Godrej to Pick-Up Stake in Panasonic India
Sep 30, 2005
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Godrej Appliances is in talks with Japanese electronics major Panasonic for a tie-up in India. Jamshyd N. Godrej, chairman & MD, Godrej & Boyce Manufacturing, had visited Japan a couple of months ago and held discussions with the Matsushita brass on several possibilities, say company sources. These include picking up stakes in the durables company's Indian arm, National Panasonic India (NPI) and a distribution alliance for Panasonic audio visual products. In either case, Godrej would market Panasonic products through its own dealer network.

For over a year, Godrej has been planning to expand its basket of consumer products, which primarily consist of home appliances, such as refrigerators and washing machines. "The company has definite plans to get into consumer electronics to expand its range," said a source. In fact, Godrej has already introduced its DVDs and microwaves early this year as a first step in that direction. The company is understood to be gearing up for its CTV launch in February 2006.

Godrej's interest in consumer electronics seems to have been triggered by the declining profitability of the company's white goods business due to mounting raw material costs. A tie-up with Panasonic's audio-visual products will enable Godrej to quickly enter the brown goods segment, more effectively leverage its distribution network, and spread its overhead costs over a larger product range. Korean consumer durables majors such as LG and Samsung have an extensive product range, which affords them much leverage with trade channels.

For Matsushita, it could be an additional channel to hawk its Panasonic brand, which hasn't made headway in the Indian market. The U.S. $82 billion global giant, which entered India a decade ago has failed to make any impression in the marketplace. Currently, the company has a market share of less than 0.5 percent in CTVs, around 1 percent in washing machines and a little over 2 percent in microwaves.

Analysts believe India was never a top priority on the parent's global agenda. At the time of entry, NPI had set a target of $1 billion in sales by 2000. It went through several mid-course corrections along the way and Panasonic still remains a fringe player. "The Japanese giant expected its Indian arm to sustain itself without making any significant investments other than at the time of entry," says an analyst. Others blame it on Matsushita's inability to give a free hand to Indian managers unlike it's Korean counterparts in the country.

Meanwhile, NPI has been quietly restructuring its operations. The Indian arm has moved its marketing head office to Chennai and for the first time the Japanese arm has installed an Indian MD, something not too common with Japanese MNCs, who want to place their men at the top. (The Economic Times)

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