Marketing: Can BPL Sanyo Play It Again?

Here's a word association foursome for BPL: The Best, Badshah Brand, Bachchan, Butchered.

Yup, all the accolades accruing to India's No. 1 consumer electronics and home appliances brand wash off like cleaning fluid on a CD lens (don't try it!) for the 31,000 shareholders of Rs 83.22-crore BPL Sanyo Technologies (BPL Sanyo Tech). Despite the mighty BPL brand, this manufacturer of audio products-stereo tape recorders and CD players-has been getting a royal battering in the marketplace. Now, Ajit Nambiar, the 36-year-old CEO of BPL, has a plan to rectify matters. Will it play?

Aiwa is the single reason why BPL Sanyo Tech's turnover has dropped to Rs 83.22 crore, or half of what it used to be two years ago. With net losses of Rs 19.55 crore, BPL's marketshare in the audio market, in terms of value, dropped from close to 20 per cent in 1998-99 to only 5 per cent in January-July, 2000. The scrip price is hovering at around Rs 5.70, or almost half of its face value. Says Nabi Gupta, 51, Raymond Group President and former Group Marketing Chief, Videocon: ''The market has significantly moved towards CD-based audio systems and Indian firms could not keep pace with the change.''

Today Aiwa, armed with cheap imports from China, dominates the CD-player market with an invincible 46 per cent marketshare (January-June, 2000), followed by Kenwood, Panasonic, and Sony. Admits L.H. Bhatia, 55, Managing Director, BPL Sanyo Tech: ''Aiwa changed the market completely with its low-priced CD-based system, but we could not change ourselves as quickly.'' BPL Sanyo Tech's two factories (at Palakkad in Kerala and Dodbalapur in Karnataka) bear testimony to a new, imported semi-knocked-down kits world. The lack of support from its main technology partner, Sanyo Corporation of Japan-which is weak in audio-hasn't helped matters.

BPL Sanyo Tech's revival strategy is two-pronged. The first is a continuation of its strategy (initiated last year) to use the idle manufacturing facility to manufacture colour televisions (CTVs). Last year, the company produced 62,638 CTVs and 18,422 black and white TVs. In April this year, BPL Sanyo Tech started producing the Evelux brand of CTVs, BPL's new range to fight cheaper brands. BPL Sanyo Tech's total CTV production in the current financial year is pegged at 2.7 lakh, of which 1.2 lakh will be Evelux and the remaining BPL brand.

The second, and more crucial leg of BPL Sanyo Tech's strategy, is to launch a new range of CD players. It's playing by the new rules of the market (don't manufacture, outsource or assemble). In the old cassette player-based audio systems, the company has pruned the number of models from the earlier 40 to 11. Most of the cheaper models (Rs 2,000-3,000) among them will be outsourced. For CD-based systems, BPL has recently introduced four models. This will go up to 11 models by November (Diwali time) this year.

BPL Sanyo Tech's CD offerings will cover the entire range (from portable CD players to audio/video CDs) and price spectrum (Rs 6,000 to Rs 20,000). Says Bhatia: ''Our pricing paradigm will be similar to that of the Japanese manufacturers. We will aggressively position ourselves against Sony, Kenwood, and Panasonic.'' The sets will be imported from Sanyo's affiliate companies in China. And brand-building will continue to be the cornerstone of BPL Sanyo Tech's strategy.

Fine, but will it work? Early entrants Aiwa, Sony, and Panasonic already have a head-start over older players like Philips and BPL Sanyo Tech. Players like Kenwood, Sansui, and Philips are becoming more aggressive in the middle segment (Rs 10,000-15,000), which accounts for 60 per cent of the CD market in the country. Says Sharmila Sahay, 36, General Manager (Audio Marketing), Philips: ''We shall soon launch a few more models. We have a major plan to revamp our audio line.'' Adds a spokesperson of Baron International: ''You will see 16 new CD-based models-audio and video-from Aiwa, within weeks. Our products will cover price points from Rs 4,990 to Rs 23,990.''

In any case, BPL Sanyo Tech says the lower end of the market is out of bounds. Or is it? BPL, for instance, already has a presence in all the segments of the CTV market. With a lowest CD offering of Rs 6,000, it is clear that BPL Sanyo Tech expects the bulk of its sales to come from the Rs 10,000-14,000 price range. BPL Sanyo Tech's products will be, however, priced at a 15-20 per cent premium to Aiwa's. This pricing strategy is based on the premise that consumers will be willing to pay a little extra for the quality-and after-sales service-that BPL promises to the consumer. While BPL has used this tack to hold its own in the CTV market, it didn't have to deal with a rampaging Aiwa in that segment. The rules of the market have since been rewritten.

In the middle segment, BPL Sanyo Tech will have to fight extra hard to compete with Sony, Panasonic, and Philips, which are nimble in adapting to new technologies, designs, and style. The last big change in the audio market (from stereo tape recorders to CD players) has shown that BPL is a laggard, thanks largely to its technology partner Sanyo. Says Francis Xavier, 46, CEO of the market research firm Francis Kanoi Associates: ''It has been proven in the audio market that if you offer the right features at the right price under a reasonably known brand, you can sell. As BPL Sanyo Tech can offer all the three, there is no reason why they can't survive.''

Rounding The Bend?
Year end March 31	1997-98	1998-99	1999-2000	2000-01**
Sales	162.62	147.11	83.22	200.00
Net Profits	2.07	-12.86	-19.55	-2.00
Equity Capital	17.60	17.56	17.59	17.59
Borrowings	71.03	77.54	52.76*	52.76
Interest Cost	17.68	17.93	13.57	N.A
* Excluding Rs 22 crore received from BPL as advance towards the purchase of the Palakkad plant ** Projections Figures in Rs crore

For now, the company is hard at work getting back into the black. A series of cost-saving measures-including selling its Palakkad factory to BPL for Rs 22 crore-are paying off. Its turnover for the first five months (April-August, 2000) of the current fiscal is up 180 per cent over the same period last year. Net loss has come down to Rs 2.8 crore from Rs 10 crore in the same period. The company even hopes to book a cash profit this year. But make no mistake: despite a great brand, strong distribution, and solid after-sales, BPL Sanyo Tech is battling for survival.