report on branding of havells

7/30/2019 Report on branding of havells

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Note:Home appliance launched by havells comes under the segment

of Electrical Consumer Durables

Why Havells has added this new product line:

The electrical equipment maker is betting big on consumer appliances.

A month before Diwali 2011, Havells India, best known for electrical equipment like switches,

cables, fans and bulbs, launched its range of home appliancesirons, mixer and grinders,

juicers, toasters, electric kettles, and blenders et ceteraunder the Havells brand. The price tags

were premiumabove rivals like Philips and Bajaj and in the same bracket as Morphy Richardsand Oster. The products are yet to roll out nationally. Still, home appliances are fetching Havells

India around Rs 15 crore a month.

Till some years ago, the home appliances market was extremely fragmented. There were a few

national players like Philips and Bajaj, but there were powerful regional and local brands.

Production was in the small-scale sector and tax evasion by factories was rampant. Local playerssold at rock-bottom prices. In the last few years, production has moved to the hill states of

Uttarakhand and Himachal Pradesh, where huge tax concessions are on offer. This has almost

killed the small and local price warriors.

The market, according to Havells India Joint Managing Director Anil Gupta, is about Rs 5,000

crore and is growing at 10-12 per cent annually. The premium end of the market is worth almost

Rs 500 crore. What perhaps gave Havells the confidence to launch home appliances was thecompanys performance in other consumer categories. In switches, it has cornered almost 20 per

cent of the market, 15 per cent in fans, 20 per cent in cables and 12-13 per cent in lights and

fixtures. Internal research has shown that people now consider Havells a household brand andnot an industrial or backend brand.

Havells strategy has been to leverage its distribution network to launch new products. Thus, it

used the channel for switches to launch fans, lights and cables. Most companies that sell

electrical equipment also stock home appliances. Last year, Havells had launched geysers which

70 per cent of its retailers sell. And now, almost 70 per cent of the retailers will stock the homeappliances also. Qimat Rai Gupta is also hopeful of getting into modern trade and is eyeing good

volumes from the 190 Havells Galaxy stores.

Qimat Rai Gupta knows that the home appliances market is tough. Apart from national playerslike Philips and Bajaj Electricals, there is Inalsa in the east, Maharaja in the north and Preeti in

the south. Havells premium price tags may be fine, but the products need to be properly

differentiated. He lets in that work started on the range almost two years back. Havells had


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acquired Sylvania in April 2007 for 227 million Euros from a clutch of financial investors. The

acquisition came with a design centre at Guangzhou in China. Havells have since expanded it to

about 100 engineers, says he. The entire home appliances range has been designed here,keeping in mind the demands and needs of an Indian housewife. Since Indians do a lot of wet

grinding, the Havells grinders have been fitted with a 900-watt motor. The toaster comes with a

lid so that cockroaches dont get inside when it is not in use.

Almost 60 per cent of the range is being manufactured under contract by five companies in

Uttarakhand and Himachal Pradesh. The rest, says Qimat Rai Gupta, is being imported from

China. The company plans to set up a factory at Hardwar to make some of the appliances.

Legend has it that the name Havells derives from the founder of the company, Haveli Ram

Gandhi (fashion designer Rohit Gandhis grandfather). The company, as well as the brand, was

bought over by Qimat Rai Gupta, a cable dealer in 1971. Anil Rai Gupta, Qimat Rai Guptas son,

says the company had a German association, and thus the Havells brand could have come fromthere. Whatever be the origins, the brand has expanded in the last few years. Of its annual

turnover of Rs 3,000 crore or so, the company sells almost 90 per cent, or close to Rs 2,700crore, under the Havells brand. The other brands in its portfolio are Crabtree (Rs 200 crore per

annum) and Standard (Rs 100 crore).

The company also owns the Sylvania brand. Qimat Rai Gupta says it wasnt chosen for the foray

into home appliances because of its strong association with lighting. Thus, when the company

launched switchgear in the UK recently, it did so under the Havells brand. The Havells prefix, ofcourse, has been added to Sylvania. That association also led to a change in the brand. Earlier it

was Havells. So, Havells Sylvania gave the impression that Sylvania had become a sub-brand.

To remove that perception, the apostrophe was dropped and Havells became Havells.

The campaign for the home appliances range has been created by Lowe Lintas. Some like the

Shock laga campaign worked, some like the one that showed a flood of sweat (because Havellsfan hadnt been switched on) didnt. This time, its a simple campaign that shows the entire

range. Almost 30 per cent of the companys ad budget has been set aside for home appliances.

