Godrej Appliances is on track to cross its ₹4,500-crore revenue target in FY19, said Kamal Nandi, business head and executive vice-president of the company, which is the consumer durables business of the Godrej group. The company is ramping up its store count and trying premiumization to win over customers.
“Sales in 2018 was less than we had hoped for," Nandi said in an interview. “About 80% of our business is in the cooling category. Summer sales of ACs were poor because of intermittent rain. The floods in Kerala affected the Onam festive season and sales growth overall was about 3-5% higher than in 2017, mostly driven by the washing machine segment. We expect that the industry’s growth rate for the year will be at about 10% and we would have grown at about twice that. We are targeting ₹6,000 crore topline revenue in FY20," he said. Over the last year, Godrej Appliances has increased its presence in tier 2, 3 and 4 cities, opening up about 100 exclusive brand outlets (EBOs) and 300 preferred brand outlets (PBOs). “While most other brands are situated in the metros, we operate in tier 2,3 and 4 regions. Consumers in these regions are also looking for premium products but accessibility is an issue for them."
“These are distribution-led markets with large distributors catering to several small outlets, which would only be about 500-1,000 sq. ft. These outlets are so small that they can’t display all models, so they only display a few fast-moving models of certain brands. So we’ve found that premium products are less in volume here. In our effort to drive premiumization of our portfolio, we decided to offer premium products through EBOs. These would be frost-free refrigerators, front load washing machines... What we’ve found is that because of this presence, the ratio of premium sales is higher in these EBOs than in main metro market outlets. We want the EBO count to increase to 200 in the next three years."
“We are also doing PBOs, where the retailer displays Godrej as the preferred brand. We get about 70% of store display, which lets us proliferate much more in smaller markets and gives us much higher visibility. We offer extra margins to PBO retailers because they are almost wholly dependent on our brand. This year, we had 300 such open up and we want to get to 1,000 in three years. These two—EBOs and PBOs—will help us drive our premium portfolio aggressively in the market," Nandi said. The company has just completed capital expansion of ₹450 crore at its manufacturing centres in Mohali, Punjab, and Shirwal, Maharashtra, which now have the capacity to produce 3.75 million home appliances—3 million refrigerators, 600,000 washing machines and 150,000 air conditioners every year. The plants will achieve full capacity in 2020.
“Customers are looking for value and aesthetics. They want the best in class," Nandi said. “We’re trying to bring premium features across the product chain. The Godrej Duo refrigerator has a separate drawer for vegetables, which reduces the number of times you open the fridge door simply to take the veggies out. This feature has been popular. We are working with Bosch and Siemens to develop energy efficient platforms, for our refrigerators and ACs." he said.
“In the mid-90s, Indian consumers wanted to try multinational products but now we seem them switching to products that offer them value and the brand, whether its domestic or international, is less important. So we have customers who used to buy Samsung, Whirpool and LG who are now buying Godrej," said Nandi.