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LG targets corporate segment to bolster room AC sales

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LG targets corporate segment to bolster room AC sales

LG Electronics has identified the corporate segment as an assured channel to bolster sales of its room air-conditioner (RAC) division. This strategy will rope in the telecom sector next year.

The company has tied up with Nokia, Alcatel, HFCL as their sole suppliers for room air-conditioners. It has signed pacts with these telecom players during last few months, and the project will take off in January next year.

"We see a great demand for air-conditioners coming from corporate segment, which includes telecom and banking players," Mr Ajay Bajaj, Product Group Head, RAC, LG Electronics told Business Line.

The consumer durable major had signed up with major banks earlier this year to provide air-conditioning to their infrastructure including their ATMs. It is currently servicing UTI, IDBI, SBI.

"We expect to sell one lakh RACs from this channel next year," Mr Bajaj said.

The RAC industry is growing at 20 per cent compounded annual growth rate and 22-25 per cent annually. The industry sold 11 lakh units in the calendar year 2004 and is expected to sell 14 lakh units in 2005.

LG holds around 34 per cent market share in this industry. It sold four lakh units in 2004, and expects to sell 2.5 lakh in 2005.

"We have set a target of 40 per cent market share next year, which will further contribute Rs 1,200 crore to the coffers of LG Electronics," Mr Bajaj added.

The company has set dual marketing strategy for 2005, which would include providing value for money and asking money for value. The former would target the economy segment while the latter would address the high-end segment.

The marketing expenses lined up for next year is around Rs 50 crore, of which 70 per cent will be spent on mass media and the rest will be spent on below-the-line activities.

Earlier, air-conditioners were a luxury, today it is more like a necessity. Moreover, till last year, raw material prices dwindled, and the benefit was passed on to the consumer, and hence the industry witnessed constant growth.

However, this year prices of raw materials such as steel soared up, and these prices cannot support that kind of growth, and hence the modest target, pointed out Mr Bajaj.

LG's RAC division has around 2,000 dealers distributing across the country. The company will add 400 more next year.


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