Whirlpool will never be in the pricing game: MD Sunil D’Souza
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New Delhi: Consumer durables maker Whirlpool Corp. entered India in the late 1980s, long before South Korean companies Samsung India Electronics Pvt. Ltd and LG Electronics India set foot in the market in 1995. Whirlpool formed joint ventures, acquired local companies and made itself a household name. But it could not keep pace with the competitive pricing game played by the Koreans. Its market share fell and revenue did not grow, but surprisingly, the company managed to keep its profits growing. In the past one year, the stock price of Whirlpool of India Ltd, the local arm of Michigan-based Whirlpool Corp., surged 64.4% to Rs1,212 from Rs737.20 apiece on BSE, outperforming the benchmark Sensex’s 13.68% gain.
Sunil D’Souza, managing director of Whirlpool of India, said the firm will never play the pricing game, and does not want to get into unrelated product categories like its peers. It will, however, expand into a few related categories, including the premium segment as part of its plans to cross the $1 billion mark by 2020. Edited excerpts:
Whirlpool is known for maintaining profitability and not for chasing revenue. How come you have set a revenue target with a deadline? Is there pressure from the global headquarters?
Whirlpool Corp. is looking for growth. There is no better way to find growth than in Asia. India is a priority. The target is to cross $1 billion mark by 2020, but earlier is better. At present, Whirlpool of India contributes about 3-4% to Whirlpool Corp.’s global revenue. We are growing at a high double digit rate. Importance of India as a market is growing simply because the opportunity is huge, because of the low penetration of consumer durables. The global headquarters is offering the right support that we need for faster growth.
You grew at around 6% in the year ended 31 March 2016. How realistic is the target of doubling the revenue by 2020?
The industry has suffered during the past few years. Till 2010, it was a good run. After that the whole economy softened. If the country’s gross domestic product (GDP) is below 6%, our business suffers. If the economy grows above 7% consistently, we’ll have a dream run again. In the past two years or so, we have been seeing good growth.
The government initiatives are making things better, and these will boost growth for appliances makers. Smaller towns are growing faster. By 2019, the government has planned to electrify all villages. That’s going to boost sales of appliance companies. Plus, there’s the 7th Pay Commission money, a part of which will translate into discretionary spends. This will also boost sales in smaller towns where penetration is even lower. There’s a long way to go.
Doesn’t pricing play an important role in smaller towns?
We’ll never be in the pricing game. We’ll always be in the value game. Indian consumers are value-conscious buyers. As long as we manage to offer that and ensure differentiation, we are home. In Bihar, our 5 star ACs sell more than the 3 star ones.
More importantly, India’s penetration (of durables) level is far below any economy of this stature or size. It is a penetration and a replacement game and replacement cycle (coupled with capacity upgrades) is getting shorter day by day. We have got a very strong game with our existing offerings and we are getting into newer, but adjacent categories.
Refrigerators, washers, cooking and built-in appliances (kitchen appliances that are fitted with walls or doors, wholly or partially housed into a cavity) are the ones we are playing now. At present, about 85% of our business comes from refrigerators and washers. Over a period, we want our non-refrigerator and non-washer businesses to contribute about 25%.
We have just got into air treatment, water purification, cooking led by built-ins, and we are looking into possible expansions, including ovens, hoods and dishes. We have also entered the premium space by launching KitchenAid, a leading kitchen appliances brand in Europe and US that we acquired in 2015, in India.Globally, we don’t get into something which is radically different.
Will you bring more brands owned by Whirlpool Corp. to India?
It depends on the market. Globally, we have brands like Gladiator which is a leader in garage and household organizations and storage systems, and Swash which is a clothing care system. At present, built-in kitchen appliances, which is a premium business, is growing fast. Many of the big builders are also latching on to built-ins. This is a good space for us to play.
So premium is the focus.
We are there in the value premium to super premium space. As urbanization grows, premium and mass ends will contribute to growth. In any case, premium is not just to do with metro markets. Smaller towns are getting good demand for premium products. There is no difference in what consumers in Patna or Madurai look for from what they look for in Delhi.
Why didn’t you enter the mobile handset business like others?
Globally, we don’t think we have ever thought of getting into mobile phones. It’s good to get into a business to push revenues, but that has to make sense and has to align with other businesses. The key is to focus on the right things and the strategy is all about what not to do.
Also, it is a lot to do with heritage. Most of the appliances makers today are electronics companies which came into appliances. But we are an appliance maker which branches into electronics selectively. Globally, we pride ourselves on being the No. 1 durables maker. We have stuck to home appliances.
If tomorrow we feel we have run out of space, we may look at bringing new things on the table. To date, we feel we have enough room for growth.