Corporate: Competition - Badshah BPL!

COMPETITION
Badshah BPL!

The consumer durables company is holding its own against the transnationals in a long, grim battle.

By Dilip Maitra

Half an hour every morning is what Ajit Nambiar, the 36-year-old CEO of BPL, devotes to the e-mails he gets from the consumer electronics and appliances giant's customers. BPL's call centres selectively re-direct customer-calls through the Net to Nambiar. He says: ''This is one way I keep in touch with the market.''

He'd better. BPL, which is the country's largest producer of CTVs, also sells audio systems, refrigerators, washing machines, and vacuum-cleaners. The company is fighting a grim battle to hold its own in the competitive consumer-durables segment. In a no-holds-barred environment, the good news comes mixed with the bad for BPL. The Rs 2,128-crore company has maintained its 20 per cent marketshare in CTVs. It sold 1.13 million CTVs in 1999-2000. This is 42 per cent more than its nearest rival, Videocon. According to ORG-MARG, BPL now has market leadership in five CTV segments: 14, 20, 21, 25, and 29 inches.

The price squeeze

But this has come at a price. Intense competition and price-cutting by brands such as Aiwa, Akai, and Sansui has forced BPL and other players to drastically reduce CTV prices. Since CTV sales account for 55 per cent of BPL's turnover, the falling unit price has stunted the value growth. The company's turnover increased by only 4 per cent and net profits by 4.5 per cent last year, against the last five years' average of 14 per cent growth in sales and 25 per cent growth in net profits. What helped BPL keep prices low and margins stable was the company's ability to manufacture nearly 90 per cent of the components that go into its CTV.

But that hasn't stopped BPL from taking two horrible beatings. One, the sales of its audio systems nosedived from around Rs 140 crore to Rs 50 crore in 1999-2000. Crows a senior executive in Baron International, which markets the Aiwa brand: ''Traditional players like Philips and BPL could not cope with technological changes and have been kicked out of the market.'' In the same period, BPL lost 10 per cent marketshare in the frost-free refrigerators segment.

If BPL has managed to hold on to its lead in the competitive CTV marketplace-which has seen an invasion of 10 transnational brands in the last five years-that's largely because of its huge investments in brand-building. According to Gallup India, BPL is the country's third-most recognised brand, and the most recognised domestic brand among consumer durables. In the last three years alone, BPL has spent Rs 225 crore in advertising and brand-promotion. Says Francis Xaviers, 46, the CEO of Chennai-based consumer market consultant Francis Kanoi Associates: ''No brand even comes close to half of BPL in terms of brand-recall.'' Agrees Suma Nair, 28, business analyst in the financial portal Indiainfoline.com: ''BPL has a track record of establishing a powerful brand image and having an unmatched distribution channel.''

Betting on the brandname

Brand-building will continue to be the cornerstone of BPL's CTV strategy. In an age where consumers find it difficult to distinguish between CTVs, BPL obviously feels that branding is a key differentiation tool to rise above the clutter. For instance, BPL also advertises for its digital range of products and web-enabled CTVs though they do not add to the top- or bottom-line. The technological image is everything. However, there are sceptics about the viability of this strategy. Devina Mehra, 35, Director (Research) at the Mumbai-based First Global, feels that the CTV business is gradually becoming commodity-driven, and that brands will slowly become insignificant. Says she: ''I do not think that within the top eight- to-ten brands, the consumers will differentiate much between the brandnames.''

Of course, BPL's distribution network has worked in its favour. The company has spread quickly to every nook and corner of the country. Its number of dealers has gone up from 4,500 in 1997-98 to 5,500 in 1999-2000, and the number of exclusive showrooms from 90 to 200. The company is today present in all cities having a population of 50,000 and above. That gives it-for now-a major competitive advantage over the transnational brands.

In a strange contradiction to its brand-building strategy, Nambiar has realised that he cannot hold on to BPL's premium pricing tag. The fact is that Aiwa's CTV model Aiwa 219-which set the market on fire by selling 21-inch models at sub-Rs 10,000-was the single largest-selling model in the 21-inch category in 1999-2000. This has willy-nilly forced BPL to enter all the price segments of the CTV market in the country, ranging from Rs 6,000 (for the 14-inch model) to Rs 60,000 (for the flat-screen 29-inch model).

In fact, BPL is currently test-marketing a new lower-priced CTV brand called Evelux, developed jointly with a Slovenian company, that will be sold in the price range of Rs 6,000 to 12,000. When rolled out nationally by the end of 2000, Evelux will compete with cheaper brands like Aiwa and Sansui. Explains Nambiar: ''It's a fighter brand that will work at the lower end of the market.'' However, the continuous focus on the CTV market has taken its toll on BPL's audio and refrigerator businesses.

Waiting for the big bang

The company is now reviving its audio business by launching a new range of CD-players in 2001. Says Nambiar: ''Wait for the big bang in audio. We will storm the market with an array of new products.'' Nambiar has now merged BPL's refrigerator and appliances companies to better harness the synergies. The company has also introduced conventional (non frost-free) refrigerators. It has also developed the Converti, which converts the deep-freezer into a refrigerator at the turn of a knob. Now, if only BPL could transmit strategy that effortlessly to warm up the troubled audio and refrigerator segments.

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