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| Havells goes off the beaten track |
| Bhupesh Bhandari / New Delhi Dec 05, 2011, 00:58 IST |
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The electrical equipment maker is betting big on consumer appliances.
A month before Diwali this year, Havells India, best known for electrical equipment like switches, cables, fans and bulbs, launched its range of home appliances – irons, mixer and grinders, juicers, toasters, electric kettles, and blenders et cetera – under the Havells brand. The price tags were premium – above rivals like Philips and Bajaj and in the same bracket as Morphy Richards and 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 players sold 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 the company’s 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 and not 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 home appliances also. Gupta is also hopeful of getting into modern trade and is eyeing good volumes from the 120 Havells Galaxy stores.
Gupta knows that the home appliances market is tough. Apart from national players like 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 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. “We 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 don’t 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 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 Gandhi’s grandfather). The company, as well as the brand, was bought over by Qimat Rai Gupta, a cable dealer in 1971. Gupta, Qimat Rai Gupta’s son, says the company had a German association, and thus the Havells brand could have come from there. 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 2,700 crore, under the Havells brand. The other brands in its portfolio are Crabtree (Rs 2000 crore per annum) and Standard (Rs 100 crore).
The company also owns the Sylvania brand. Gupta says it wasn’t 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, of course, has been added to Sylvania. That association also led to a change in the brand. Earlier it was Havell’s. So, Havell’s Sylvania gave the impression that Sylvania had become a sub-brand. To remove that perception, the apostrophe was dropped and Havell’s 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 Havells fan hadn’t been switched on) didn’t. This time, it’s a simple campaign that shows the entire range. Almost 30 per cent of the company’s ad budget has been set aside for home appliances.
From home appliances, consumer electronics sounds like the next logical step. 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. Gupta says that last year Havells had seriously looked 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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