Air Treatment Products in India B2B

AIR TREATMENT PRODUCTS IN INDIA

Euromonitor International

March 2014

A I R T R E A T M E N T P R O D U C T S I N I N D I A P a s s p o r t I

© E u r o m o n i t o r I n t e r n a t i o n a l

LIST OF CONTENTS AND TABLES

Headlines ..................................................................................................................................... 1 Trends .......................................................................................................................................... 1 Competitive Landscape ................................................................................................................ 2 Prospects ..................................................................................................................................... 3 Category Data .............................................................................................................................. 3

Table 1 Sales of Air Treatment Products by Category: Volume 2008-2013 .............. 3 Table 2 Sales of Air Treatment Products by Category: Value 2008-2013 ................. 3 Table 3 Sales of Air Treatment Products by Category: % Volume Growth

2008-2013 .................................................................................................... 4 Table 4 Sales of Air Treatment Products by Category: % Value Growth 2008-

2013 ............................................................................................................. 4 Table 5 NBO Company Shares of Air Treatment Products: % Volume 2009-

2013 ............................................................................................................. 4 Table 6 LBN Brand Shares of Air Treatment Products: % Volume 2010-2013 ......... 5 Table 7 Forecast Sales of Air Treatment Products by Category: Volume 2013-

2018 ............................................................................................................. 6 Table 8 Forecast Sales of Air Treatment Products by Category: Value 2013-

2018 ............................................................................................................. 6 Table 9 Forecast Sales of Air Treatment Products by Category: % Volume

Growth 2013-2018 ....................................................................................... 7 Table 10 Forecast Sales of Air Treatment Products by Category: % Value

Growth 2013-2018 ....................................................................................... 7

A I R T R E A T M E N T P R O D U C T S I N I N D I A P a s s p o r t 1


AIR TREATMENT PRODUCTS IN INDIA

HEADLINES In 2013 air treatment products records retail volume growth of 7% to reach 38 million units

and current value growth of 14% to reach Rs140 billion

Economic slowdown continues to affect air treatment products in 2013

Split air conditioners the best performer with retail volume growth of 11%

Rising input costs result in a 7% increase in unit price

Crompton Greaves Ltd leads air treatment products in 2013 with a 23% volume share

Air treatment products anticipated a retail volume CAGR of 7% over 2013-2018

TRENDS In 2013, air treatment products registered retail volume growth of 7%, marking a significant

slowdown from the 20% increase achieved in 2010 as a result of the economic slowdown

which started in 2011. On the positive side, growth in 2013 was slightly stronger than in 2011

and 2012. The other reason behind sub 10% growth in 2013 was that ceiling fans continued

to dominate air treatment products. Ceiling fans continued to enjoy strong penetration in 2013,

resulting in a high base, meaning during times of economic slowdown strong growth is not

possible. The length of the summer was short in 2012 and 2013 due to an early monsoon

season, which also affected demand for air treatment products. There continued to be

extremely negligible demand for room air conditioners, humidifiers and dehumidifiers in 2013,

which also limited the growth of the wider category.

Split air conditioners was the best performer in 2013, posting volume growth of 11%. This

healthy performance was the result of a transition from window air conditioners to split air

conditioners in most parts of India. Only in northern parts of the country were window air

conditioners still in demand. The other reason behind the strong growth of split air

conditioners was the narrowing price difference between split air conditioners and window air

conditioners. As split air conditioners offer superior technology, most consumers preferred

them over window air conditioners in the absence of any significant price difference.

The transition from window air conditioners to split air conditioners saw the former register a

volume decline of 8% in 2013. Throughout the review period demand for window air

conditioners was under pressure, with the category posting a volume CAGR decline of 4%. As

a result, players like Samsung stopped focusing on window air conditioners in 2011.

Average unit price in air treatment products rose by 7% in 2013. The price of ceiling fans rose

by 5% due to an increase in raw material costs. However, as ceiling fans was an extremely

competitive category, with cheap Chinese imports making it even more competitive, it was not

easy for manufacturers to raise prices. On the other hand, the price of air conditioners rose by

9% in 2013. This was due to growth in demand for air conditioners with a good energy rating.

