Being the coolest?

With its thunder stolen by upstart air-conditioner brands, a shaken Carrier Aircon sets to work on regaining its numero uno status.

By Jaya Basu

Once, it ruled the global air-conditioning market: it had an US parent with deep pockets; and boasted a wide range of products. Today, Carrier Aircon's thunder-in the fastest-growing segment of the market, (residential) window air-conditioners-has been stolen by aggressive Korean rivals like Samsung and LG. The company's reaction is, expectedly, defensive. Soft-pedals Anil Once, it ruled the global air-conditioning market: it had an US parent with deep pockets and boasted a wide range of K. Srivastava, 52, Managing Director, Carrier Aircon: "This is just one segment of the market; overall, we continue to be the undisputed leader."

It is a fact that the company is the market leader in other segments like non-ducted high wall splits for homes and light commercial ducted splits for offices. Still, Srivastava cannot afford to dismiss the (window units) residential segment of the market. The segment accounts for 52 per cent of the overall market, and grew by 30 per cent in the first half of this year (January to June 2000). And, of the 200,000 units sold in this period, LG sold 60,000, and Carrier, 50,000. Explains S.N. Tripathi, 58, Executive Vice-President (Unitary Products), Voltas: ''In the last six-to-eight months, most retail customers have opted for LG or Samsung. These brands are highly visible in the marketplace.'' Carrier's effort to tackle the problem of visibility is understandable: it has upped its annual advertising budget by 250 per cent to Rs 15 crore.

The Channel Challenge

Reach has proved Carrier's undoing. While the company's products are available in 414 outlets, LG's are available in close to 2000 ones-it helps that LG has a presence in other consumer durables. Agrees Srivastava: "Limited market presence proved a big disadvantage.'' Adds Ajay Kapila, 37, Vice-President (Sales & Marketing), LG Electronics India: ''Most companies sell ACs through sales-and-service dealers, but we treated the product as we do other durables and revolutionised the retailing aspect of the business.''

At the vanguard of Carrier's response, therefore, is a dealer expansion initiative. The objective? To increase its channel strength from 414 outlets to 1,600 by the end of the year, at a cost of Rs 3.50 crore. And the company has forged relationships with HDFC, ICICI, and Countrywide Finance, to offer loans at 0 per cent interest for the purchase of air-conditioners. Although, Carrier boasts one of the largest service networks in the country, it never viewed the service function as a revenue generator. Now, courtesy competition, it does. This year, the company expects to invest Rs 1.20 crore in upgrading its service network; in return, revenues from services will account for 30 per cent of its total earnings.

With a presence that spans several consumer durables, companies like Samsung and LG can afford to reach out to smaller towns and cities; Carrier cannot. Confesses Srivastava: "We've missed several opportunities because of this." To deal with this inadequacy, the company has formed alliances with Maruti's dealers in the North, and tractor manufacturer TAFE's dealers in the South: both sets of dealers will display and sell Carrier's products.

The Product Challenge

Keeping pace with Carrier's network-enhancement drive will be its product-launch initiatives. The company proposes to launch 26 products this year, ranging from 0.75-tonne economy air-conditioners (costing around Rs 18,000), to premium two-tonne ones. Today, Carrier has a capacity of 3 lakh units. However, it uses only 60 per cent of its capacity. Srivastava aims to use the remainder and says his company is in talks with two MNCs already in India to manufacture ACs under their name.

The company's larger objectives for 2000-01 are to achieve a volume growth of 30 per cent-and a turnover of Rs 500 crore. For a company just recovering from a nightmarish 1999-2000-it had to deal with labour unrest in its Daman plant, and saw its net profits plunge 67 per cent to under Rs 10 crore-that could be tough. The first quarter of this financial year has seen Carrier meeting its volume growth targets in almost all the segments in which it operates, but it could still take some time for the chastened AC major to come in from the cold.

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