Aim to achieve market share of over 10% in FY16: Blue Star

B Thiagarajan, executive director, Blue Star believes the summer hasn’t set in fully and expects the Indian AC market to grow at 15-20 percent in FY16.

In an interview to CNBC-TV18, Thiagarajan says the company is aiming to achieve a market share of over 10 percent this fiscal.

Below is the transcript of B Thiagarajan’s interview with Sonia Shenoy & Anuj Singhal on CNBC-TV18

Sonia: Give us a sense of how much demand has picked up and where exactly? What are the geographies that you are seeing an improvement in demand?A: I will say that the summer has not fully set in; it is beginning to set in. Most part of the country barring some parts in Andhra Pradesh, it has been raining. I was in Delhi this morning and was worried about the gathering of clouds in a big way. In Tamil Nadu and parts, it has rained. In Eastern India, there has been rain. However, it is a usual factor. The climate change has been causing this kind of patterns but I am sure it is going to be some what a hot summer. It will continue till July. Our estimate is that the market will definitely grow at least by 15 percent. The industry will be looking forward to anything between 15-20 percent of growth. In terms of the hierarchy of purchase among the consumers, the research shows that refrigerator, washing machine, LCD television, two-wheeler, four-wheeler are there; it is only the air conditioner which is being sought after.Now, we see the demand picking up and the dealers stocking up very heavily. I am confident that it will be a good season ahead. We at Blue Star are very optimistic about it. We are planning for some around 25 percent growth.Anuj: Your market share right now is 8.50 percent. What is the internal target and what kind of new launches do you have in plan for next financial year? A: One small correction, 8.50 percent is in the residential segment. If you take the institutional segment, we stand somewhere around 9.5 percent. Our goal is to reach around 10.5 percent this year. So, while we are talking about all India market share, you will have markets where we have 16 percent market share also. There are markets in which we have 2-3 percent. These are the markets we are focusing. 57 percent of our sale comes from tier – III, IV and V markets. There are certain emerging markets say in the north-east, Chhattisgarh or Jharkhand - these kinds of markets where we had not stepped up our efforts in terms of retail outlet presence as well as marketing communication including advertising into vernacular media. Everything is set and we are fairly confident we will get there to turn point 5 percent market share. Sonia: In the cooling product business, who is your biggest competitor at this point in time and is there any higher amount of marketing spends that you have to incur only because competition is heating up?A: Who is who is there. All the multinational players are there in the room air conditioner segment. Within the air conditioning, there are central air conditioning which caters to large spaces, packaged air conditioning which is for medium spaces and then the residential part. Residential is the largest in India. It is somewhere around Rs 9,500 crore is the market size. The central air conditioning will be somewhere around Rs 4,500 to 5,000 crore. So, the growth in the coming year is going to come from residential segment. You have Japanese, Korean and American players and other players. I don’t think anybody is yet to enter that space. Our value proposition comes from the fact that we are a 72-year-old company. We are the oldest and were the last ones to enter the residential space, which was in 2011. So, the Blue Star Way or Blue Star values calls for looking after every stakeholder. That is how we have been brought up within the company. What the consumer has got to gain, say for example certain markets price point, is very important whether we are adding value for the money.Sonia: Hitachi Home has been expanding its presence as well in tier - II and III cities and now, they are strengthening their presence in the air conditioner business. What are you doing to combat competition at this point? Whether it is with respect to higher marketing, may be discounts, promotions etc, and digital? A: The closest company which you can compare to us is Hitachi. We are in the top premium segment and within reach of Hitachi figure. They are a company with engineering orientation. Their positioning is somewhat closer to ours and we fight neck to neck. But, we have to differentiate ourselves. You will see in our communications that we are positioning ourselves as the experts and we have today – I can proudly say 81 models which are comparable with anyone in the globe and within the energy efficiency. We are in the top bracket of every star rating and our products are priced as premium. There are certain markets where we need to correct the product mix though. We have to make it affordable in certain markets. We have not been at the vernacular communication at all in a place like Guwahati, Ranchi or Patna. This is what we have done.