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Desi CTV brands make inroads in rural market, while MNCs slug it out

06-November-2002
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Desi CTV brands make inroads in rural market, while MNCs slug it out

Remember Oscar, Weston, Beltek, Salora, Crown, Televista, Texla and Bush. They were brands to reckon with in the early 80s. Forced out of the domestic market during the CTV boom of the 90s by bigger players, they are on a comeback trail.

Resurgence of Desi brands

After living in near oblivion for a decade, these brands have almost captured 20% of the entire low end of the 6 million units a year CTV industry from about 5% of the market in 2001. With bigger brands like LG, Samsung, Sony, Philips, Onida, BPL slugging it out in the ever saturating urban market, the desi brands made their presence felt in the rural and semi-urban areas by bridging the gap of pricing between B&W TV's and CTV's thus making it affordable.

"Prices of Desi brands being much cheaper than MNC brands especially in the 14" and 20" CTV segment and the VCD standalones has contributed to the resurgence in the rural areas," says Rajeev Karwal, Senior VP, Consumer Electronics, Philips and President Consumer Electronics & Television Manufacturers Association (CETMA).

Major factor for the resurgence

- Pricing. All the players offered 14" CTV for as little as Rs 5200/- thus narrowing the gap between the CTV and B&W TV, which was priced anywhere between Rs 3000 to 5000. This in turn affected the B&W TV market, whose share plummeted from 5.7 million units a year in 1999 to 3.9 million in 2001. The colour TV had a growth of 13-14% per annum.

- Availability of cheap imported components from China, Taiwan and Korea reduced the prices of components by almost 25%. The cost of picture tube, which accounts for 37% of CTV manufacturing cost came down to Rs 2,800 in 2002 from Rs 3,200 in 1999. This helped them to keep their overheads low and to sell more they kept margins also low.

- By keeping their overheads low they have been able to divert the funds into advertising and brand building. Desi brands, which used to advertise its brands on glow signs, banners, wall paintings, had started advertising in the vernacular dailies. According to industry sources, Beltek's adspend have gone up from 4 lakh two years back to Rs 49-50 lakh in year 2002. Salora's adspend have gone up from 1 crore to Rs 3 crore.

- Desi brands managed to fill the vacuum created by Akai and Aiwa. Together these two brands used to sell around 44,000 plus units a month at the peak.

- The big national players like LG, Samsung, Sony, BPL, Philips are not fully focussed on these markets.

With Philips, LG and Samsung trying hard to penetrate the rural market for so long, why does one find the 'desi' brands managing it quite easily? "Lower price and focus on smaller geographical reach due to which they are able to provide better service in that small area and also able to keep the organisational costs down," opines Rajeev Karwal. But at the same time he does not see these brands emerging as big national threats.

Geographical limitation

One major reason, which could hamper Desi brands growth, is the fact that they are focussed more towards the northern and eastern part of India (basically Punjab, Uttar Pradesh, Bihar, and West Bengal). And they have a reason for it also. According to industry sources Northern and Eastern part of India is more price sensitive as compared to Southern counterparts, where quality plays major part in purchase decision. Hence none of these brands have a network of dealers in South.

Even though MNC brands have money power, strong logistics, yet they have not been able to penetrate the rural markets effectively.

One has to also keep in mind the fact that India is a vast and diverse country, spread across geographically, and a market like India does require significant sums of marketing investments, which the local brands do not have to bother about as they operate in smaller territories," counters Karwal.

Says Rajeev Karwal, "MNC's have devised innovative ways to reach out to the rural areas. For instance, Philips has the 'Philips Mahasangram' which is an integrated marking initiative targeted at the rural / semi-urban audience. Philips has over 50% of the Audio Market in these areas."

However, the recent MNC entrants to the market have still to strengthen their presence in the metros and mini-metros, only post which they will think about making inroads in the semi-urban and rural areas.

Can they sustain?

These brands would continue to have a status of niche players in this segment due to their excessive focus on the low-end segment of the market. But it would be just a matter of time when their new found status would be challenged by national players like LG, Samsung, Philips, BPL, Videocon, Onida.

"Till the time MNC brands get over the hurdles in terms of setting up or leveraging distribution channel network strengths, long term investments in promotions, which may not necessarily pay back immediately, and lack of consumer insight and lack of knowledge of Indian customer, and marketing the product in the right manner to them, the desi brands would rule the rural market" says Karwal.

The MNC brands have already started covering these markets with the launch of models having better features, looks and technology. And would soon follow with their own version of low-cost greater feature product.

Big Picture:
Year B/W
(units in mn)
Revenue
(Rs. Cr.)

Colour
(units in mn)

Revenue (Rs. Cr.)
1998 5.90 1,000 3.80 4,000
1999 5.60 950 5.00 5,500
2000 4.50 750 5.00 5,500
2001 3.90 650 5.35 6,000

Source: CETMA

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