From home appliances, consumer electronics sounds like the next logical step. Qimat Rai Gupta

says that could happen in the future, but in collaboration with a partner. Unlike what the

company has sold till now, consumer electronics is a technology-intensive market. The

collaboration will perhaps plug that gap. Mr. Gupta says that last year Havells had seriouslylooked at airconditioners. But the hitch was that only 25 per cent of its retailers could have

stocked airconditioners. The proposal was thus given up.


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How this new addition has affected the revenue or salesand total standing of the firm in the market (Change in

stock prices or or image or more market coverage

or)?Havells, already a leading player in the Electrical and Power Equipment Sector, Lighting & Fixtures

Segment and Consumer durables like fans in India has expanded its portfolio into the business ofHome

Appliances. The business is synergetic to consumer durables and will get benefit of Havells brand which

has huge acceptance in fans and geyser market. It has been decided to invest Rs. 70 Rs. 80 Crores

(approx.) in marketing, research and development in this segment range over the next two to three

years. The products were initially sold in top 40 cities through some 4,000 outlets retailing electrical

goods and also through Havells exclusive Galaxy stores.

Havells India, entered the home appliances business in August 2011, is targeting better revenues from

this segment going forward. The company best known for electrical equipment like switches, cables,

fans and bulbs, has launched its range of home appliances - irons, mixer and grinders, juicers, toasters,

electric kettles, and blenders under the Havells brand. So far, it has received tremendous response from

customers to the appliance products. The company targets to achieve around Rs 300 crore turnover in

the next three years from this category. The home appliances market in India is currently pegged at Rs

5,200 crore, where the premium segment has 30 % share, and major players are Phillips, Panasonic and

Morphy Richards. The overall market is growing at 20-25% year-on year. Havells plans to invest Rs 70-80

crore in branding, product development and marketing. It also plans to launch room coolers and water

dispensers in the next six months besides launching 5 more models under its mixer grinder category. It

has tied up with some international players to bring their technology in product development.

Launching its home appliances products in the Andhra Pradesh market, it is targeting 10% market share

in the home appliances market in AP. Havells at present retails its home appliance products in metros

and Tier I cities. It plans to enter Tier II, Tier III and rural markets in three years

A.1.1 Stock Performance since entry into Home Appliances business


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Havells has made a mark in the fan industry in India over short span of time and had reached

millions of homes in India as consumer preference for premium quality. The success in the fan

segment gave us an initiative to launch small appliances. Specifically designed for the changing

preferences of quality conscious customers, the Havells Pro-Hygiene range of appliances, tries

to enhance the overall consumer experience in the modern kitchens and homes. All the

appliances are truly international in technology, design with the highest level of cleanliness andhygiene with ease. Although currently small, the business is progressing well, and has the

potential for scale up by leveraging the existing supply chain and product development. Your

Company is investing behind these categories and building consumer relevance and brand

differentiation through new products, new consumption moments as well as through new

communication. The electrical consumer durables division registered net revenue of Rs 572.08

crores during financial year 2011-12 as compared to Rs 469.15 crores during financial year

2010-11, a growth of 22% .The contribution margins had shown an improving trend with the

similar growth.

Growth in domest ic operations dr iven by l ight ing div is ion and launch

of new home appl iances

Havells standalone revenues increased by 26% in Q3FY12 to Rs. 896 crore from

Rs. 713 crore in the corresponding previous. The growth in top-line was largely


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driven by the contribution from new home appliances, robust growth in the

lighting & fixtures division that reported 28% growth over the previous fiscal, and

an increase in prices to pass on the higher raw material cost especially in cables

and wires division. The sale of home appliances and water heaters contributed Rs

36 crore to the revenues in Q3FY12, as against Rs 15 crore in the corresponding

previous, while sale of fans also picked up to 16% as against lacklustre

performance of most competitors in the fan industry.

Havells standalone growth to be driven by new launches in ECD segment;

l ight ing bu siness cont inu es i ts stel lar performance

Havells standalone revenues, including Standard Electricals, increased by 26% in Q3FY12

compared to Q3FY11, primarily driven by strong revenue growth in the lighting and ECD

divisions. The contribution margins continue to show encouraging improvement, especially for

the lighting segment that benefited from a favourable product mix and reduction in warranty


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claims. The higher realisations in most of the segments helped Havells report a much stronger

EBITDA margin in this quarter. The switchgears segment, that earns the highest contribution

margins, continued to be a laggard in terms of revenue growth because of modest exports in

9MFY12. However, the company has recently launched switchgears in Europe, and expects

revenues of 10-12 million in CY12, which should support growth in FY13 (the revenues fromEurope would be negligible in FY12).

