Facts and figures
Demand and supply
Critical success factors
items that have white enamel
or coating on them
• Washing Machines
• Airconditioners etc
Facts and Figures
• Refrigerators are being manufactured in India for the last four
• Till early 90’s only direct cool refrigerators were used in India.
• Videocon introduced frost-free refrigerators in 1991.
• Demand for refrigerators grew from 11,000 units in 1968-69 to
about 2.25 million units in 1996-97
• Demand for refrigerators has grown at a CAGR of around 22%
from 1.04 mn units in 1992-93 to 2.18 mn units in 1997-98.
• The total stock went up from 3.3 million units in 1968-69 to
17.2 million units in 1996-97, but still covering only about half
of the total households in middle and high-income groups.
Facts and Figures
The current demand for refrigerators is approx. 2.9
mn units per annum.
The 165-200 ltrs of refrigerators comprise of 80%
of the total demand.
Frost free refrigerators contribute 15% of the total
demand with 5% coming from the premium range.
Penentration (%) per '000 Households
1985-86 1989-90 1992-93 1995-96
Urban 88.4 140.4 196.9 252.3
Rural 3.3 7.7 11.9 20.4
Total 26.2 45 62.1 86.1
Source : NCAER Report
Low rural penetration …
• Inadequate infrastructure - Lack of electricity/power cuts
• Low disposable income levels
• Price factor
• Different lifestyles
Average price movement
1997-98 1998-99 1999-00
Refrigerator 16000 15000 14500
Source : Industry Estimates
Regional Share of purchases(%)
Year North South East West
1985-86 31 21 10 38
1989-90 25 26 13 36
1993-94 26 28 13 33
1994-95 28 29 14 30
1995-96 29 28 15 28
Source : NCAER Report
• Major market Share – North and West followed by South
• Income Level – growth in personal disposable income
• Availability of Finance
• Eg. BPL tie up with ICICI, Standard Chartered, Instabuys,
Transamerica and Bajaj Consumer Finance
Replacement Demand – Avg life of refrigerator 15 Yrs
Purchase Hierarchy……CTVs, refrigerators, washing
machines and air-conditioners
Demand for consumer goods
1990s-change in the socio-economic scene
• Rapid economic growth
• Increase in the number of working women
• Changing lifestyles and
• Higher aspirational levels - exposure to satellite television
• Easy consumer finance
Other factors affecting demand…
Growth in urbanization
Trend towards smaller families
Seasonality in demand – Oct – Dec – 30-35% sales –
Festive season Apr – June 25 % sales – before summer
Installed capacity of refrigerators in FY99 was about 5.2mn
165ltr direct cool refrigerators were estimated at 2.7mn
As per ASCON, during FY2000, the refrigerator production grew
Capacity Utilization and Sales of Major player in 1997-98 were as follows
Godrej 1100000 75.06% 825.69 673.79
Whirlpool 1000000 65.90% 659.01 455.80
Kelvinator 300000 218.23 204.25
Voltas 550000 470.96
BPL 300000 70.94% 212.81 262.67
Source: Annual Reports
Inputs and Technology
Press shop Paint shop Final Assembly Testing
Other Components … evaporator, innerbody and liners, polyurethane
Manufacturing cost – directly related to degree of backward integration
viz. firms manufacturing compressors in-house have a lower cost
structure as they account for a major cost element
Technology – depends on type of cooling system
Raw materials Cost content to the total cost(%)
Cold rolled steels 14.6
Electric motors 17.1
Source: Industry, ETIG
Refrigerator – Manufacturing Process
Process - Runs on the vapor compression cycle, as does an air-conditioner.
Sealed compressor, condenser coils, a capillary tube, evaporator and a control
Presently almost all refrigerators now are without coils running zigzag at the
Refrigerators nowadays are frost-free, i.e. they have a timer mechanism for
Also, many refrigerators have several additional features like multi-doors, ice
dispensing facilities, a special fan for uniform airflow and so on.
The refrigerant gas used is a CFC (Freon 11 or 12). But with the date for
implementing the Montreal Protocol drawing near, some companies like
Whirlpool, have started manufacturing CFC free refrigerators or are in the
process of setting up new capacities.
Basis for Differentiation - various price points for same capacity -
top and high categories.
