Although the fit between the price-champs is perfect, regaining leadership will be tough for Videocon.

By Nanda Majumdar

"I will not rest until I drag Joe (J.R. Mulchandani, the Chairman of Baron International) to the streets. I will finish them!" fumed Venugopal Dhoot, the 45-year-old Chairman of the Rs 3,500-crore Videocon Group at a closed-door meeting of senior officials of the Consumer Electronics & Television Manufacturers Association (CETMA) a couple of years ago. Those privy to that outburst remember dismissing his battle-cry as a sign of frustration. After all, even the mercurial Dhoot could not deny that Baron International's ruthless exchange-deal strategy for the Japanese brand, Akai, had pulled the rug from under the market's reigning price-champ, Videocon International Ltd (VIL).

Fast-forward--and the melodrama is complete. For, the Videocon Group's consumer electronics flagship may now be on the verge of joining hands with Akai Electric, which has all but broken off with its partner, Baron International. But the consummate tactician is neither confirming nor denying his role in the picture-in-a-picture. When approached by BT in early January, 1999, Dhoot only said: "We have not been contacted by them (Akai Electric) so far. If they do, only then will we evaluate the situation. Otherwise, it is hypothetical." While Akai Electric refused to comment on the issue, Baron International's CEO, Kabir Mulchandani, said: "We can stop Akai from entering the Indian market. As per our agreement, Akai has to give us an offer--a reasonable offer--before it can withdraw."

BT learns, however, that the Dhoots and Akai Electric are floating a joint venture, Akai India, to market the Akai range in the country. The deal will make VIL--or, perhaps, even the Dhoots themselves--a 70 per cent stakeholder in the new company. As the CEO of a rival company affirms: "The only Indian player Akai can logically link up with is VIL. Our information too indicates that a deal has been struck between the 2 companies."

Adds S.K. Palekar, 45, Vice-President (Marketing), Eureka Forbes: "Philosophically, both Akai and Videocon are similar. Both have an entrepreneurial, opportunistic streak, and are, fundamentally, aggressive, market-savvy price-warriors." So, BPL willing, two old-new foes-turned-friends will clamber onto the CTV and audio-products brandwagon as one.

Already, the Dhoots manage 4 brands: VIL markets the Toshiba, Kenwood, and, of course, Videocon brands while a group company, Kitchen Appliances, markets the Sansui brand. A potential fifth, Akai will only intensify the Videocon Group's 3-year-old tryst with multi-branding.

Actually, Videocon becomes only the second consumer non-durables company in the country--after Maharaja International's tryst with Electrolux and Kelvinator in the refrigerators market--to manage a basket of unrelated brands across a swathe of product and price segments. Will it work?

MANUFACTURING. Look upstream to spot the raison d'être of VIL's gameplan: its enormous manufacturing capabilities. With annual capacities of 1.20 million CTVs and 1.60 million audio sets--and a fairly integrated manufacturing set-up--the group controls a 35 per cent share of CTV production (including its contract manufacturing business) in the country. With Akai in its pocket, that will go up to 45 per cent--5 per cent short of its 50 per cent target for 2001.

Moreover, the Dhoots are on a production rampage. For starters, Videocon is scaling up the economies in its electronics as well as home appliances businesses. By 2001, VIL plans to beef up its CTV capacities from 1.20 to 2.50 million units. Says Dhoot: "Technology is a purchasable commodity, and India is, undoubtedly, the cheapest production-base. We are consolidating our core strengths in low-cost manufacturing, and going in for global volumes."

Realising the merits of locating its plants close to the market, VIL is also spreading its manufacturing-bases across the country. "This will definitely reduce our labour costs, and also help us cut down unnecessary closures," says Dhoot. Clearly, VIL wants to dominate the market--vendors, distributors, indeed, the entire supply chain--through volumes. Admits the marketing director of a competitor: "When you manufacture at such large scales, it can lead to competitive advantage."