The ECD division posted a revenue growth of 35% benefiting from the launch of home

appliances, with fans growing at a modest pace of around 16%. The sale of home appliances

and water heaters contributed Rs. 36 crore to the revenues in Q3FY12, as against Rs 15 crore

in the corresponding previous (and Rs 18 crore in Q2FY12). Although volume growth in fans

was subdued in H1FY12 because of a moderate North Indian summer, th e growth revived as

per our expectations, with the company witnessing 9% volume growth in Q3FY12. Given the

seasonal nature of fan sales, the growth is expected to continue in Q4FY12 as well. In

Q3FY12, sale of water heaters and launch of home appliances was the major revenue driver

for the segment, but the water heater component is likely to be lower in Q4FY12 which would

be partly compensated by a higher growth in fans and home appliances. We maintain our

estimates for Havells ECD division.

Overall, the ECD and lighting divisions would drive the standalone profit growth of Havells over

FY12(E) and FY13(E), the key driver being launch of electrical appliances. As per companys

estimates, the total market for electrical irons, juicers and mixers is around Rs 4,000 crore, with

the top 2-3 players accounting for more than 40% of the total market. Havells premium

product image and existing distribution channel, which accounts for about 60% of the sales of

home appliances, are expected to help it in pushing the products in the market. Hence we

expect it to capture a modest market share (2-3%) by FY13(E). The company expects revenues

of about Rs. 70-80 crore from water heaters and Rs 100 crore from home appliances in FY13(E),

which would support revenue growth in the segment.


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G. MARKET NEWS


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Does this new line add value or benefit to the

consumer?Why and How?

Havells, India's fastest growing electrical consumer durable and power distributionbrand, launches its premium Domestic Appliances range. This range is designed toenhance the overall consumer experience in the modern kitchens and homes. All theappliances are truly international in technology and design and the range offers differentproduct categories like Garment Care (Steam Iron, Dry Iron), Cooking (Pop-up Toaster,Sandwich Toaster, Induction Cooker, Electric Cooker), Brewing (Kettles), FoodPreparation (Juicer, Mixer Grinder, Blender), Home Comfort (Room Heater).

Fascinated with the consumer preference for Havells world class products,Havells had launched the complete range of small appliances in thepremium category. The idea is not to just provide another product to theconsumer but to provide an experience of comfort, life style and ultimatesatisfaction of the changing needs.

In the past few years, home appliances have seen tremendous advancement in their

features and aesthetics. They have become more powerful, more automated, betterlooking and even more efficient. However one aspect that has not received as much

attention is the maintenance of high standard of hygiene in appliances.

For instance, toasters may offer many innovative features but don't offer the ease of

dealing with dust or bread crumbs. While steam irons may have progressed to provide

multiple temperature settings but have no means to clear sediments and corrosion

particles that get accumulated. In fact, the list can be endless and this is an area of

extreme relevance, given the fact that these appliances handle pretty much all that we

eat, drink or wear on a daily basis.

When Havells created its appliances, it not only strived for the best performance,

features, efficiency and aesthetics but also had a special focus towards hygiene. This

focus started right from the designing and materials to ensure the appliances are able to

maintain the highest level of cleanliness and hygiene with ease. Ensuring that users

only get the best out of these appliances, while still being easy-to-clean. All this

happens as a consequence of sophisticated designing, additional hygiene-focused


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features and the use of the best food grade coatings and materials. Simply put, Havells

extensive range of appliances would add ease and quality in fabric care, food

processing and preparation. They come with multiple best-in-class features which are

not exclusive only to the top range but are offered across most models.

Havells brand endeavor is to offer unique features across all appliances like the Digital

Steam Iron, Perfect Point Steam Iron, Vetro Glass Kettle, Dual -voltage Travel-mate

Kettle, Max cookers with three dimensional heating, Indianised cooking panel in the

induction cooker, unique Pizza Pan Tray in OTGs, LED lit pop up toasters and many

more.

All products are designed and manufactured with world class quality & performance and

come with a 2 year warranty. Our pan-India service setup is committed to offer the best

service, if and when, there may be a need.

Until a decade ago, we would have to go to several shops and stores, to do our householdshopping. Then came the supermarket, and in todays scenario, with Food Bazaars, we have the

option of shopping for everything related to the home, under one roof. Similarly, before theadvent of the departmental store, one would have to go to as many as 10 stores to buy different

items of clothing, accessories and so on. Now, with Pantaloons, Shopper Stop and other suchdepartmental stores, we can be in the cool confines of a well appointed multi-level store that

stocks everything from socks, to suits, to shoes.