No. and type of doors
Crushed ice and water dispenser
Quick chilling zones
Multiple temperature zones
Adjustable racks and shelves
Multiple use compartments
Refrigerant – CFC free Vs CFC
Energy efficient compressor
Freezer space vis-a-vis refrigeration space
Cooling System Mkt Share (%)
Direct Cool Manual Defrosting 85%
Frost Free Built in system, takes care of ice built up 15%
Consumer type for various sizes
Capacity (In lts) Market Share(%) Consumers
< 100 L 5 Hotels/restuarents, dispensaries
Household with space crunch
100 L - 200 L 80 Small households
200 L - 330 L Replacement market and
15 huge households
330L & above
Segmentation on Buyers
Demand ('000 units) % age Penentration Lvl
Top 7 metros 707 32 44.5
Other 1 mio + Cities 233 10.6 27.6
0.1 - 1 mio 561 25.4 22.6
< 0.1 mio 310 14.1 15
Rural 310 14.1 1.1
Total Households 2121 96.2 7
Institutional Demand 85 3.9
Total 2206 100
Brand awareness of Indian Brands High
Large % of rural buyers – first time buyers
After sales service - critical
Need for strong distribution network
Koreans viz. LG and Samsung
Company Name Brand Name Market Share (%) - 1999
Whirlpool of India Ltd Whirlpool * 26.5
Electrolux Kelvinator,Electrolux, Allwyn, Voltas 30
Godrej-GE GE*, Godrej 21
Videocon Videocon 10
BPL BPL 6
Koreans LG, Samsung 6.5
* Imports CFCFree Refrigerators
Source: ORG:GFK Survey, Published Reports
Company Manufacturing Facilities Out Sourcing
BPL Bangalore, Palghat(Kerela) Direct Cool from Allywn-Voltas
Godrej-GE Malanpur (M.P)
Videocon Chittegaon, Aurangabad
Whirlpool Faridabad, Pune, Pondicherry
Voltas Warora, Thane, Hyderabad
Samsung Greator Noida(planned) Importing till 1997 from Korea
LG Greator Noida Direct Cool from Voltas
Godrej Appliances Ltd
• 21% Market share approx
• 95% of revenue from refrigerator business
• Penta Cool Series
• World Series
• Cold Gold Deluxe
• Cold Gold
Focus on Cost Competitiveness
Target rural/semi – Urban Market
• Korean company
• Bio-fresh range
• Super X flow range
• Twin cooling system
Promoted by the Videocon Group
Videocon Appliances Ltd. was incorporated in 1988
Entered the market in 1992
Videocon pioneered India's first Frost-free refrigerators
In technical (design and drawing) collaboration with
Matsushita Refrigeration Co., Japan
World leaders in white goods manufacturing
Electrolux, Kelvinator, Allwyn, Voltas Brands
Focus on building the kelvinator brand
Strengthen distribution network
Approx mkt share 30%
Niche player - Frost Free Segment
High Value strategy
• Major global player in electronics &
• Premium pricing strategy
• Frost Free
• Direct Cool
• Cute N Cool
LG Electronics’ strategy includes developing non-traditional channels of
selling even while it continues to strengthen its retail sales network.
The company has banded together small teams of people to be attached
to its branch offices to carry out brand promotions in smaller cities and
Electrolux - Multi-pronged strategy
Aggressive product launches
Focus on quality and increased rural reach
Focus on building a strong market for its 35-year old brand –
Introduction of at least four new refrigerator models every year
The group has outlined a multi-brand marketing strategy aimed at
• high-end - Electrolux
• upper end and middle income - Kelvinator
• lower segments - Voltas and Allwyn
Voltas brand will soon be phased out.
Different marketing strategies for different customer segments.
The focus will also be on the price-sensitive rural markets.
To push the products, the dealers are trained such that they are able
to explain the value-addition to prospective customers.
At the top-end, the company's products are priced higher than the
Strategy for growth this year includes
Consolidation of its existing operations and
Entering new product segments.
Electrolux has put the Internet on the forefront of its sales strategy.
Very aggressive dealer-push strategy to get a foothold in the highly
Discovered that most customers associated refrigerators with ice and
Realized that the upwardly mobile consumer was sheepish at the
thought of having to borrow ice
The company merged the two findings to create its hummable Ice,
Samsung – ‘Market based Management’ strategies include:
Sponsorship of TV programmes on various channels
To position its products as an ‘elite’ product
Improve brand visibility
• Samsung, LG, IFB and Electrolux sponsored movies on the Star
• Samsung and IFB, for instance, sponsor the Saturday and
Sunday night premieres.
• LG has sponsored, ‘Kaun Banega Crorepati?’.
Videocon - Umbrella branding strategy for their products.
• VIL claims to be the first company in India to introduce
frost-free refrigerators and fully automatic washing
• Assiduously built images over the years.
• Convey the message of leadership to their customers.
Videocon, for example, has changed its logo to convey the
message of precision, quality and technical edge in all
• A good example of how a well-known and popular brand suffers
due to a lack of adequate marketing support
• Early entrants in the market
• Limited portfolio of models
• Lower brand visibility and indifferent dealers
Electrolux (which has bought over the brand since January
1997) - bolster the brand
• Kelvinator will be the flagship brand straddling most of the
• Kelvinator being present in India for a long time and popular as a
brand which is the ‘coolest one’, was chosen ahead of others
• A new campaign for the brand was launched as part of a mega
promotion exercise at a cost of Rs160mn.
