Indian home appliances firm Electrolux Kelvinator Ltd. (EKL) is set to enter into a nationwide tie-up with Kinetic Engineering Ltd.'s direct selling arm, Kinetic Marketing & Services (KMS).
The alliance will be used to sell EKL's microwave ovens. Under the arrangement, KMS will earn profit margins per unit sold. EKL has projected that 10 percent of microwave oven sales per city will be accounted for by the direct selling arm in the first year. The concept will be tested initially in about seven SEC-A cities. The Indian deal comes at a time when globally, EKL's Swedish parent, Electrolux AB, has exited direct marketing business.
Growth in refrigerators, EKL's mainstay product category, is stagnant, which is forcing the firm to look for fresh avenues. "Growth has to come from emerging categories like microwave ovens, which requires more concept selling than retail-level dealer push," said Ajay Kapila, EKL vice president.
The Indian microwave oven market is estimated at just 3 lakh units annually. However, given its small base, this market is growing at 20 to 25 percent, bucking the overall 5- to 8-percent growth rate the durables and appliances industry is witnessing.
EKL had re-entered the microwave oven category in January this year. Its current market share is said to be less than 7 percent. In April this year, Electrolux AB had increased its stake in EKL from 75.9 percent to 87.9 percent. EKL has projected wiping out accumulated losses by 2005-end.
Meanwhile, Forbes Gokak has initiated a fresh round of negotiations with EKL's parent company, Electrolux AB, to buy out the latter's 40-percent stake in direct selling firm Eureka Forbes. (The Times of India Online)
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