Videocon: A price warrior chants the tech mantra

Videocon wants to beat the MNC brands at their own game; targets the premium segment in small towns and metros

Having lost out to multinational players in the consumer durables segment, Videocon Industries is fighting back. It has chalked out a plan that envisages doubling its turnover from the consumer durables segment over a span of three years. The current turnover from the consumer durables business stands at around Rs 9,000 crore and it brings in almost 80 per cent of the group's revenue. The group is banking on technology to drive its brands into the premium segment, instead of price which has been its strength in the past.

Technology has been the preserve of MNCs so far. Korean and Japanese companies like LG, Samsung and Sony have all depended on their technological superiority to invade the Indian markets since early 2000. Now Videocon wants to wear the same mantle. Akshay Dhoot, who heads technology and innovation at Videocon, is the son of Rajkumar Dhoot, founder of the group. He took charge in early 2014 and is seen as the man behind the technology focus. He says, 'There is a change of mindset. Before we used to focus more on cutting down the costs, that focus has changed and; I feel for good. Now, the maximum research is on increasing the features of the product.' Its new avatar, Videocon hopes will provide it with the impetus needed to increase market shares and boost its bottomline.

The premium trail
Videocon has doubled its headcount for R&D to 250 over the last four years. 'We have removed a cap on our R&D expenses for the next three years, this is our priority,' says Sunil Tandon, CMO at Videocon. Why is the company focused so keenly on bringing the best technology home?

One reason could be that the company, despite spending over a decade in the business has not been able to push its brand into the top league. It has been attentive to price since its customers, largely in tier two and three towns, look for affordable brands. By getting innovative with its tech features, the company is tapping into the premium market in these towns and also, perhaps, the metros.

Videocon has decided to charge a premium of 15- 20 per cent on the new products in its portfolio. 'More and more of our products are now being shifted to the premium range, now almost 50 percent of our sales will happen in the premium range and it is happening across category, going ahead we want to be a major player in the premium range,' says Dhoot. The company, in response to OLED TVs from LG, has introduced Liquid Luminous TV sets which has the same features but is more affordable. These sets are priced at around Rs 25,500 while the OLED starts at Rs 2,89,000. 'Whenever a new technology comes to a product, its price remains high. Gradually cost starts falling up to a point when it can become commercially successful. We are trying to reach that point,' says Dhoot. The company is pushing its research teams to come up with new features across all segments - be it air conditioners, refrigerators, televisions or washing machines.

The company recently launched air conditioners with a new technology that it calls 'quantum edge', which is used for cooling in extreme conditions. 'But there was the problem of these ACs guzzling more power, our team increased the efficiency and the Bureau of Energy Efficiency (BEE) gave it 5 star ratings,' says Tandon.

Beating the rest
Industry insiders are not convinced about the company's ability to wrest the throne in the consumer durables market.

It is a long and difficult race, they say. 'This is a marathon, the Koreans and Japanese brands still rule in the premium, innovation-led space across categories, Videocon has to prove that it has stamina for it,' says a senior executive.

Besides it takes time and perseverance to build trust in a brand which is a key factor in purchase decisions in the segment. That is another hurdle the brand has to cross. The company seems to be aware of the challenge given its recent advertising blitz and the appointment of Shah Rukh Khan as its ambassador for the new products.

Videocon however is optimistic and; some also point to the Voltas example in its support. Voltas has been successful in changing brand perceptions in the AC market and is giving the market leaders a run for their margins and rankings. But Voltas has the advantage of being a part of the Tata brand and hence, holds an edge. Can Videocon emulate the same model?