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issue: May 2004 APPLIANCE Magazine

New Delhi Report
Indian Appliance Market Growth to Continue


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Adite Chatterjee, India correspondent, APPLIANCE magazine.

During 2003, Indian manufacturers of appliances—which include color televisions, washing machines, air-conditioners, refrigerators, and microwave ovens—hoped to encourage consumers to buy their products by offering price cuts.

During 2003, Indian manufacturers of appliances—which include color televisions, washing machines, air-conditioners, refrigerators, and microwave ovens—hoped to encourage consumers to buy their products by offering price cuts. Last year, the industry witnessed the sharpest price cuts during the past 5 years. The Rs 200-billion (approx. U.S. $4.6-billion) industry naturally witnessed terrific competition as players tried to beat out each other in a price-cutting game to woo the consumer. Luckily for the manufacturers, the gamble has paid off.

From January to December 2003, color TV sales rose 8.1 percent to 7.1 million; washing machines sales grew 9.3 percent to 1.3 million; refrigerator sales rose 4.4 percent to 3.2 million; and microwave oven sales were up 39.7 percent to 2.5 million. Despite the heavy price cuts, manufacturers are not worried. They feel that the move to cut prices has brought in a whole generation of appliance users into the fold, while existing consumers have chosen to opt for premium models. The easy-finance options that are available are also encouraging consumers to upgrade to premium models, particularly in the urban markets. According to industry estimates, nearly 50 percent of all consumer durables purchased during 2003 were paid for through easy-finance schemes.

Semi-urban and rural consumers are also expected to spend more on consumer durables this year. Rural sales, which constitute almost two-thirds of industry volume sales in some categories, are expected to grow, as the Indian government has announced major sops for the farm sector in its Budget 2004 in light of the impending elections. Manufacturers expect rural demand to go up from March 2004, which could result in higher sales for color TVs and refrigerators. As a result, companies like LG are specially designing products for small-town and rural consumers at the lower end of the price spectrum to give volumes a boost.

With customs duties on imports of consumer durables expected to drop by nearly 20 percent this year and the appreciation of the value of the rupee against the dollar, consumer durable manufacturers also have good news in the foreseeable future. Since import duties on electronics are still quite high at 40 percent, the market is unlikely to be flooded with imports. Washing machines and refrigerators will benefit from lower input costs. Reduction in import duties is expected to significantly lower prices of products such as microwave ovens.

The microwave oven market in India grew by almost 25 percent last year, taking sales up to nearly 250,000 units. This is still insignificant in terms of consumer durables sales, but manufacturers are hoping that coupled with the lowering in import duties and aggressive marketing, sales will grow at a fast clip. Manufacturers are, therefore, keen on introducing product innovation to make the microwave ovens relevant to Indian users. For instance, Whirlpool has introduced microwave ovens that can replicate the functions of an Indian tava (griddle) to make some of the popular Indian preparations such as parathas and dosas.

In another bid to grow the microwave oven market, manufacturers are introducing a variety of marketing schemes to popularize microwave cooking. For instance, LG India is planning to organize a “Cooking Carnival” so that women can attend microwave cooking classes conducted by LG’s in-house chefs. LG executives hope such marketing initiatives will help grow its market share to 40 percent. Similarly, Samsung India is planning to focus on the top 16 Indian cities to promote its microwave ovens through new retailing activities. It will give away Indian cookery expert Tarla Dalal’s recipe books to educate customers about how to cook Indian dishes in microwave ovens. Samsung will also conduct cooking classes on a regular basis. With these new initiatives, Samsung India hopes to grow its sales by 25 percent and increase its market share from 33 percent to 35 percent.

 

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