Such air conditioners were priced at a much higher level than air conditioners with a low

energy rating.

The penetration of window air conditioners and split air conditioners continued to be very low

in India in 2013 compared to developed countries. This was primarily due to low per capita

incomes and low awareness as well as the high cost of electricity in India compared to many

other countries. The room air conditioners category was non-existent in India over the review



period. The penetration of split air conditioners was 3% in 2013 and that of window air

conditioners less than 1%.

Energy rating in India falls under the auspices of the Bureau of Energy Efficiency (BEE). Five

years ago, the BEE started to implement energy ratings for air conditioners in India. Ever

since then, it has continued to improve its standards. As it upgrades its standards,

manufacturers have to incur higher costs to manufacture air conditioners with the same star

rating. Such cost increases are passed on to the end consumer. In 2012, the BEE upgraded

the standards for the rating of split air conditioners and by the end of 2013 there were

indications that the BEE may upgrade standards again at the start of 2014. If that were to

happen, the price of air conditioners will increase by 5-10% in 2014.

COMPETITIVE LANDSCAPE Crompton Greaves Ltd continued to lead air treatment products in 2013 with a 23% volume

share. The company’s leadership is due to its strong position in ceiling fans, in which it held a

volume share of 28% in 2013, with ceiling fans accounting for around 80% of volume sales of

air treatment products.

Bajaj Electricals Ltd and Khaitan Industries Ltd both increased their share by 0.3 percentage

points in 2013. Bajaj Electricals Ltd achieved this increase thanks to extremely aggressive

marketing across both urban and rural areas. Khaitan also pushed its products aggressively.

There continued to be little differentiation in mass products like ceiling fans, desk fans and

cooling fans. Companies like Bajaj, Polar Industries and Crompton Greaves offer premium

branded products, while there are also many unbranded and low-quality products available in

the marketplace. Thus, price is a major differentiator for these products. In the case of air

conditioners, energy rating is one of the most important factors. Premium air conditioners with

a 4- or 5-star rating were priced in excess of Rs35,000 in 2013, while air conditioners with a 3-

star or lower rating were priced at less than Rs30,000.

Panasonic and Mitsubishi launched air conditioners in the Indian market in 2012 and 2013.

Panasonic was able to build on its product launches as its air conditioners were of good

quality and priced appropriately to face competition. Mitsubishi was not able to build its

presence in 2012 and 2013. One of the reasons behind the relative success of Panasonic

was that it was selling its air conditioners through its own stores, called ‘Panasonic One Stop

Service’. There were no emerging brands in fans as it was a stagnating category.

Voltas Ltd launched ‘All Weather’ air conditioners in April 2013. The key feature of these is

that they provide cooling even at a high temperature of 52°C. Moreover, they have an active

dehumidifier, which provides dehumidification even in cases of high humidity. As this product

was unique, it did well in 2013. It also helped Voltas Ltd retain its leading position in air

conditioners.

Of the top 10 companies in air treatment products in 2013, nine were domestic players.

Crompton Greaves Ltd, Bajaj Electricals Ltd, Usha International Ltd and Orient Paper &

Industries Ltd were among the leading domestic companies. The reason why Indian

companies continued to dominate was that ceiling fans accounted for a large share of air

treatment products. The only international company in the top 10 was LG Electronics India Pvt

Ltd. This was due to the company’s strong position in air conditioners. However, in air

conditioners, of the top 10 companies, five were domestic and five were international in 2013.

Voltas Ltd, Blue Star Ltd and Videocon Industries Ltd were among the top domestic players

while LG Electronics India Pvt Ltd, Samsung India Electronics Ltd and Panasonic Home

Appliances India Co Ltd were among the top international companies.



PROSPECTS The growth in air treatment products is expected to improve over 2013-2015. Air treatment

products will continue to be boosted by the growing sales of split air conditioners in India.

