Corporate: Kodak's New Picture

STRATEGY
KODAK sets the cameras rolling

Post-revamp, KODAK has emerged as an aggressive player ready to take on the competition and tap into emerging hi-tech avenues.

By Nita Jatar Kulkarni

Humayun Dhanrajgir has an old-worldly charm that sits uneasily with the cut-throat competition he faces. But underneath, the genial and aristocratic 62-year-old Managing Director of Kodak India means business. Back in 1994, Kodak India, a 74 per cent subsidiary of the $14-billion US giant Eastman Kodak, was almost being written off. Competition from aggressive Japanese players like Fuji and Konica had dented its bottomline. In fact, in 1994 and 1995, Kodak India would have racked up losses if it hadn't sold prime Mumbai real estate.

Fast-forward to the present, and a whole new picture emerges. In 1999, Kodak India's turnover more than doubled from Rs 244 crore in 1996 to Rs 592 crore, and profits grew ten-fold from Rs 2 crore to Rs 25 crore. Last year, its turnover rose Rs 100 crore. The trend continues. In the first quarter of 2000, the turnover was Rs 170 crore (up from Rs 143 crore in Q-1, 1999) and profits Rs 12 crore (up from Rs 2 crore in Q-1, 1999).

Dhanrajgir attributes the turnaround to a complete overhaul of the company's operations. ''After the mid-1990's, everything was revamped,'' he says. A successful downsizing of staff levels was carried out. Departments like infotech, manufacturing, and servicing got a face-lift. Kodak's aggressive expansion of distribution infrastructure helped. From a network of 170 Kodak Express stores in 1995, the number of retail outlets has risen to 600, covering 224 cities and towns. ''The real jolt to the competition came when we expanded our distribution set-up,''adds Dhanrajgir.

Kodak still claims a 50 per cent share in the massive photo film market though Konica comes close with 40 per cent. Kodak has bounced back in the recent years, and expects its marketshare to go up 10 per cent this year.

Towards a Photo finish

To be sure, that is partly because the market has grown over the years. The consumer imaging market is growing at a rate of 15 per cent per annum. Says Dhanrajgir: ''There has been an explosive growth in consumer imaging.'' Indeed, as much as 55 per cent of the company's turnover comes from consumer imaging. Even so, Fuji and Konica have made life tough for it with low-priced products. For instance, Konica VX100 film-roll is priced at Rs 75 while Kodak's cheapest colour film is priced at Rs 95 (Kodak Gold 100).

Last year, Konica upped the ante by launching the Centuria series with two variants priced at Rs 90 and Rs 120, respectively. In contrast, the Kodak Max, a premium film, sells for Rs 130. ''Konica provides quality products at reasonable prices,'' says M. Chiga, 42, General Manager, Konica India. New-comers like Konica have adopted a low-price strategy for good reason. Says Anuraag Dabral, 29, Senior Consultant, KPMG: ''Fighting Kodak, which has a direct presence here, is difficult. Konica has no choice but to fight on price.'' But most analysts see Konica's low pricing as unsustainable. Already, Konica has appointed cricketer Ajay Jadeja to promote its films and is planning to ramp up its ad budgets. Kodak has traditionally been a big advertiser. ''Our ad spend is 5 per cent of our sales,'' says Rajesh Singh, 44, Senior Vice-President (Consumer Imaging), Konika India.

Kodak is countering the threat by targeting new users. ''We are not competition-focused, but market- driven,'' says Singh, who has a three-pronged strategy for growth: seed the market, focus on building the brand, and enter new distribution channels. The company expects to prime the market for films by selling cameras. Kodak's strategy of introducing affordable cameras has already shown results. The launch of KB 10, an inexpensive manual camera, in 1997 for just Rs 995 was a huge success, and it is now the largest-selling camera in the country. In 1998, Kodak launched the KE series of easy-load cameras, priced in the Rs 2,400-3,500 range.

Framing the Market

Kodak's camera sales have increased from a mere 50,000 a year in 1995 to five lakh units today. Not only do camera sales seed the market, they also enhance the Kodak brandname, encouraging consumers to buy its rolls. The competition is taking its cue from Kodak. Says Chiga of Konica: ''It is important to introduce economically-priced cameras. Konica is working on it.''

With a low per capita consumption of film-rolls (0.1 rolls versus 7-8 rolls in the US and 0.5 rolls in China) and the lowest penetration of cameras (72 million cameras in 1999), everybody expects the Indian market to boom. Says Toral Modi, 29, Analyst, Indiainfoline: ''This market is seeing a steady growth as usage of cameras is going up'' Agrees Dabral of KPMG: ''Indians are going to take to photography in a big way.''

At Kodak, Dhanrajgir is banking on his distribution strengths to tap that potential. Now, Kodak wants to expand its network by selling through non-traditional channels like paan shops groceries, stationery, and chemist shops as well as telephone booths. ''We want to tap unconventional distribution channels,'' says Singh.

Kodak's consumer imaging thrust is understandable. Although Kodak has an 80 per cent share in motion imaging films, growth has plateaued at 5-7 per cent. And, although the margins are healthy, the business is risky.

The Perfect Picture

Dhanrajgir sees great potential in digital imaging. Says he: ''Eastman Kodak spends the maximum on R&D for digital products.'' The market for these products is set to zoom, but the base is still small, and it will be some time before the company sees significant volumes. One of the main obstacles to growth here is the high (68 per cent) duty level. ''Kodak expected duties to be brought down, but this has not happened,'' says Indiainfoline's Modi. But although Kodak is lobbying for lower duties on digital cameras, the sharp focus is still on the consumer imaging market.

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