DISTRIBUTION. And then look downstream. Videocon has a 1,000-strong salesforce, 150 service-centres, and more than 5,000 retail outlets. This reach extends to rural India too, particularly in the West. In the past two years, the marketer has been extending its reach by penetrating towns with populations of below 1 lakh; it now plans to target towns with populations of below 50,000. Although Videocon is barely holding on in the metros, the company is reiterating its role of a mass marketer in small-town India. Agrees Francis Xavier, 45, the Managing Director of the Chennai-based Francis Kanoi Associates: "Videocon is well-known even in remote markets."

That's why multi-branding fits into Videocon's belief of maximising its share of shelf-space. Says Nabankur Gupta, 48, Director (Marketing), VIL: "Our assumption is that a dealer does not like to keep the entire range of a single brand, preferring, instead, a few models of each. In a cluttered market, more brands mean larger marketshare." Moreover, with a bouquet of brands at its disposal, VIL can devise attractive promotion schemes for dealers as well as consumers. For instance, a current scheme allows a consumer to buy a Toshiba CTV and a Kenwood audio system at a discount of 15 per cent.

However, since all its brands use the same distribution channels, true differentiation hasn't really taken place. Concurs Rajesh Jaisingh, 30, the proprietor of Ganesh Televideo Agencies, a multi-brand dealer in southern Mumbai: "Having too many brands from the same company is more of a disadvantage than an advantage. It often confuses the consumer, who goes through an elaborate search before buying a product."

That's why Kitchen Appliances--which markets Sansui and Videocon's small appliances brand, Kenstar--is trying to ensure that at least 70 per cent of its dealers are not part of the Videocon fold. To be sure, this may have more to do with sifting out less-cluttered outlets than enhancing differentiation. But VIL is definitely trying to distance its brand portfolio--operationally, at least. In fact, BT learns that soon after Akai's first problems with Baron International surfaced in September, 1998, the former approached Videocon for a marketing and distribution tie-up a la Toshiba, Sansui, and Kenwood. The Dhoots turned it down, insisting that a separate company be formed to launch Akai.

MARKETING. How does Videocon plan to position its brands basket? Here, the company has developed a spring-flank model. At the premium end are Toshiba (CTVs, VCRs, and VCPs) and Kenwood (audio systems). Priced at par with brands like Sony and Panasonic--or almost 20 per cent higher than the other ranges in the market--these brands are counting on pedigree and an international track-record to attract the premium buyer.

Sansui was primarily positioned to take on the Korean and Japanese challenge from Samsung, Daewoo, LG, and Sharp. While the top-end 2989 Digital 100 29" CTV, priced at Rs 59,000, claims parity with BPL, Onida, and Philips, the next rung of Hilltop and Club Class series targets the Korean majors using a design-and-features peg. And, finally, to lure the economy buyer, Videocon offers the Sansui Smart range, with a 20" CTV for Rs 11,000 and a 14" CTV for Rs 8,500. Sansui's positioning as the mid-range flanker entwines the price and the positioning between Videocon and the Korean companies as well as the domestic majors. So, Sansui will encompass a price-range 8 per cent less than Videocon, and 15 per cent higher than the lowest-priced AIWA.

That leaves Videocon, which is attempting to reinforce the stamp of quality rather than a mere v-f-m tag. For one, Baron International's successful commoditisation of the Akai brand hit at the heart of Videocon's core positioning as the price-leader in its markets. So, where Videocon was the market-leader in CTVs in 1995 (29 per cent share), 3 years later, its share has tumbled to 19.40 per cent. Similarly, in the audio segment, Videocon's marketshare has fallen from 18 per cent in 1995 to 16 per cent in October, 1998.

To make matters worse, Baron trespassed on Videocon's turf at a time when the latter was striving to acquire a premium appeal. It had splintered its CTV range into various sub-brands--Bazooka, Turbo Tuff, Challenger, Budgetline, and the Freedom series--each customised for a different set of consumers. Moreover, VIL was tirelessly promoting its top-line brand, Bazooka, for a premium rub-off on its other sub-brands, thereby down-playing its economy appeal.