More and more consumers will switch from window air conditioners to split air conditioners as

the latter are superior products. Moreover, awareness of split air conditioners will increase in

metropolitan areas as well as small towns.

Split air conditioners is expected to be the fastest growing category in air treatment products

over 2013-2018 with a retail volume CAGR of 9%. Manufacturers expect significant growth to

derive from small towns and villages over the forecast period. To tap into city demand,

manufacturers will continue to launch products with superior technology. For instance, a

number of manufacturers launched split air conditioners with digital inverter technology over

the review period, which helps to maintain temperature at a certain level, thereby reducing

energy consumption.

Demand for products like humidifiers and dehumidifiers was negligible over the review period.

However, it is expected that these categories will make some gains over the forecast period.

Products like dehumidifiers are expected to gain ground in coastal areas and especially the

city of Mumbai, where humidity remains high throughout the year.

CATEGORY DATA

Table 1 Sales of Air Treatment Products by Category: Volume 2008-2013

'000 units 2008 2009 2010 2011 2012 2013 Air Purifiers - - - - - - Cooling 22,195.6 25,950.4 31,143.8 33,036.4 35,325.8 37,956.8 - Air Conditioners 1,680.0 2,233.0 2,371.0 2,472.0 2,597.0 2,763.0 - Air Coolers 1,284.8 1,541.7 2,035.0 2,104.6 2,200.0 2,313.9 - Ceiling Fans 17,316.0 20,086.6 24,405.2 26,015.9 27,956.7 30,184.8 - Cooling Fans 1,914.9 2,089.1 2,332.6 2,443.9 2,572.2 2,695.0 Dehumidifiers - - - - - - Humidifiers - - - - - - Other Air Treatment - - - - - - Products Air Treatment Products 22,195.6 25,950.4 31,143.8 33,036.4 35,325.8 37,956.8

Source: Euromonitor International from official statistics, trade associations, trade press, company research, store checks, trade interviews, trade sources

Table 2 Sales of Air Treatment Products by Category: Value 2008-2013

Rs million 2008 2009 2010 2011 2012 2013 Air Purifiers - - - - - - Cooling 66,415.9 80,570.7 91,439.8 103,561.4 122,476.7 140,167.7 - Air Conditioners 34,242.9 43,869.3 44,919.7 50,673.1 62,301.2 72,228.2 - Air Coolers 4,651.1 5,354.1 7,174.5 8,217.4 9,319.8 10,562.3 - Ceiling Fans 25,975.7 29,683.9 37,401.7 42,485.7 48,399.0 54,639.3 - Cooling Fans 1,546.2 1,663.5 1,943.9 2,185.1 2,456.6 2,737.9 Dehumidifiers - - - - - -



Humidifiers - - - - - - Other Air Treatment - - - - - - Products Air Treatment Products 66,415.9 80,570.7 91,439.8 103,561.4 122,476.7 140,167.7


Table 3 Sales of Air Treatment Products by Category: % Volume Growth 2008-2013

% volume growth 2012/13 2008-13 CAGR 2008/13 Total Air Purifiers - - - Cooling 7.4 11.3 71.0 - Air Conditioners 6.4 10.5 64.5 - Air Coolers 5.2 12.5 80.1 - Ceiling Fans 8.0 11.8 74.3 - Cooling Fans 4.8 7.1 40.7 Dehumidifiers - - - Humidifiers - - - Other Air Treatment Products - - - Air Treatment Products 7.4 11.3 71.0


Table 4 Sales of Air Treatment Products by Category: % Value Growth 2008-2013

% current value growth 2012/13 2008-13 CAGR 2008/13 Total Air Purifiers - - - Cooling 14.4 16.1 111.0 - Air Conditioners 15.9 16.1 110.9 - Air Coolers 13.3 17.8 127.1 - Ceiling Fans 12.9 16.0 110.3 - Cooling Fans 11.5 12.1 77.1 Dehumidifiers - - - Humidifiers - - - Other Air Treatment Products - - - Air Treatment Products 14.4 16.1 111.0


