Videocon puts mobile phone plans on hold

Will instead grow its consumer durables, exports businesses.

Given the tough economic environment, consumer electronics company Videocon Industries has decided to delay its foray into the mobile phones category by a year. It has also decided to put on hold its plan for a consumer electronics retail foray across West Asia, Europe, Africa and Latin America under the brand name ‘VC’.

Instead, Videocon will now concentrate on streamlining operations and expanding its home appliances categories, growing its consumer durables’ business, which remains the core of the $4 billion conglomerate with business interests in diverse areas such as glass shells, picture tubes, consumer electronics, home appliances and oil refining.

The company clocked sales of around Rs 3,600 crore in its durables business last year and plans more efforts to improve efficiency. “We are targeting a Rs 5,000 crore turnover through innovation, consolidation, entering new categories, improving productivity, and profitability at various levels such as logistics and human resources, among others,” K R Kim, its vice-chairman and chief executive officer, told Business Standard.

To start with, Videocon will launch its range of water purifiers under the Kenstar brand. It has also ventured into the power inverters and battery business with the launch of its ‘UPS-H’ product range under the Videocon brand. The product range will have three variants and is positioned under Videocon’s new home appliances (NHA) segment. It plans to pursue a target of Rs 250 crore in 2009, and aims to double its revenue to Rs 500 crore by 2010 and further to Rs 1,000 crore by 2011.

“We can also grow through categories such as mixer grinders and make the small appliances division touch Rs 1,000 crore by 2011,” Kim said.

Videocon will also invest Rs 150 crore in R& D innovation and sourcing. “We hope to improve the productivity by 30 per cent through regionalisation of sourcing,” he added. So far, Videocon’s Aurangabad factory was sole supplier for the company. Kim has made it mandatory for each factory to purchase. “We can now reduce the burden on the Aurangabad factory while reducing cost and improving efficiencies. There are many such innovations on the level of operations that will help us achieve our revenue target,” Kim explained.

Further, the company plans to open its exclusive Videocon Digi World stores for retailing all its brands — Videocon, Kenstar, Electrolux, Kelvinator, Sansui, Akai and Hyundai — under one roof. It hopes have around 100 such stores from the present 11 by the end of this year. Modern retail at present contributes only 5 per cent of sales for the company. The company will outline a separate strategy for each of its brands. “Since we are restructuring the business, we are not bothered about market shares at this point. The aim is to see the long-term picture,” Kim added

Plans to grow exports are in place. “The new focus areas such as small appliances and inverters will help grow our overseas business,” Kim said. He has set a target of growing exports to Rs 100 crore by 2011, from Rs 250 crore this year. It already has significant presence in Latin America, West Asia and parts of Africa. It has one manufacturing facility in Muscat so far.

Unlike its Korean competitors, LG and Samsung, who are striving to achieve a more premium image, Videocon will continue to grow as a mass to premium brand. “It is about where the profits are,” Kim said adding, “ We cannot ignore the mass end which drives volumes.” The company has a 80: 20 ratio of mass to premium products.