Godrej's George Menezes

If you see our growth trajectory over the last three years, we have been growing at CAGR (compounded annual growth rate) of around 28-29% as a division, and the industry has been growing around 12-15%.

We grew nearly twice the industry growth rate largely because of certain strategic initiatives. For example, in our portfolio strategy, we shifted gears to expand business in other allied categories in home appliances.

Till a few years back, we were known only as a refrigerator company. We embarked upon this (new strategy) aggressively in the last 8-10 years. We started with washing machines, added air-conditioners, and microwave owens. New products boosted our topline.

The second thing we did was to adopt a product platform, or rather a philosophy in product development, that positioned us uniquely. For instance, most players in appliances tend to emphasise on style and design, and are not differentiated. Each refrigerator across brands looks the same, and if you had to camouflage the brand name, you won’t be able to distinguish. In functionality too, everybody is pretty much the same.

So to differentiate was a huge challenge. First you need to go to consumers and find out what is it that they desire in appliances. Indian consumers are very different and we tried to address these innate Indian needs.

The multinationals are becoming Indian! Where a lot of them get constrained is, they are driven by lot of processes that are global.
For a smaller organisation like us, we are completely empowered; decision-making is quick and we can initiate changes very fast. We are more agile and have an advantage over them.

But as their India portfolio starts going up, they will be at par.

When we launched our Eon brand in 2006, we implemented an innovative technology in our refrigerators that cooled differently. Our study showed, unlike a western consumer who would be pretty disciplined in the use of a refrigerator by keeping various food articles in different zones, the Indian consumer tends to stuff everything wherever there is space.

People put the whole vessel containing leftover food inside the refrigerator! Because of this, the cooling vents which are typically designed to provide cooling used to get blocked, and the cool air never reached the rest of the compartment or gave excessive cooling in one concentrated space.

So we designed our product around this. Normally, the 4-5 cooling vents are at the back or side of the refrigerator. We redesigned the cooling delivery mechanism by building vents into every shelf.

Similarly, we did that in washing machines by identifying the pain area of a consumer. Urban or rural, India has its fair share of infrastructure-related problems. For high-end washing machines, which are at the mercy of erratic power and water supplies, we build appliances that can sense if either power or water supply go off and go into the hibernation mode.

For every product, we try to find at least one hook that can leverage the Indian need. In the last few years, we got strongly differentiated in the market. In May, we launched MuziPlay, a refrigerator with radio to the women who are closeted in the kitchen for hours. But every innovation has its life and the challenge is to innovate over and over again.

Every quarter, we want one innovation. We should be able to create something new, because of the severity of competition in the industry. On the topline front, we want to double turnover every three years.

We are focusing on appliances especially for the rural segment. After our low-cost refrigerator ChotuKool, we are working on a low-cost washing machine solution for the rural market, and a low-cost water purifier. We have a strategy to enter the hinterland through an altogether different business model and build a channel of self-help groups.

There has been erosion on pricing power across categories. But Indian consumers are migrating toward higher-end products, which is also higher on profit for all brands. We all have been able to sustain our growth and profitability only because of that.
Otherwise, the cost structures are swinging; the commodity prices are so volatile. Steel, copper, aluminum, plastic, polymers, chemicals… are all governed by metal prices and oil prices, and both are highly volatile and on an upward trajectory right now.

The last two months have been very difficult for the industry as people are not able to afford buying durables with cost of financing going up. Rupee depreciation is also hurting the industry as appliances are high on import content.