This has meant a transforming change in our buying habits and patterns. Gone are the days of

store-hopping, and in are the times of the all-under-one-roof convenience. So why must it be anydifferentwhen it comes to our home electrical needs? After all, this too is a widespread productcategory that includes several things that we have to hunt for at different shops. Well, those days

of hunting for wires at one hardware store, and switches at another, are also thankfully behind us.

Say hello to the electrical mega-store!

Geysers, Motors, CFL, Wires & Cables, all the way to Circuit Protection, Capacitors, and Fans;

even Lighting and the extremely popular Modular Switches; all this and more is now made bythe same brand, and the choice of brands here is world class and endless. And the best part, these

brands have stand alone flagship stores. Think of them like supermarkets for all your electrical

needs, where under one giant space, you have all the convenience and luxury of experiencing all

these products in real world situations first, and then, buying whatever you need, all at the sameplace!

Companies such as Havells, with their dedicated super stores like Havells Galaxy, have taken thegame to a whole new level. As the name suggests, Havells Galaxy is an initiative taken by the

company for the customers to provide them with the complete range of electrical products

manufactured by Havells and facilitate them with personalized services and support; all under asingle roof! With an already robust network of 190 Galaxies in various cities across the country,


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Havells is quickly adding Galaxy outlets sooner than one can imagine; providing perhaps for the

first time in India, a one-stop-shop for all your electrical component needs, at a single point of

purchase, with world class products

The super store of the 21st century has made strides that are revolutionary, and continues to

innovate and accelerate, and challenge convention. A one stop shop, unlike any other!

Is this new addition is consistent with the existingPortfolio of the company?

The launch of Home appliances is consistent with the existing Portfolio ofthe company as it falls under the segment of Electrical Consumerdurables.Thriving for the leadership position in electrical markets, Havellshas diversified into various verticals of electrical consumer products. Usingthe same distribution network and brand, we had launched over a period oftime, cable, electrical wiring accessories, motors, capacitors, lighting andfixtures, electrical consumer durables including fans and small domesticappliances in addition to traditional switchgear range of domestic andindustrial. Having a product portfolio unrivalled in the Indian electricalindustry, Havells caters to the electrical needs of a household, small

industry, institution and commercial establishment. We have becomeprominent in consumer and dealer space by expanding the productportfolio and selling through the same distribution channel.

In an attempt to promote product portfolio and facilitate the consumerexperience while taking initiatives for our dealers, Havells brought forwardthe concept of Havells galaxies one stop shop showcasing entire productrange. This is an attempt to reach the consumers directly and enhance ourbrand visibility. Owned by our dealers and acting as an alternative businesswhich synchronizes with the existing business; these help to attractpremium customers and provide a unique shopping experience. Thusthrough Havells Galaxies we repositioned the same network channel tocater to the changing demands of the consumers for balancing price withquality, convenience, consistency, innovation and above all to give theconsumer a unique shopping experience.


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Does this line addition provide competitive advantagein the market?

The segments in which Havells operates (except cables) are

characterised by limited capital expenditure (capex) requirements andavailability of outsourcing or imports to meet demand. Consequently,

Havells faces intense competition in most of its business segments.

Although there is only one large company - Crompton Greaves - that is

into similar areas of operation as Havells, low investment requirements

have resulted in significant competition from single-product/segment

companies (referFigure ) and unorganised players. In this scenario, an

established brand name and distribution network become critical, as the

same cannot be easily replicated. Havells ability to differentiateproducts (for instance, introducing additional attributes like low power

consumption and electric shock prevention), and its effective brand

building initiatives, thus, restricts competition from the unorganised

sector to some extent.


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Until 2QFY11, Havells only had fans in its consumer durables portfolio. It enjoys

13% market share in fans, with competition mainly coming from CromptonGreaves, Orient Fans, Bajaj Electricals, Usha, etc. Havells has positioned its fans

in the premium category. Its fan business EBIT margin was 28% in FY10. The

lower end of the market remains intensely competitive, especially for table top andportable fans, and is dominated by unorganized players or Chinese imports. Low

penetration of ceiling fans in rural areas and the construction boom in the urbanareas will drive demand for the product. Havells intends to expand its consumer

durables portfolio by including geysers and irons. It has already launched geysersin 2QFY11 and has been generating decent revenue. We expect geysers to

contribute revenue of Rs400m in FY11, and grow at 35-40% over the next few

years.


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report on branding of havells

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