Scalded at the lower end, Dhoot could do with a price-warrior like Akai to redefine its branding. It will be tough for VIL to do battle at the low end without eroding its equity. One snag: globally, Akai Electric is trying to vacate the low-end price-segment, and graduate to higher ones. If that happens, Videocon will have to change its strategy. In such a scenario, Sansui, which is already perceived as a low-priced brand, may emerge as the price warrior to take on AIWA, while Akai will become the mid-range flanker brand. And since both Sansui and Akai are owned by the Ontario-based Semi-Tech Corporation, such mid-course corrections may not prove to be a problem.

However, the new strategy may impact the Videocon brand itself. While Videocon has tried to build the Toshiba and Sansui brands--and will have to do the same with Akai--Videocon has been relatively neglected as a brand. Declares a dealer on Mumbai's Lamington Road: "There has hardly been a new product in the Videocon CTV range for ages now." Adds Rohit Srivastava, 33, Account Planning Director, Contract Advertising: "In hindsight, for a brand which harped on the theme Bring Home The Leader, Videocon may have thrown in the towel too soon. In fact, the rejuvenated focus on the Videocon brand in recent months is a step in the right direction."

Another criticism is that while it makes sense theoretically, a multi-brands strategy isn't too hot unless you have pockets deep enough to ensure differentiation--of product, pricing, promotion, and distribution. That is, high investments. Admits Ravi Pisharody, 42, Vice-President (Consumer Electronics), Philips: "With media fragmentation, building even a single brand is expensive. If I focus on one brand, my return on investment is much better."

In VIL's case, the money, after all, comes from the same kitty. And it is no secret that Videocon suffers from a perpetual liquidity crunch. For instance, the company's margins have been reflecting the pressure of stiff rivalry in a lukewarm market: from 7.75 per cent in 1995 to 5.36 per cent in 1996 to 4.80 per cent in 1997, before perking up to 5.90 per cent in 1998.

Clearly, the jury is still out on Videocon. Its strategy is sound: Videocon needs labels to service its burgeoning capacities and distribution strengths. But the company will have a tough time managing the inherent tactical differentiation between its brands, and their individual needs. Meanwhile, under Baron's tutelage, AIWA is doing well. With Akai in its portfolio, Videocon has a better chance of regaining its market leadership. But only with the help of the price arrows in its quiver.

SCREENING A WAR

The gloves are back on. Although the bitter war of ads between Baron International and Philips India has ended--Baron's legal department touched base with Philips' on February 6, 1999, calling for a truce--the damage may have been done. Says VIL's Nobi Gupta: "This is the first time that comparative advertising has been this brutal in this market. There are inaccuracies on both sides, but Philips has more reason to be aggrieved."

The spat began in late January, 1999, when an AIWA advertisement compared its 21" CTV with Philips' bestseller, Powervision 240B. A few days later, Philips responded with a product-centric ad. Baron's retaliation was ruthless: it attacked Philips directly, claiming that AIWA had amassed market leadership. Baron quoted ORG-MARG statistics for December, 1998, which attributed AIWA with a 46.80 per cent share in the high-margin, stack-up hi-fi systems segment against Philips' 20.80 per cent. And the company's scrip price dropped from Rs 125 to Rs 88 after the ad-slugfest.

No wonder the Dutch transnational is rousing Aiwa International--of which Sony owns 50.60 per cent--to look into the matter. Adds a Philips spokesperson: "We are considering legal action against Baron." If Baron has, indeed, retreated, the matter may die quietly. But the spat exposes Philips' vulnerability. Although it has challenged ORG-MARG's findings, these figures will have to do until the industry comes up with a better standard. Meanwhile, by attacking the undisputed leader in the audio segment, Philips, Baron has chosen its enemy with deliberation. As the battle intensifies, the sound and the fury will only increase.

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