How has the Covid19 outbreak impacted Voltas Beko and the overall consumer durables industry in India?
Due to the Covid-19 outbreak, the consumer durables industry in India like other industries is also faced with severe setbacks caused by shortage in the supply chain as well as reduced footfall in the marketplace. The industry depends on variety of components that are manufactured in China which now either have restricted entry or stuck in transit hence these becoming costlier by 25 -30 percent.
Voltas has always been ahead of the curve and has tried to become self-reliant by opening the first factory for Voltas Beko in Sanand, Gujarat in January 2020. This facility uses world-class technology to manufacture a wide range of home appliances on Indian soil.
While we have not faced any major supply chain issues, the sales of consumer durables across the industry have taken a hit owing to the lockdown. However, during this period, more and more consumers have been taking care of household chores without support staff at home. We are anticipating that consumers will in the future be more self-reliant and invest in automated, technologically superior, comfort products to ease their lives. We are quite confident that there will be a surge in demand for appliances like dishwashers and washing machines once the lockdown is lifted.
What’s your analysis of the consumer durables industry in India?
The consumer durable industry in India is one of most competitive spaces compared to similar industry globally where each key product category has more than 10 brands operating in the market. This makes the market extremely cluttered with few strong players cornering over 75 percent of the market size. With a consumer penetration for refrigerators at 28 percent to 30 percent and for washing machines at 12 percent to 14 percent and newer categories like Dishwashers yet to create a category, there is a huge opportunity across rural and Urban India.
We anticipate significant growth for the consumer durables industry from rural markets as more and more people opt for branded white goods. The government’s emphasis on rural electrification will also increase demand for durables like refrigerators. Rising disposable incomes and easy access to credit will also give people the ability to purchase appliances like microwaves and washing machines.
While the Indian market has some well-entrenched multinational companies that have been in operation for a long period time, we see a lot of opportunities of growth. Some of the biggest drivers of growth of consumer durables industry are the fact the India is one of the fastest growing economy, Change in consumption pattern owing to large population base, Growing infrastructure and increasing accessibility to electricity/ power.
While Voltas is well known brand in India for decades, Voltas Beko is a relatively new player. How’s been the journey so far for Voltas Beko?
Within two years of its launch, Voltas Beko has already established itself as one of the fastest growing consumer durables brand and is aiming to become the market leader across select product segments. We have sold close to half million SKUs in the very first year. A lot of this was driven by the refrigerator and washing machine sales where in new products were offered into the market keeping the need of the India consumer in mind.
The brand has also done exceptionally well in the dishwashers category and is poised to be the market leader in this segment by FY21. Our newly inaugrated Voltas Beko factory in Sanand, Gujarat is helping us increase our product portfolio and market share by offering innovative products specifically designed for the Indian consumers
How satisfied are you with the existing portfolio of Voltas Beko India? Will you look at any expansion or diversification in the near future?
Currently, Voltas Beko has a wide range of appliances like refrigerators, washing machines, dishwashers and microwave-ovens. We will be expanding our product portfolio across all segments. Amongst other product categories, we have recently forayed into the direct cool refrigerators category – which claims 80 percent of the refrigerator market by volume.
Tell us about your manufacturing capacities and capabilities in India.
We recently opened our first manufacturing facility in India. Spread over 60 acres in Sanand, an industrial hub near Ahmedabad, Gujarat. The factory manufactures Home Appliances that include refrigerators and washing machines. Backed by an investment of $180 million (INR 1000+ crore), Voltbek’s Sanand factory is one of the first white goods appliances unit in the State of Gujarat that will create an OEM base for home appliances in the region, along with local employment opportunities.
With this new facility, we aim to increase our product portfolio and develop new innovative products specifically designed for Indian consumers. Voltas Beko is also producing Direct Cool Refrigerators which are ~ 80 percent of the refrigerator market by volume. The facility will reach its annual production capacity of 2.5 million units by 2025 and will primarily cater to the needs of the Indian market, leveraging Voltas’ brand and distribution strength. However, going forward we might also explore export opportunities.
You operate in a very competitive industry and also operate in a market where customers are both demanding as well as price sensitive. How are you managing costs at the shopfloor level to ensure good quality at competitive prices?
Our advantage is that we understand the needs of the Indian consumer and we have the technology to deliver products that our consumers require. Our state-of-the-art manufacturing facility in Sanand, Gujarat leverages Arçelik’s global expertise in manufacturing and product development and Voltas’s strong brand presence, and country wide sales and distribution network. This enables us to broaden our consumer reach by providing affordable, accessible and technologically advanced consumer durables.
Tell us about your existing distribution network and retail presence in India. Do you see the e-commerce segment becoming increasingly more relevant in the time to come?
We aim to be the market leaders across product categories in the next few years. In sync with this objective, Voltas Beko is aligning its business and marketing strategy to cater to the rising demand for consumer durables in metros as well as Tier 2&3 markets. In less than two years, VoltBek has already achieved 10-11 percent retail reach. We are also focusing on expanding the footprint through more exclusive brand outlets (EBOs) across tier 2&3 cities remains, and the brands Voltas and Voltas Beko are now available at 200+ EBOs in the country.
In the post-lockdown period, we anticipate there will be a heavy increase in consumer durables being purchased through e-commerce and we are well-prepared for such a development. Presently online contributes close to five percent of the overall sales volume which is more or less in line with the industry for MHA, going forward the impact of the pandemic we would see consumers experiencing and buying products differently.
Due to their relevant properties, plastics are suited for various applications in the white goods industry. Tell us how the industry in general and Voltas Beko in particular are dealing with recycling of plastic components in the larger interest of the environment?
As the market leaders, we aim to set industry benchmarks in everything we do. Environmental pollution due to e-waste is an alarming issue and we take it very seriously. We have made efforts to ensure we are not wasting any plastic, as it is highly recyclable. Presently, of all the plastic that would have otherwise been wasted, we are using 100 percent of it all, in order to gain the maximum mileage out of the resources available.
We have also set some goals for ourselves to ensure proper management of resources. We aim to incorporate recycled plastic use in products at 20 percent by 2025 and 40 percent by 2030. With regards to Bio plastic use in products, we aim to reach 2.5 percent by 2025 and 5 percent by 2030. Overall, the industry is at a very nascent stage with this concept and we are definitely leading the way for other white good manufacturers follow this path of sustainable recycling.
What are your expectations from the government with regards to the policies for your industry?
We, at Voltas, have always been committed to integrating energy efficiency in all our offerings. In the Room Air Conditioner category, we have been a pioneer in energy efficient product innovations. We have always worked towards introducing products and technologies that would lead to more energy savings and at an affordable price to our consumers. The same applies for Voltas Beko.
However, India has always been a price-sensitive market and looking at the trends, only two and three-Star rated products have experienced high demand. With the society now becoming sensitive towards climate change, we hope people look beyond the price point and opt for products that are more energy efficient. The government can lower the GST for energy efficient products to reduce costs and encourage people to invest in 4-Star and 5-Star rated products that are better for the environment.
What kind of market share and position are you envisaging for Voltas Beko in the Indian consumer durables market in the next two years?
We aim to acquire more than 10 percent market share by 2025 and are confident that we are on the path of sustainable growth. Our goal is to become a leading player across product categories and achieve double digit market share in the Indian white goods market over the next decade. We believe that our new factory will help us deliver this ambitious goal and make a significant contribution to Indian economy.