Taking lessons from the slow offtake last year, refrigerator manufacturers such as LG, Samsung, Godrej and Haier will introduce a wider range of models in new capacities this year, besides reverting to their reliance on the direct-cool models.
Last year, most majors shifted focus to the high-end, frost-free segment. This year, direct-cool is equally important. Frost-free refrigerators gained popularity since they don’t need manual defrosting, are easy to maintain and the price difference between the two segments has narrowed considerably. In a direct-cool refrigerator, cooling is by natural convection. Direct-cool models consume less electricity, but frost-free ones are able to keep food fresh for a longer period.
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At present, the direct-cool category accounts for 70 per cent of sales, say observers. The ratio, however, is expected to change to 50:50 in the next couple of years. Frost-free fridges cost between Rs 13,000 and Rs 2,25,000, while the direct-cool models are available from Rs 6,000 onwards.
“It is important to have the right products in the direct-cool segment, since the bulk of demand for the category comes from first-time buyers in Tier II & Tier III towns, which haven’t been directly hit by the recession. There is also sufficient cash flow in these areas,” said George Menezes, COO of Godrej Appliances.
Explaining why frost-free models sold more in recent times, he said, “With changing lifestyles, Indian consumers are willing to experiment and buy high-end products which offer enhanced features and convenience.” Godrej is betting big on its direct-cool range, introduced with new power-cool series compressor and door designs. This year, it has introduced new capacities such as 230 litres, 270 litres and 290 litres, giving more choice to consumers.
Overall, the refrigerator category grew 10 per cent in 2008 and its volume-driver, the direct-cool segment, grew only 3-5 per cent, against 7 per cent in 2007. Overall, the refrigerator category is pegged at Rs 5,200 crore. Around 4.6 millions units were sold last year.
Last year, every fourth refrigerator sold was initially expected to be from the frost-free category, with the segment expected to generate sales of Rs 2,000 crore, an over 50 per cent growth. However, a short summer season, coupled with price hikes and lower consumer spending on the back of a slowing economic environment, slowed the growth in the category to 15-18 per cent, as against 25 per cent in 2007.
Korean company Samsung expects the frost-free category to contribute to its sales in a big way, even as the demand in the rural markets is expected to be led by the direct-cool models. “We expect frost-free refrigerators to account for 45 per cent of our overall refrigerator sales,” said Ravinder Zutshi, deputy MD, Samsung India, which recorded over 35 per cent growth in the frost-free category last year. This year, Samsung plans to make significant investments in new moulds to strengthen the line-up, besides expanding its dealer channel by 40 per cent.
Given the rise in demand for energy-efficient products, rival LG India has created a new line-up by introducing frost-free models in four-star and five-star rating categories. “All new models have not only undergone immense deliberation but also intensive customer research. With this new range, we expect to increase our market share to 32 per cent in the coming financial year,” said Rajiv Jain, business group marketing head, Home Appliances.
Other refrigerator players like Videocon, Hair and Whirlpool are also betting big on innovations in both engineering and design of their products across categories.