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Haier Aims for Top Three in India
Feb 6, 2006
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Haier Electronics Group Co. Ltd., China's top home appliance maker, is determined to become India's third-biggest home appliances and consumer electronics firm by 2010, its CEO said. Haier, which entered the Indian market in late 2003, aims to more than double its revenues to U.S. $118 million in 2006, as rising incomes boost sales of premium washing machines, refrigerators and air-conditioners in Asia's third-largest economy.

Haier Appliances (India) Ltd., which earns half its revenue from consumer electronics and the rest from appliances, expects revenues of $500 million to $1 billion by 2010, making India its third-biggest market after the U.S. and Europe. "India is on top of the priority list, because we expect the market to double in the next 3 years," T.K. Banerjee said. "Until and unless we become a significant force here, there's no stopping our effort."

Korea's Samsung Electronics Co. and LG Electronics Inc. have gained the edge in India's $4.8 billion consumer durables market through aggressive pricing, a vast distribution network and products designed specially for the market. Together, the two have more than 40 percent of India's market for color TVs, washing machines and refrigerators. Samsung in 2005 was expected to make revenues of $1.4 billion, while LG expects India sales to hit $1.9 billion in 2005 and reach $6.7 billion in 2010, growing about 29 percent each year.

Haier's challenge is to find prime shelf space in stores and entice consumers, who have nearly abandoned Japanese, European and local brands, attracted by high-decibel advertising and promotions from Haier's Korean rivals. But while Chinese products ranging from transistors to mobile phones and plastic Hindu deities find ready takers in India's many "grey" markets, consumers still hesitate to buy high-end products that sport the "Made in China" label.

"That is why we chose to use communication that focuses on the size and global nature of the brand, and introduced very hi-tech products, like detergent-free washing machines and wine coolers," said Banerjee. "We know we can't sell too many of these, but they showcase our technology and create respectability for the brand."

The market, which is skewed toward lower-priced products, will shift upward as incomes rise and retailing of consumer goods becomes more structured, as that would encourage sales of more premium products, Banerjee said. That would also stop the erosion in product prices and help the bigger brands achieve better profitability, he said.

Haier is sold in about 4,000 retail outlets in India, while Samsung is sold through 8,500. Other players include Whirlpool, Hitachi, Electrolux AB and domestic firms BPL Ltd. and Voltas Ltd. Haier has a research and development centre in India, which could serve as a base for the region, Banerjee said. But it has not yet set up a manufacturing facility in India, which is fast becoming a base for making everything from cell phones to cars.

Haier India, which broke even towards the end of 2005, now imports its premium products and has outsourced the manufacture of lower-end products to local firms. It has also set up a separate firm to focus on telecoms, and now makes CDMA phones. "But we are looking to set up a greenfield facility or acquiring facilities ... we cannot achieve our 2010 target without manufacturing," Banerjee said. (Reuters)

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