GODREJ APPLIANCES

BYHIMANI AGARWAL BBA(III)B

INTRODUCTION OF COMPANY
Started in 1958 CEO. Mr. RAVI BHAT Dominated consumer durable market For many years it sold only a range of refrigerators, but added washing machines to its product line in 1996. The findings of a series of market surveys stunned the top management of Godrej Appliances, one of the leading companies of the Godrej group.

INTRODUCTION OF CASE

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This case study describes how the company reacted to the situation, re-branded its products, and fought its way back.

PROBLEMS
Lost touch with its customers. Liberalisation and the entry of foreign players saw its market share in the segment drop by half. especially korean brands like LG and Samsung, and the Japanese like Akai and Aiwa. But Godrej executives had never imagined that such a yawning gap had grown between perception and reality.

PROBLEM The company and its products were not connecting with young people. survey claimed, it was not even perceived as a technology brand - the market did not think its products incorporated the latest advances in technology. The year was 2005. The surveys had been commissioned to figure out why Godrej Appliances was losing market share.

"There was little or no difference in terms of technology between us and the foreign players, says Ramesh Chembath, Assistant Vice President, Marketing, Godrej Appliances. "Yet the youth considered us a momand-pop brand." Though market share in refrigerators hovered around 27 per cent - there were rivals even then, indigenous ones like Kelvinator, Videocon, Whirlpool and Voltas - Godrej was always among the top three players.

Godrej's products were priced 15 per cent higher than similar products offered by foreign players. Slowly, Godrej's market share began to fall. The management remained complacent, calling it a temporary blip, unable to believe that customers would abandon a brand they had trusted for generations in favour of relatively new and unknown brands.

Entry of LG: It also drew comfort from the fact that LG's first foray into India in 1993, then sporting its original name, Lucky Goldstar - had been a failure. But LG's second coming, in 1997, proved to be completely different. By 2000, Godrej refrigerators' market share had fallen by half - to 13 per cent.

To shore up its overall market share in consumer durables - and also address a longstanding complaint of dealers that Godrej Appliances' portfolio of just refrigerators and washing machines was too limited - the company began selling air conditioners from 2004 and microwave ovens from 2005. "The idea was to muscle out the foreign brands in market share, deepen our engagement with customers and get an upper hand in trade negotiations with channel partners who wanted to sell a full bouquet of our products," says Chembath.

But neither of the two new products made any impact. Even at the height of the crisis, still, Godrej refrained from cutting prices to match those of its foreign competitors.

Slashing prices was an option, but they realised it could not be a long-term solution

SOLUTION To woo the youth, Godrej turned to design specialists to suggest shapes and colours that would make their products look sleek and appealing. "We emphasised making our products look contemporary," says Kamal Nandi, Vice President, Marketing and Sales, Godrej Appliances. "We gave our brand a sheen of technology by telling consumers about the presence of other Godrej companies in hightech areas such as aerospace and industrial egipment manufacturing.

SOLUTION
"We are spending close to five per cent of our annual turnover on research and product development activities," says Nandi. Godrej added around 100 new stock keeping units or innovations under various categories -to its portfolio in 2010.

SOLUTION To address the market better, Godrej Appliances also began differentiating its product offering, providing different models for different socio economic groups. The high-end 'cool shower technology' refrigerators were given the label Eon. For the mid-market segment: brands Edge and Axis, for the cost conscious mass market, it had Neo. In the months that followed, it did the same with its ACs, washing machines and microwave ovens.

SOLUTION

"We identified a specific need for each category and products were developed around these needs," says George Menezes, Chief Operating Officer, Godrej Appliances.

An alarmed Godrej management's first few attempts to turn the tide ended in failure. It introduced some innovative technologies like 'Penta Cool' in refrigerators - which provided cooling from five sides, unlike others those days whose cooling came only from the back of the refrigerator - but failed to arrest the decline.

ACHEIVEMENT
In the past five years, Godrej Appliances has posted a compound annual growth rate of 35 per cent, much higher than the 17 per cent growth rate of consumer durables industry. It hopes to close the current financial year with a market share of 6.9 per cent in the consumer durables category and revenues of Rs 2,400 crore - up from Rs 600 crore in 2006/07. This puts it in fifth position in the sector behind market leader LG, with 30 per cent share, followed by Samsung, Videocon and Whirlpool. The pinnacle may still be some distance away, but the progress made is significant. Equally important, Godrej Appliances's average customer is now in the 25 to 35 age bracket. Within the company the emphasis is now on product expansion and innovation, with a 100-member multigeneration product planning team having been set up for this purpose.

ACHEIVEMENT
The Eon brand has been particularly successful, even though it costs five to 30 per cent more than similar products of rival brands, and contributes roughly 30 per cent of the company's total revenues. "That is why our media advertisements are focused only on the Eon brand," says Menezes. In washing machines, Godrej's market share has jumped from six per cent in 2008 to 11 percent this year. In ACs, Godrej's share is the fastest growing, having risen from 3.5 per cent in 2005 to seven per cent now.

ACHEIVEMENT
In 2006, it was the first to introduce an air conditioner, with a compressor that ran at different speeds depending on room temperature, thereby reducing power consumption by about 30 per cent compared to other products, where compressors run at a single speed. In 2008, it launched washing machines with built-in intelligence. For Indian consumers, plagued with taps suddenly running dry or power unexpectedly going off, this was a huge convenience.

ACHEIVEMENT

In 2010, it came up with a fully automatic frontloading washing machine with an upward facing tilted drum so that the user does not have to sit down while loading or unloading the clothes being washed.

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