production is exported while the rest is for domestic
consumption. We sold about 2.4 million GSM handsets in India last year and we
expect a 50% increase in sales this year. Our institutional sales account for just 10%
our total mobile sales.
Q: Currently the Indian mobile handset market is dominated by some of your
competitors. How are you looking at improving your brand visibility here?
A: LG is rapidly gaining market share in the GSM market, despite being a late
entrant. We are already the fifth-largest player in the segment. I believe our
distribution line was poor earlier, but now we are reworking our strategy here.
Based on the analysis of our marketing team, we are deploying 1,000 additional
shop sales executives and we will be launching about 1,000 additional shop-in-shop
formats in rural and tier II cities. On the organised retail front, the overall channel
coverage is at 42%.

AC, refrigerator sales grow 35%

The Economic Times: May 08, 2009

New Delhi: Airconditioner (AC) and refrigerator sales spiked 30-35% in April
compared to same month last year on the back of rising mercury levels in the
country. Consumer durable firms say demand was particularly strong in the northern
and southern parts of the country.
The growth in AC sales was largely driven by the split models which has, over the
years, been selling more compared to the cheaper window ACs. In the case of
refrigerators, growth was led by the mass direct cool segment. “The demand for ACs
surpassed supply as temperature rose sharply last month,” said Voltas vice-
president (sales) Pradeep Bakshi.
All top brands, including LG, Samsung, Whirlpool, Voltas, Carrier and Godrej, have
switched to star-rated products. As per government’s Bureau of Energy Efficiency
(BEE), all electrical appliances are to be star rated on a scale of 1-5 depending on
their energy consumption. Higher energy efficiency gives a product higher star
rating.
Retailers say most consumers are opting for products with 2-3 stars as they are
affordable and attract the first time buyers. Every additional star rating for an AC
costs between Rs 1,000-2,000 depending on the model and Rs 500-1,000 in case of
refrigerators.
Appliance firms say that the premium on higher star rated products are more than
compensated by lower electricity bills. Market leader LG, which claims to have sold
two lakh ACs in April — up 30% over the previous year, says almost two-third of
sales came from 2-3 star-rated models. Its refrigerator sales grew 35%.
“Due to production constraint, companies offer only up to three stars in window AC,
whereas for split, all star ratings are available. With the awareness of energy
efficiency catching up, demand for four and five star rated products will increase in
future,” said LG India airconditioners business group marketing head Ajay Bajaj.
Samsung, which saw up to 25% growth for both refrigerators and Acs in April, is
selling only five star rated refrigerators. Godrej Appliances witnessed up to 30%
growth in AC and refrigerator sales last month. Although sales proceeds from the
North were low in March, it went up steadily in April as summer set in. Whirlpool, for
instance, saw almost 35% of its overall AC sales in North India last month.

Now designer mobile phones are here

The Economic Times: April 28, 2009

Bangalore: You know of designer clothes. Not long ago, we brought you a story on
designer laptops. Now, you have Dolce & Gabbana, Armani and Prada mobile.
Designer phones are an emerging trend, as consumers become more style
conscious. A unique mobile phone is seen to act as a personalized lifestyle
statement.
“Along with performance, the design, the form factor, colour, the size of the display,
are increasingly becoming relevant for consumers,” says Ruchika Batra,
spokesperson for Samsung.
Samsung tied up with Emporio Armani to introduce a co-branded mobile phone
earlier this year. The phone shows off the Emporio Armani design and logo with a
signature Emporio Armani LED display. Motorola has combined with Italian design
brand Dolce & Gabbana (D&G ) to launch a gold and silver mobile phone.
The phone has exclusive wallpapers, screensavers , MP3 ring tones, animations and
comes with a D&G gold pendant. Motorola also had a special edition Ferrari mobile
phone for car racing enthusiasts. The phone features the Ferrari logo on the outer
body and comes loaded with
“Luxury consumers are abandoning the bling and shock value of high-end handsets
and seeking minute details of quality and craftsmanship. Discerning shoppers are
putting a premium on superior materials, close attention to detail and quality that you
can actually see,” says Faisal Siddiqui, head of India operations (mobile devices) for
Motorola.
Motorola’s recently launched Aura, a luxury mobile phone inspired by high end luxury
watches, boasts of handcrafted design etching on the outside, and colour schemes
that “look to redefine artistry”. The phone has a circular display similar to that of a
watch.
LG has tied up with Prada to launch a touch screen mobile phone with a gloss-black
finish. Its sleek, slim and slender look reveals the Prada style. It does not have a
keypad and the buttons are displayed on the screen in a touch format. Most of the
luxury/designer phones come in the Rs 30,000 plus range, going up in some cases
to several lakhs of rupees.
The Aura for instance costs Rs 1,11,492.

Going up: Consumer durable industry tasting success


Nach ik et Kelkar / CNN- IBN

Published on Mon, De c 2 9, 20 08 at 2 2:1 1 in Busines s section

Tags: Economi c Gr owth , Cons umer Dur ab le Industry , Mumbai


Rea d Com ment | Post Com ment
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Mumbai: The consumer durables industry seems to have weathered the economic
slowdown better than other sectors. Both manufacturers and retailers have recorded
double-digit growth, with the recent cut in excise duty giving the sector a further
boost.
India's 24,000 crore rupee consumer durables industry has had a turbulent year. A
sharp rise in commodity prices, double digit inflation, tougher credit requirements,
and consumers postponing big-ticket purchases made for some tough times.
But the recent fall in interest rates and excise duty cuts seem to have turned things
around. Experts say the sector could see a robust 15 percent growth this year,
against 2007.
Samsung says that the sale of consumer appliances such as washing machines and
refrigerators has gone up by as much as 30 per cent this month. It has also recorded
a 25 per cent growth in LCD TV sales, compared to December 2007.
Rival LG expects 2008 turnover to come in 15 per cent higher than the 9,500 crore it
recorded in 2007. The company recently cut prices by 1.5-2.5 per cent after the
government slashed excise duty.
Lower excise duties seem to have brought shoppers back to retail outlets too. Tata's
Croma, for instance, says it has seen sales surge in the last two weeks, with LCDs
selling much faster than conventional televisions.
Same store sales are also around 15 per cent higher than last year. Croma hopes to
cash in on this growth, and will open 8 more outlets by April 2008.
Croma's not alone in its expectations. But analysts say overall sector growth will
slowdown in the next quarter, which traditionally sees lower sales.
And with no new stimulus on the horizon, consumer durable retailers may have to fall
back on promotional offers to reel in the customers.