Point of ContactMs Garima, Senior Manager, MagppieMr Vivek Jain, Director Ice Cubes, MagppieMr Viren, Manager, Ice Cubes, Kirti Nagar Showroom, Delhi

Modular Kitchen IndustryModular Kitchen is a term used for the modern kitchen furniture layout consisting of modules (units) of cabinets made of diversified materials which hold accessories inside, which can facilitate the effective usage of the spaces in a kitchen

Originated when the ideas for streamlining work spilled over into domestic kitchen architecture because of a growing trend that called for a professionalization of household work during the late 19th century.

An estimated Rs. 2 lakh crore kitchen furnishings market in IndiaSource: IndiaRetailBiz interview of Vinod Jain, MagppieModular Kitchen Market Size:1700 croresLess than 2% , market penetrationLarge number of foreign and local players in the market trying to establish their brand All players trying to scale up their retail presence radicallyUnder a new method of defining 'affluence', based on lifestyle and consumer durables ownership, Nielsen Company India launched the Nielson Upper Middle and Rich (UMAR) Survey which estimates a total of 2.5 million affluent household in India of which 40% has modular kitchen.Consumers need to be offered a complete solution such as installation, after sales service and maintenance.

Magppie International A 30 year old family run business.Started with the business of rolling stainless steel.In 1990, got into the fabrication business.In 1998, brand Magppie was launched.First design driven stainless steel home accessories brand to be launched in India.Presence in over 20 countries.Forayed into retail with the opening of exclusive boutiques.

Financial SummaryIt is a family owned business and thus do not have external shareholders The company has taken only long term loans. Thus it doesnt depend on banks for its working capital requirements.Sources of Financing : Magppie has an investments arm that has a strategic alliance with Birla Sun Life Insurance. The sales have increased to 450 Cr in 2009, showing a growth of 23.4 % year on year.Operating profit has grown by 18 % per annum. The reported net profit has grown by 14.8 % (y-o-y). Thus, the expenses of the company (as percentage of revenue) have increased, as the organisation has expanded.Debt-Equity ratio (currently = 1.98) has increased over the past five years(2004-2009) as the company has started expanding its operations rapidly.The various turnover ratios (creditors, debtors, inventory turnover) have remained nearly constant over the period of five years, indicating that the expansion has been in line with the market demand for their products.

Ratio Analysis Solvency Ratios (useful for long-term lenders) Efficiency/activity Ratios (helpful to assess the efficiency and effectiveness of management)

Icecubes A new venture of Magppie International.Started in 2007.Products are manufactured in India.Modular Kitchen Range designed by a team of Indian & Italian Designers.One company owned showroom in New Delhi.4 Franchisee showrooms (Lucknow, Jaipur, Jalandhar, Kanpur )

Market Share (India)Source: Mr Viren, Magppie

Source: Mr Viren, Magppie

Chart1

200

1500

Sales

Total Market Size 1700 Cr (2009-10)

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Sales

Branded - 200200

Non Branded - 15001500

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20

180

Others include: Veneta Cucine, Poggen pohl, Aran Kitchen World, Elevator, Godrej

Sales

Market Share in branded category 2009-10

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Sales

Magppie - 20 Cr Expected20

Others - 180180

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Ice Cubes Product PortfolioModular Kitchens

Price: Rs 4 lacs onwardsConstitutes about 95% of sales

Wardrobes

Price: Rs 1 lac onwardsConstitutes just 5% of sales

Competitor AnalysisMostly Foreign Competitors.Major competitors are Veneta Cucine, Poggenpohl , Aran Kitchen World & Hacker Kitchens.None of the Foreign brands have manufacturing facility in India.

Veneta CucinePresent in India for the past 17 years.27 company owned outlets.Biggest player in the Branded modular kitchen Industry.40 models to choose from ,with finishes & colors in over 300 combinations.Price range starts from 6 lacs.Delivery time is 4 months.Life time warranty.

POGGENPOHLOldest & best known modular kitchen brand in the world.Present in 70 countries.Three outlets in India (Mumbai, Bangalore and Delhi)Price range starts from 8 lacsHigh build QualityDelivery time is 3 months.Warranty of 4 years.

Aran Kitchen WorldJoint venture of Aran, Italy & Kitchen World, India.Have five company owned outlets (Delhi, Bangalore, Coimbatore , Mumbai & Chennai).Range starts from 4.5 lacs.Guarantee of 1 year & warranty of 11 years.Delivery time is 3 months.

Company Operations

Supply Chain at Magppie Ice Cubes

Suiting Indian NeedsExtensive research on the Indian kitchen requirements.Use Boiling Water Resistant (BWR) Ply as a base material for cabinetry, which is better suited to the Indian climatic conditions and cooking styles. Brand Philosophy as a brand creating kitchens that can be heart of an Indian homeBetter quality in half the price of the foreign competitor.

Emerging ScenarioExpected growth rate for the industry is 14 % for the coming financial yearExpected growth rate for Icecubes is 35-40 % Indian manufacturers like Elevation, Godrej & Prestige are coming up with modular kitchens at much lower price

Decision Dilemma Whether the company should continue to target the luxury segment or the company should foray into the low cost modular kitchen segment?

Whether the company should expand solely through franchise model or through company owned outlets?

Strategic IntentMission: To produce kitchens by making a craftsman's expertise available to new trends and to render design an accessible value.

Purpose: Making design accessible

Objective: To become market leader in modular kitchen industry

Goal: To increase its market share from 10% to 25% within 5 years.

Environmental AppraisalEconomic:

Technological:

Increase in per capita income Increase in interest rates on home loansGDP increase

Designing Softwares for CustomizationDevelopment of synthetic materials

Environmental AppraisalSocial:

Market and Regulation :

Status ConsciousnessRise in disposable incomeIncrease in on the move jobs

High competition from international playersHigh market growth51% FDI cap on single branded retailing

Organizational Appraisal

Marketing RelatedFinance Related

Product QualityPrice Brand RecognitionPromotion

Cost of capitalReserves and Surplus

Operations Capability Factors

Production & OperationsServicesR&D System

RecommendationsNot to enter the low end segment.They will have to compete with Indian Brands like Godrej, Prestige whose brand perception is very high.The market for high end segment is increasing as conveyed from the ETOP. Existing operational & financial capability doesnt justify this mode.Itll not be in sync with the Magppies brand identity.

RecommendationsOpening company owned Showrooms:Since the brand perception of Icecubes is very low, so they wont be able to expand rapidly through Franchise model.

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