Table 5 NBO Company Shares of Air Treatment Products: % Volume 2009-2013

% retail volume Company 2009 2010 2011 2012 2013 Crompton Greaves Ltd 20.9 21.4 21.9 22.3 22.5 Bajaj Electricals Ltd 12.3 14.6 15.9 16.4 16.7 Usha International Ltd 13.4 14.1 14.6 15.1 15.3 Orient Paper & 10.1 9.3 9.2 9.1 8.9 Industries Ltd Khaitan Industries Ltd 8.1 7.3 6.6 6.0 6.3 Havells India Ltd 4.3 3.9 3.3 2.8 3.0



Polar Industries Ltd 2.9 2.7 2.6 2.5 2.5 Symphony Comfort 1.9 2.3 2.2 2.2 2.2 Systems Ltd Voltas Ltd 1.6 1.5 1.5 1.6 1.6 LG Electronics India 1.7 1.5 1.5 1.1 1.2 Pvt Ltd Samsung India 1.3 1.5 1.1 0.7 0.8 Electronics Pvt Ltd Videocon Industries Ltd 0.6 0.6 0.7 0.6 0.6 Blue Star Ltd 0.8 0.7 0.6 0.8 0.6 Panasonic Home 0.0 0.2 0.3 0.6 0.6 Appliances India Co Ltd Daikin Airconditioning - 0.1 0.2 0.5 0.5 India Pvt Ltd Godrej & Boyce Mfg Co Ltd 0.3 0.3 0.3 0.3 0.3 Hitachi Home & Life 0.2 0.2 0.2 0.2 0.2 Solutions (India) Ltd Carrier Aircon Ltd 0.4 0.3 0.2 0.2 0.2 MIRC Electronics Ltd 0.2 0.2 0.3 0.2 0.2 Electrolux AB 0.2 0.1 0.2 0.2 0.2 Whirlpool of India Ltd 0.3 0.2 0.3 0.2 0.2 Haier Appliances India 0.1 0.1 0.1 0.1 0.1 Pvt Ltd Fedders Lloyd Corp Ltd 0.1 0.1 0.1 0.1 0.1 Electrolux Kelvinator Ltd - - - - - Standard Electric - - - - - Appliances Ltd Others 18.2 16.8 16.2 16.1 15.2 Total 100.0 100.0 100.0 100.0 100.0


Table 6 LBN Brand Shares of Air Treatment Products: % Volume 2010-2013

% retail volume Brand Company 2010 2011 2012 2013 Compton Greaves Crompton Greaves Ltd 21.4 21.9 22.3 22.5 Bajaj Bajaj Electricals Ltd 14.6 15.9 16.4 16.7 Usha Usha International Ltd 14.0 14.5 15.0 15.2 Orient Orient Paper & 9.3 9.2 9.1 8.9 Industries Ltd Khaitan Khaitan Industries Ltd 7.3 6.6 6.0 6.3 Havells Havells India Ltd 3.9 3.3 2.8 3.0 Polar Polar Industries Ltd 2.7 2.6 2.5 2.5 Symphony Symphony Comfort 2.3 2.2 2.2 2.2 Systems Ltd Voltas Voltas Ltd 1.5 1.5 1.6 1.6 LG LG Electronics India 1.5 1.5 1.1 1.2 Pvt Ltd Samsung Samsung India 1.5 1.1 0.7 0.8 Electronics Pvt Ltd Blue Star Blue Star Ltd 0.7 0.6 0.8 0.6 Panasonic Panasonic Home 0.2 0.3 0.6 0.6 Appliances India Co Ltd Daikin Daikin Airconditioning 0.1 0.2 0.5 0.5 India Pvt Ltd Videocon Videocon Industries Ltd 0.5 0.5 0.5 0.5 Godrej Godrej & Boyce Mfg Co Ltd 0.3 0.3 0.3 0.3



