Consumer Durable 060109

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C O N S U M E R D U R A B L E SDecember 2008


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The Indian Consumer Durables Industry

can be segmented into three key groups

CONSUMER DURABLES

December 2008

Consumer Durables

White Goods

Rerigerators

Washing Machines

Air Conditioners

Speakers and Audio Equipments


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Consumer Durables

Kitchen Appliances/Brown Goods

Mixers

Grinders

Microwave Ovens

Iron

Electric Fans

Cooking Range

Chimneys

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Consumer Durables

Consumer Electronics

Mobile Phones

Televisions

MP3 Players

DVD Players

VCD Players

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Several key trends are driving growth in the sector

Income growth and availability o fnancing

Disposable income levels are rising and consumer

fnancing has become easier

Increased aordability o products

Advanced technology and increasing competition

are narrowing the price gap and the once expensiveappliances are becoming cheaper

Increasing share o organised retail

Urban and rural market are growing at the annual

rates o seven per cent to 10 per cent and 25 per cent

respectively with organised retail expected to garner

about 15 per cent share by 2015 rom the current

5 per cent

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Several key trends are driving growth in the sector

Entry o heavyweight retail players is

increasing competition

Competitive evolution o organised retail due to the

entry o heavyweight players like Croma, E Zone and

Reliance Digital is stimulating the demand through

exposure

to experiences

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Making Consumer Durable one o the astest growing industries in India

Industry sales was estimated to be about

US$ .1 billion in value in 00-08, a growth

o more than 1 per cent over 00-0

Key Consumer Durables - Share by Volume (%)

n Colour TVs n Rerigerators

n Air Conditionersn Washing M/Cs

n

Others

30%

19%

12%

5%

34%

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Consumer Durables is one o the astest growing industries in India

A strong growth is expected across

all key segments

Projected Growth Rates

Colour TVs 25-30%

Rerigerators 18-22%

Washing Machines 15-20%

Air Conditioners 32-35%

Others (including VCDs

and DVDs)

35-40%

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Overall, the sector is a dynamic one, with signifcant growth opportunities

Threat o New Entrants

Most current players are global players

New entrants will need to invest in Brand,

Technology and Distribution

Supplier Power

Indigenous supply base limited - most raw

materials are imported

Competitive Rivalry

Number o well established players, with

new players entering

Good technological capability

Many untapped potential markets

CONSUMER DURABLES

December 2008

HIGH

MEDIUM

LOW


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Overall, the sector is a dynamic one, with signifcant growth opportunities

Customer Power

Multitude o brands across price points -

wide variety o choice or customers

Threat o Substitutes

Unbranded products and cheaper imports

could enter the market

CONSUMER DURABLES

December 2008

HIGH

MEDIUM

LOW


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Some o the attractive areas or investment include

High End Colour TVs

Plasma display panels and liquid crystal display TVs

have registered an average growth o more than

100 per cent in 2007-08 and the trend is expected

to continue

Split Air-conditioners

Split ACs have been growing at a much aster rate

than Window ACs - Growth o 97 per cent in

2006-07 as compared to a 32 per cent growth

o Window ACs

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Some o the attractive areas or investment include

Mobile Phones

The mobile phone market grew at 29 per cent

in 2007-08, over the previous year. The market is

expected to grow at a CAGR o about 28.3 per cent

rom 2006 to 2011

Distribution and Retail

With the rural and semi-urban markets creating

opportunity and an almost sedentary urban market,

the need to have a strong distribution network is

crucial or the companies to remain price competitive

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Attractive States or Investment

Key parameters used or determining

attractiveness o states:

Incentives or manuacturing sector

Consolidation o actors, including skilled workorce

Proximity to demand centres

Proximity to ports or raw material imports

Maharashtra, Uttar Pradesh and Tamil Nadu

are attractive locations or investment in

manuacturing consumer durables.

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A successul MNC in India sample case

Situation

Mobile phone landscape in 1995 was one

open business opportunity or all the players

to capture and succeed

Nokias Key Strategy

Being ocused and ahead o the curve

Invested in each vertical o the handset ecosystem

manuacturing, distribution and design R&D

Parent company is always ready to invest

more in India

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Key Success Factors

Strong Distribution Network

India has some 95,000 outlets that sell mobile phones

with a conservative estimate o 50,000 o them selling

only Nokia

Manuacturing Edge

Nokia has several R&D centres and labs in India

including a $150 million handset manuacturing acility

in Chennai set up in 2005

The Mother Brand

Whether it is N series or the E series, the

key ocus is the Mother Brand Nokia

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Key Success Factors

Local Products

Custom-made mobiles or Indian conditions: Nokia

1100, having a torch built into a mobile phone helps

in a country with requent power cuts - distinct and

tangible beneft

Such examples highlight the key success actors

to succeed in the Indian market

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Success in the industry would depend on addressing

key actors

Market Positioning and Branding

Addressing key customer requirements that act

as demand drivers by proactive marketing and

establishing strong brand association

Product Technology

Providing technologies that beneft the customer

through - low power consumption, low service

requirement, low cost o operation, etc.

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Success in the industry would depend on addressing

key actors

Distribution and Service Network

From saturated urban regions to low penetration

rural areas and tier II/III towns, distribution network

and brand recognition will continue to play more

signifcant roles

Attractive Locations

With raw materials orming a signifcant chunk o

costs, production acilities located near ports

to import cheaper raw materials could provide

an advantage

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Profles o Key Indian Consumer Durables Players

MIRC Electronics

Commands strong brand equity among consumers,

largely owing to the success o its Onida brand

Finest design has made the company a leading player

in the electronics and entertainment business today

Planning to set up a manuacturing plant in

Uttaranchal or manuacturing various consumer

electronic products

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Voltas

Oers engineering solutions in areas such as heating,

ventilation and air conditioning, rerigeration,

electro-mechanical projects, textile machinery,

machine tools, mining and construction equipment,

materials handling, water management, building

management systems, indoor air quality and chemicals

Operations have been organiaed into our

independent business specifc clusters: air conditioning

and rerigeration, unitary products, engineering

products and international operations

Tied up with RBS Home Appliances Ltd or the use o

640 service centres that Voltas has across the countryor ater sales services

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Videocon

Market leader o consumer electronics and home

appliances in India - manuactures home appliances

such as rerigerators, microwave ovens, compressors,

ACs and washing machines

Planning to acquire Daewoos consumer electronicbusinesses worldwide to bring LCD TVs, Plasma TVs

and components into its old and also helps

in having a consuming partner or the recently

acquired Thomsons picture tube business

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Bajaj Electricals

Engaged in marketing o various consumer household

and industrial goods

Manuactures erection and commissioning o

transmission line towers, telecom towers, mobile

telecom towers and wind energy towers

Planning to outsource manuacturing o gas appliances

and water dispensers, which will be marketed under

its own brand

Planning to introduce inverters and two new lines

o business

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Equity Foundation (IBEF) and KPMG Advisory Services Private

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CONSUMER DURABLES

December 2008

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Consumer Durable 060109