Philips: Tube talk

Philips has inked a five-year deal with Videocon Industries to market its televisions in India. According to the deal, Videocon will make the TVs according to the specifications and standards of Philips. On the financial side, Philips will get a royalty; the profit or loss in the business will go to Videocon.

This is not the first time Philips has got into such an agreement. Some years back, it did something similar with Funai of Japan for its TV business in the US. The deal proved to be a success and has prompted Philips to try the same in India.

For Philips, the deal means improving the profitability of its TV business in India. At the moment, it is a small player in the market. Sector experts say that Philips’ big problem was reach. The association with Videocon gives the brand access to the Dhoot family-owned company’s strong distribution network. Videocon has access to 5,000 showrooms across the country.

The Videocon association solves another problem for Philips. So far, it has sourced TVs from global manufacturers. Videocon, on the other hand, has large production facilities. So, Philips TVs can now be made in the country. This should keep a lid on costs. “The agreement with Videocon presents a good solution for us to drive profitability in our TV business, while allowing our Indian organisation to concentrate on bringing innovative, high-growth and high-margin products and solutions to the market with a clear focus on health & wellbeing,” says Philips Consumer Lifestyle Vice-president & Sales Organisation Leader Mahesh Krishnan.

Though it has lost market share in consumer electronics, Philips has done well in other spaces like lighting where it has a 35 per cent market share. It is also a large player in household appliances, and has ambitious plans for the healthcare market. It is even trying its hand at “bottom of the market” products like chullahs and lanterns for the rural markets.

All marketing responsibilities for Philips TVs will be assumed by Videocon. “The Philips brand licence will ensure strict compliance with Philips brand rules,” adds Krishnan. But pricing will be determined by Videocon. Philips, for its part, would be hoping that given its premium positioning in the market, Videocon would hit upon the right price points.

While it is unclear how Philips TVs will be sold, Krishnan is hopeful that Videocon will use its prowess in marketing and distribution. Apart from Videocon, the Dhoots have always had a bouquet of consumer electronics brands. Apart from TVs, Videocon also sells air-conditioners, refrigerators, phones, and so on. All told, Videocon has approximately 20 per cent share of the TV market. The agreement with Philips will take off from July 1.