VP Marketing | 22 Jan 2004
“BPL is most often associated with trust. We want to build on this trust and make it an innovative, hi-tech, fun filled brand in the consumer durables section. We have trust as our platform and want to grow beyond it, as trust in the consumer durables section is hygiene: good product, good distribution, good brand. But when a consumer goes out to buy, he has to see something new all the time.”
Currently with BPL as its VP Marketing, Sharad Mathur has acquired a fine understanding of the consumer durables market, having earlier worked with the likes of Godrej and Whirlpool. Along with this, he also has to his credit a two-year stint at ICICI Prudential Life Insurance. In this conversation with Shubha Kumble, he chalks out BPL’s comeback plans, offers optimism about the consumer durables industry and shares his views on where the market is headed.
Q. There has been a lasting stagnancy in the consumer durables sector. What caused it?
According to me the consumer durables sector, speaking mainly about the CTV business, is not sluggish. It’s very linked to the World Cup. Last year, for example, up to March, the market grew at a rate of near 33%, which is phenomenal. Normally the industry grows at about 12%. Post World Cup we knew it would be slow, in fact it was at around minus 13% in the first six months. But this was not worrisome, as we knew it would kick back in.
Q. What should help the sector bounce back?
In the CTV sector there are two big things happening. Essentially the market is price driven. Flat TV rates are coming down drastically; so much so that they are now almost at par with the regular 21 inch TV which forms the belly of the market. People need a reason to upgrade and this higher technology at lower price has proved to be a very good reason. Earlier it was the 100 channels concept that drove the market as there were so many new channels coming in. Now the reason is the flat TV, which along with price is driving growth. Another factor that is pushing it further is big screen. With prices of these products coming down and expected to get lower, growth is going to get back. Another important factor is that import duties are coming down so that will reduce the price further. So basically there is no reason to be negative as the market is all set to improve.
Q. Is price still a driving factor?
Sixty percent of the people who are buying a TV are doing so for the first time. So that clearly indicates price as an entry. Better products at lower prices also means more people are going to upgrade from a B&W to a CTV. The same will apply to a move from a regular 21 inch to a flat TV. That’s the reason why the market will be bullish over the next six months.
Q. Though the market is feeling optimistic, BPL itself is not doing too well…
BPL in terms of CTV is holding around 6% share for almost a year now. The company is undergoing financial restructuring which is essentially to retire high cost debt to lower cost debt. We have tied up with European funds, which are low cost, we are also looking at our technology partner, Sanyo, for help in us get low cost funding from the EXIM bank equivalent of Japan. We are also looking at equity coming in from Sanyo.
Q. Besides financial problems, has the BPL brand has lost a bit of its glory?
Even as late as 2002 end, BPL was the most preferred brand in CTVs, which was mainly because of the momentum the brand had acquired over the years. However, we are unable to ship as much stock into the market and make the preference share equal to the market share. So this is the basic problem that is slowing us down. We are looking at concluding a lot of restructuring in the first quarter of 2004 and building the brand back. We have not been investing in the brand for the past one and a half years and that will be a focus.
Q. What kind of investments will BPL be making?
We will be investing heavily in brand building. We are looking at matching the spends of our competitors.
Q. Most of your competitors have allocated around Rs. 60 crores as their ad budget. So it that the figure you will be looking at?
Yes, the number 60 comes after benchmarking what the top three or four brands in the sector are spending. But in this, Rs. 45 crores is spent on TV and the print media. The rest is made up of out door activities and other forms of promotion.
Q. Will there be a change in BPL’s positioning?
Due to the momentum gained by the brand over the past decade, BPL is most often associated with trust. We want to build on this trust and make it an innovative, hi-tech, fun filled brand in the consumer durables section. We have trust as our platform and want to grow beyond it, as trust in the consumer durables section is hygiene: good product, good distribution, good brand. But when a consumer goes out to buy, he has to see something new all the time. That’s very important.
Q. Is there a possibility of BPL inviting a fresh pitch?
We have not done too much in terms of advertising and brand building in the last 8 months. So a lot of water has passed since then and the Saachi team might have changed as well. So we first need to connect and see how it goes. After our talks if we click then we are happy to work with them and if not, we are equally open to a new agency.
Q. What marketing strategies will you be applying?
BPL being a national brand has to get out and reach those consumers sitting in the sub 50,000 population towns. So television due to the efficiency of its reach will be the preferred media vehicle. Apart from this, there is a fair amount of promotion required in terms of offers, changes, 0% finance that is normally done through a combination of medias. It is important to be in the consumer’s consideration. So it’s important that the consumer sees the brand and carries a positive image of it as he walks into the store. When in the store, there has to be an attractive line up of products with benefits that are new, unique, affordable and cater to all consumers. A fair amount of merchandizing and a trained manpower also needs to go in.
Q. How far will this go in bringing BPL back?
We had managed to hold on to our 18% market share for a couple of years even after brands like Samsung and LG made their entry. Because of the investment these companies are making on their brand and product, BPL started slipping. While in the long-term we may not be able to regain our 18%, we will certainly be seen among the top two or three brands in the sector. With the current spend levels, we should be able to hold our share if not increase it. We are looking at supplies improvement and our brand building should pay off.
Q. Which sector of the consumer durables market would you say is poised for growth?
I would say it is the CTV sector. Simply because of the rapid rate of innovation in the sector, it offers a reason to upgrade. Another factor is competitive pricing, which encourages first time owners to join the market. Also the display impact of CTVs is immense. You will see five star lobbies, and post World Cup the trend of going into sports bars has picked up. So you see large plasma TVs in restaurants, pubs, lobbies and other public areas. With prices coming down, we will surely see these products moving into homes. A washing machine on the other hand or say a refrigerator does not offer a big enough reason to upgrade. When people don’t see a real and significant reason, they are not compelled to replace their existing models.
Q. What new products does BPL have to offer?
We have launched a new product line in the convenience platform with a feature called i-sort. Its very unique as it actually helps you in intelligence sorting so you can label all movie channels on one key, all news channels on one key and same with sports. We are looking at developing the convenience platform and have already launched 4 models in this series last month. The other area of development is the Swarn series of products which offers a strong value proposition for the consumer. This is again targeted at the entry level. We will be launching several new models in
Q. Speaking of the entry-level products, will your focus be on the rural sector?
Let me define rural as sub 10,000 or sub 20,000. I would say yes, the big growth would come in not necessarily from the metros. At the entry level it will come in from the B category down and the C category down. This will require an extension of distribution and this is what a lot of companies are working on. Everybody is headed out there as that is where the numbers are coming from. However, products like the flat TV sells in the metros in Delhi, Mumbai and even Bangalore with close to 30 – 50% sales coming in from these cities. But if we go the smaller towns, it would be the entry level that is popular. So while rural is an opportunity, the true rural in India still faces problems of electrification as 55% of India still lacks access to electricity. So while we see that sector as an opportunity, we will not go rural-rural. We will be looking at the sub 50,000 or sub 100,000 population areas.
Q. How do you see the consumer durables sector faring? And what share is BPL hoping for?
The washing machine sector will be flat, the refrigerator market will grow in double digits, while the CTV sector will see a growth of around 12- 16%. BPL would be looking at a share or value share of abt 15%. We are significantly stronger in electronics and not so much in home appliances. So that’s an area to look for some development.