Godrej Appliances, started in 1958, dominated the consumer durables market for decades,

especially in refrigerators. But gradually it grew complacent and lost touch with its
customers. Liberalisation and the entry of foreign players saw its market share in the
segment drop by half. This case study describes how the company reacted to the situation, re-
branded its products, and fought its way back.

They said the company and its products were not connecting with young people. The average
age of its customers was 35 to 45 years - a serious impediment in a country with 45 per cent
of its population below 25. Worse, they claimed, it was not even perceived as a technology
brand - the market did not think its products incorporated the latest advances in technology.

The year was 2005. The surveys had been commissioned to figure out why Godrej
Appliances was losing market share. No doubt competition had stiffened following
liberalisation and the entry of aggressive foreign players, especially Korean brands like LG
and Samsung, and the Japanese like Akai and Aiwa. But Godrej executives had never
imagined that such a yawning gap had grown between perception and reality.

Founded in 1958, Godrej Appliances had been the largest and most popular consumer
durables company in the country. For many years it sold only a range of refrigerators, but
added washing machines to its product line in 1996. Though market share in refrigerators
hovered around 27 per cent - there were rivals even then, indigenous ones like Kelvinator,
Videocon, Whirlpool and Voltas - Godrej was always among the top three players.

"At one point, Godrej's products were priced 15 per cent higher than similar products offered
by foreign players," says Chembath.

Slowly, Godrej's market share began to fall. The management remained complacent, calling it
a temporary blip, unable to believe that customers would abandon a brand they had trusted
for generations in favour of relatively new and unknown brands.
0
0It also drew comfort from the fact that LG's first foray into India - in 1993, then sporting its
original name, Lucky Goldstar - had been a failure. But LG's second coming, in 1997, proved
to be completely different. By 2000, Godrej refrigerators' market share had fallen by half - to
13 per cent.

An alarmed Godrej management's first few attempts to turn the tide ended in failure.
To shore up its overall market share in consumer durables - and also address a long-standing
complaint of dealers that Godrej Appliances' portfolio of just refrigerators and washing
machines was too limited - the company began selling air conditioners from 2004 and
microwave ovens from 2005.

"The idea was to muscle out the foreign brands in market share, deepen our engagement with
customers and get an upper hand in trade negotiations with channel partners who wanted to
sell a full bouquet of our products,"
But neither of the two new products made any impact. Even at the height of the crisis, still,
Godrej refrained from cutting prices to match those of its foreign competitors.

So what did Godrej Appliances finally do?
It set about overcoming the two drawbacks the surveys had pinpointed: the misconception
about its technology use and its lack of youth connect.

To woo the youth, Godrej turned to design specialists to suggest shapes and colours that
would make their products look sleek and appealing.

To address the market better, Godrej Appliances also
began differentiating its product offering, providing
different models for different socio economic groups.
The high-end 'cool shower technology' refrigerators
were given the label Eon. For the mid-market segment
Godrej launched the brands Edge and Axis, while for
the cost conscious mass market, it had Neo.

In washing machines, Godrej's market share has
jumped from six per cent in 2008 to 11 per cent this
year. In ACs, Godrej's share is the fastest growing,
having risen from 3.5 per cent in 2005 to seven per
cent now.

Overall, in the past five years, Godrej Appliances has
posted a compound annual growth rate of 35 per cent,
much higher than the 17 per cent growth rate of
consumer durables industry. It hopes to close the current financial year with a market share of
6.9 per cent in the consumer durables category and revenues of Rs 2,400 crore - up from Rs
600 crore in 2006/07. This puts it in fifth position in the sector behind market leader LG, with
30 per cent share, followed by Samsung, Videocon and Whirlpool.


THE PROBLEM
Despite the strong brand name,
people were turning away from the
company's products

THE CHALLENGE
The market had turned competitive
and Godrej could not connect with
young buyers

THE WAY OUT
Introduce better technology, more
products, re-brand products to
appeal to the youth

THE SUCCESS
Success Acquired a youthful tech
image, recaptured signifi cant
market share in refrigerators