Hitachi Hitachi Home & Life 0.2 0.2 0.2 0.2 Solutions (India) Ltd Carrier Carrier Aircon Ltd 0.3 0.2 0.2 0.2 Onida MIRC Electronics Ltd 0.2 0.3 0.2 0.2 Electrolux Electrolux AB 0.1 0.2 0.2 0.2 Whirlpool Whirlpool of India Ltd 0.2 0.3 0.2 0.2 Kenstar Videocon Industries Ltd 0.1 0.1 0.2 0.2 Haier Haier Appliances India 0.1 0.1 0.1 0.1 Pvt Ltd Lexus Usha International Ltd 0.1 0.1 0.1 0.1 Lloyd Fedders Lloyd Corp Ltd 0.1 0.1 0.1 0.1 Electrolux Electrolux Kelvinator Ltd - - - - Standard Standard Electric - - - - Appliances Ltd Others 16.8 16.2 16.1 15.2 Total 100.0 100.0 100.0 100.0


Table 7 Forecast Sales of Air Treatment Products by Category: Volume 2013-2018

'000 units 2013 2014 2015 2016 2017 2018 Air Purifiers - - - - - - Cooling 37,956.8 40,925.1 44,355.3 47,271.2 50,100.3 52,777.6 - Air Conditioners 2,763.0 2,970.0 3,222.0 3,454.0 3,663.0 3,837.0 - Air Coolers 2,313.9 2,454.6 2,612.9 2,744.1 2,873.1 2,999.5 - Ceiling Fans 30,184.8 32,669.0 35,537.4 37,950.4 40,307.1 42,556.2 - Cooling Fans 2,695.0 2,831.4 2,983.0 3,122.7 3,257.1 3,384.8 Dehumidifiers - - - - - - Humidifiers - - - - - - Other Air Treatment - - - - - - Products Air Treatment Products 37,956.8 40,925.1 44,355.3 47,271.2 50,100.3 52,777.6

Source: Euromonitor International from trade associations, trade press, company research, trade interviews, trade sources

Table 8 Forecast Sales of Air Treatment Products by Category: Value 2013-2018

Rs million 2013 2014 2015 2016 2017 2018 Air Purifiers - - - - - - Cooling 140,167.7 149,123.3 159,311.4 167,864.3 175,883.4 182,833.1 - Air Conditioners 72,228.2 77,699.9 83,895.3 89,414.0 94,555.2 98,989.0 - Air Coolers 10,562.3 11,105.1 11,657.2 12,125.7 12,597.0 13,055.3 - Ceiling Fans 54,639.3 57,498.3 60,846.6 63,332.0 65,666.0 67,666.0 - Cooling Fans 2,737.9 2,820.0 2,912.4 2,992.6 3,065.2 3,122.8 Dehumidifiers - - - - - - Humidifiers - - - - - - Other Air Treatment - - - - - - Products Air Treatment Products 140,167.7 149,123.3 159,311.4 167,864.3 175,883.4 182,833.1




Table 9 Forecast Sales of Air Treatment Products by Category: % Volume Growth 2013-2018

% volume growth 2017/18 2013-18 CAGR 2013/18 Total Air Purifiers - - - Cooling 5.3 6.8 39.0 - Air Conditioners 4.8 6.8 38.9 - Air Coolers 4.4 5.3 29.6 - Ceiling Fans 5.6 7.1 41.0 - Cooling Fans 3.9 4.7 25.6 Dehumidifiers - - - Humidifiers - - - Other Air Treatment Products - - - Air Treatment Products 5.3 6.8 39.0


Table 10 Forecast Sales of Air Treatment Products by Category: % Value Growth 2013-2018

% constant value growth 2013-18 CAGR 2013/18 TOTAL Air Purifiers - - Cooling 5.5 30.4 - Air Conditioners 6.5 37.1 - Air Coolers 4.3 23.6 - Ceiling Fans 4.4 23.8 - Cooling Fans 2.7 14.1 Dehumidifiers - - Humidifiers - - Other Air Treatment Products - - Air Treatment Products 5.5 30.4


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Air Treatment Products in India B2B