Even CEO Ram S Ramasundar's four-unit, capacity-led, two-brand strategy will take years to show results.

By Papiya Pal

Finally, the frost-bitten Electrolux is spinning, tumbling, and drying out its India strategy. When, on March 15, 1998, the Swedish home-appliances giant succeeded in locating its 35-member management team under one roof at Bijwasan, near Delhi, it was symbolic of the synergistic consolidation that the $14.70-billion manufacturer of white goods was still seeking five years after it entered the country.

Operating in the country through as many as 4 legal entities, Electrolux could certainly do with a cube of consolidation. Besides Eureka Forbes-whose management control still rests with the Rs 40,000-crore Tata Group-Electrolux controls the Rs 69.70-crore Maharaja International (accumulated losses in 1997-98: Rs 60 crore) and the Rs 0.60-crore Intron (accumulated losses: Rs 25 crore). As if that wasn't enough, in March, 1998, Electrolux Voltas-an 80:20 joint venture between Electrolux and the Rs 1,109-crore Voltas-joined the group.

With that, Electrolux put in place an all-new capacity-led, volumes-driven, local-brand strategy, which will conclude with the merger of all its units in the country in the near future. Agrees Ram S. Ramasundar, the 48-year-old Managing Director of the three Electrolux-managed companies: ''Once everything is robust, and the operations are stabilised, maybe we will look at merging all 3 companies, and make a public issue.''

Meanwhile, he is thinking ahead: Ramasundar is busy acquiring capacities in a depressed market, which will give Electrolux the space to grow its brands: Kelvinator and Allwyn. And gradually phase out the Voltas brand. With Electrolux acquiring Voltas' white-goods division for Rs 160 crore, Electrolux Voltas has got a manufacturing- capacity of 550,000 refrigerators and 200,000 washing-machines per annum along with two brands: Voltas and Allwyn. By this time next year-when the two-phase transfer will be completed-Electrolux will boast of an annual production-capacity of 950,000 refrigerators. Only the Rs 794-crore Godrej-GE (annual capacity: 1.10 million units) will be bigger. Claims Ramasundar: ''By 2001, Electrolux's Indian operations should have a turnover of Rs 1,000 crore.'' Will it?

THE WASHING-MACHINES STRATEGY. In the 750,000 units per annum washing-machines market, Electrolux plans to offer a range of solutions once it annexes the Voltas facility. Apart from front-loading machines-the high-end speciality that is presently manufactured at Intron-Electrolux will introduce low-end top-loading, twin-tub machines; a fully-automatic machine; and a range of front-loading washing machines from Italy's Portryal over the next 18 months.

However, the Voltas brand (marketshare: 5 per cent) will be phased out in this market. And, despite raising its stake in Intron to 74.10 per cent in August, 1998, Electrolux is putting its earlier investment plans for the company in cold storage. Admits Ramasundar: ''We are taking one step at a time at Intron. Funds infusion from the parent may be difficult.'' Points out Vinod Sawhny, 39, Vice-President, Godrej-GE: ''With a penetration of 1.50-2 per cent, this market is in the embryo stage.'' Logically, since the sales of washing-machines are limping along with growth rates of 10-12 per cent per annum, and are dominated by the Rs 2,600-crore BPL, the Rs 792.42-crore Whirlpool Of India, and the Rs 273.24-crore ifb, Electrolux will, probably, use the freshly-acquired capacities to service its export markets instead.

THE REFRIGERATORS STRATEGY. Thus, Electrolux's turnover target rests on the fate of its 3 refrigerator-brands, in order of priority: Kelvinator, Allwyn, and Voltas. So, its earlier strategy of pushing its two brands-Kelvinator and Electrolux-has been confined to the deep freeze. Argues Ramasundar: ''Even assuming we don't do anything different-although we will in terms of relaunching, re-staging, and re-emphasising marketing-we should be able to maintain the volumes of those brands.''

He assumes that the Kelvinator brand is still the strongest one. Far from it: from a marketshare of 31 per cent in 1994-95, Kelvinator's share slipped to 20 per cent in 1995-96-and sunk to 9 per cent in 1996-97. And, according to the org Retail Audit Report for the 6 months ended June, 1998, Kelvinator's marketshare stood at 13 per cent. Obviously, the brand suffered during its ironic 2-year exile to the $8.60-billion Whirlpool as the American white-goods major bought out Kelvinator Of India, which had leased the brand from Electrolux AB until December 31, 1996.

Although it relaunched Kelvinator refrigerators in January, 1997, Electrolux argues that it has not been able to do justice to it only because of a lack of manufacturing-capacity. In 1997-98, claims Electrolux, 250,000 units of Kelvinator were sold. But it was let down by Maharaja International, which, despite possessing the ability to manufacture 250,000 units, could produce at only 84 per cent of its capacity. Which is why Electrolux had to outsource 40,000 units from Voltas last year.

That problem should end now: Maharaja International's capacity will be hiked from 350,000 units to 400,000 units this month. And since Voltas and Allwyn registered sales of 450,000 units in 1997-98, Electrolux should be able to produce enough Kelvinator refrigerators to meet this year's targets.

What should worry Electrolux is that this brand-erosion persists at a point of time when the rest of the white-goods industry is upbeat. After a disastrous 1997, when it grew by 2 per cent, growth-rates have more than revived. In fact, an org-Francis Kanoi study pegs growth in this sector at 26 per cent between January and June, 1998, over 1997. Warns Jagdeep Kapoor, 38, Managing Director, Samsika Marketing Consultants: ''It is still going to be a problem of plenty.''

Agrees Rajeev Karwal, 36, the Vice-President (Sales & Marketing) of the Rs 400-crore LG Electronics India: ''Since the present capacity is about 3.15 million units versus a demand of 2.50 million, Electrolux will have a huge production-base before it has a similar selling capacity.'' Moreover, to implement the strategy that Electrolux has chosen, it must have sustenance power. Adds Vijay Crishna, 53, Managing Director, Godrej-GE, which sold 830,000 refrigerators in 1997-98: ''Any investment in capacity-addition pre-supposes the money power to enable a company to survive in the present environment.''

In addition, in a market where credit-margins stretch between 45 and 90 days, Electrolux does not extend credit beyond 45 days. And, as the company insists that its dealers stick to the mark-up price, Kelvinator has the costliest products in its categories. Says Ramasundar: ''We insist on this because the system has become lopsided, whereby the trade and the consumer benefit, but the manufacturer does not earn any returns.''

To grow the market for Kelvinator in the value-for-money segment, Electrolux will reach out to towns with a population of less than 20,000. It is also increasing the number of its dealers from 2,100 to 3,000 this year. ''We plan to spend 5-6 per cent of our turnover on promotions, but it will be higher in the initial years,'' explains Arun Sharma, 45, Vice-President (Sales), Maharaja International.

In the mid-size segment, Electrolux will launch 330- and 370-litre frost-free Kelvinator models besides introducing 430- and 480-litre Electrolux models. And Allwyn, which still has brand equity in South India, will also be positioned in the mid-segment. But the strategy to phase out the Voltas brand, which was bought for only 4 years, is fraught with peril. Warns Kapoor: ''I am sceptical about this tactic. After all, did Whirlpool succeed in wooing Kelvinator's consumer-base totally?''

Tellingly, between April 1, 1998, and mid-August, 1998, Electrolux sold just 200,000 vis-a-vis a target of 450,000 refrigerators. And, since sales dip in winter, it is unlikely that it will do better in the next 6 months. Evidently, the coolest one will have to fight the hottest battles to live down its lukewarm track-record.

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