Consumer durables company Crompton Greaves Consumer Electricals (CGCEL) has launched two new products in the fan and cooler space to meet the surging demand for products that can help beat the agonising heat.
In an interview with Moneycontrol, Mathew Job, Chief Executive Officer at CGCEL, which holds the top spot in the fans and residential pumps businesses, talks about the product strategy and way forward.
Q. CGCEL has been a large player in the fans space. Is most of the growth coming in from this segment?
A. A large proportion of our business comes in from segments like fans as well as lighting. In ceiling fans, in particular, our market share has gone up to 28 percent at the end of the third quarter of FY18. This was 24 percent about two years back. Further, about 90 percent of that growth has come in from the premium segment.
LED bulbs is another space where we have seen a growth in our market share. We are the second largest in this space and have seen our market share grow to 20 percent from 10 percent about two years ago.
However, in the appliances segment, we are still a small player. In the coolers segment where the market is estimated to be Rs 1,800 crore, we still hold a low single-digits market share.
Q. There has also been a change in the way the brand is being positioned. Is there a change in your target segment?
A. Crompton had not really invested in the brand before the demerger happened. A lot of younger people have limited awareness and we decided to build a stronger image with them. Now, the whole positioning of the brand is also keeping the younger audience in mind.
In the three years that we have been functioning as an independent company, we have also been spending money on television advertising, including marquee events like the Indian Premier League.
Q. Have the ad spends also increased?
A. Two years ago we decided to invest into building the brand image and targeting a younger population. Prior to the demerger (from Crompton Greaves), the company used to spend Rs 8 -10 crore annually on television ads. This has now gone up to Rs 50 to 60 crore, which is roughly 2 percent of our revenue.
Overall, we have cut down about Rs 150 crore of costs and invested that back into advertising.
Q. Is e-commerce a distribution channel that you will be investing into?
A. At present, in most of the categories like fans and pump, people still prefer to buy those from physical stores rather than online stores, because installation comes added with the products. This is likely to continue in the foreseeable future.
Overall, our focus will be to improve the reach of our products across stores. Product innovations to penetrate the market will also continue. For instance, we have launched our window cooler as well as the new fan range after extensive market research.
Q. Have the effects of demonetisation and goods and services tax (GST) cooled off?
A. In the immediate period after GST and demonetisation, more than the real consumer off-take, the focus was on channel stocks including how much stocks they held and the reduction in stocks, among others.
However, about 70-80 percent demand is driven to real estate. Sustained growth can only come in once the growth in the construction/real estate sector is back to the earlier levels.
Q. You had earlier entered the air-purifiers space? Has it started seeing growth?
A. Air purifiers is still a small market and is relevant only for certain geographies. But several players have entered the space. We are watching the space.
Q. There have been acquisitions in the consumer durables space. Are you actively looking to buy?
A. We want to do acquisitions or be present in spaces where we could have a significant market share. The key priority is to improve our market share in the appliances space and we may look at organic and inorganic growth there.
But, we want to be among the top 3-4 players or have atleast 10 percent market share. Through this strategy, we may also look at adjacent categories than the ones that we are already present.