• The earlier popularity of "the coolest one" campaigns ensured that
it is continued with.
• In one of the recent ads, an old man’s dentures, kept in a bowl of
water, are seen chattering every time the door of a Kelvinator
refrigerator is opened.
• Some of the print-ads campaigns also highlighted Kelvinator as a
refrigerator, which freezes ice within no time and saves power
consumption by as much as 33%.
• The product portfolio has been beefed up with the introduction of
three new models including one in the 300-litre segment. A new
frost-free range was also introduced.
Refrigerator sectors operating at 65% capacity utilization.
Entry-level prices lower in order to activate demand.
Rural markets yet to develop due to infrastructure bottlenecks
Rising raw material costs
Competition from new entrants
Stiff competition leading to higher advertisement expenditure
Growth, less than foreseen
Economies of scale
Godrej, BPL , Whirlpool, Videocon and Voltas have achieved
economies of scale – unit cost low.
Godrej has a capacity utilization of 75% and the highest capacity in
Godrej also possesses economies of vertical integration as it
manufactures its own compressors.
BPL and Videocon who are currently outsourcing their
compressors also plan to set up their own manufacturing units for
compressors in the long run.
…any new entrant to come in at a large scale and risk strong
The industry has high exit barriers for the members who have
invested in the manufacturing facilities in India in the form of
• Godrej, BPL and Videocon - very old players in the Indian market,
high brand awareness and consumer loyalties. These brand names are
associated with trust and reliability in the Indian market.
• Korean players - LG and Samsung who engaged in heavy advertising
and brand promotion, created a niche for them in the premium segment.
• …new entrant to spend heavily to overcome existing consumer
loyalties and to build a brand image.
• Huge Capital requirements - advertising, product development,
production facilities, distribution channel credit, inventories and for
covering up the start-up losses.
Access to the distribution channels:
Godrej, Videocon, Voltas and Allwyn – cater to mass market, have a strong
distribution and dealer network.
• Urban and rural presence
• Established relationship/developed ties with the channel members over the
period of time
Whirlpool has also developed a strong network of 4000 dealers in urban and
semi-urban areas in a period of few years.
South Korean majors like Samsung and LG have a dealer network of more
than 1500, mainly in urban areas and plan to expand it in rural and semi-
urban areas also.
… a major barrier as the new entrant has to persuade the channels to accept
its product through high margins, promotional allowances, better credit
facilities and advertising support, which will reduce the profits.
Cost disadvantage independent of scale
Learning or Experience curve:
Old players viz., Godrej, BPL, Videocon are high on the
experience curve, as high local market knowledge.
Duties on the imported Refrigerators and refrigerator parts -
advantage to the Indian Players and in a way protect them
from price competition in the market with the MNCs.
Rivalry – Very High - Intense rivalry in the various segments
• Same dealer network
• Low differentiation, high ad spent
• Have high strategic stakes in the refrigerator business - major fraction of
their revenues come from this business
Pressure from the substitutes - No threats As no substitutes
• The domestic refrigerators have no substitutes and so it faces no threats in
terms of that.
Bargaining power of the buyers - High
• Presence of many competitive products in the market.
• Low differntiation – switching between the different brands based on other
criteria such price, service, warranty, promotion and financing schemes.
Bargaining power of the suppliers - Not very High
Critical Success Factors
Features and aesthetics
Strategic Group Mapping
Strategic group mapping of industry players:
High price Medium price Low price
(1) LG, Samsung,
2. High value strategy
(2) Whirlpool, BPL
3. Super value strategy
4. Over charge
5. Medium value strategy
(3) Godrej , Kelvinator
6. Good value strategy
7. Rip off strategy 8. False economy strategy 9. Economy strategy
(5) Voltas, Allwyn
Premium Strategy - LG, Samsung, Daewoo
Operating only in the frost-free segment
Large product length
Products only in the above 300 ltrs segment
The brands follow premium strategy of high quality at high price
They are targeting to the upper income, upper higher middle class of the society
with the products that are associated with status
These companies have shown a tremendous growth in few years
High Value Strategy - BPL , Whirlpool:
Frost-free models in the below 300 ltrs capacity segments as well as the above
300 ltrs segment
The models in above 300 ltrs segment cater to the replacement market and to the
higher middle class
Emphasis on providing high quality at a moderate price
Below 300 ltrs - targeted at the first time buyers of middle class and are not high
Medium Value Strategy - Godrej, Kelvinator
Old brands of India, high brand awareness
Presence in urban as well as the rural markets
Mainly serving to the direct cool segment
Have few models in the frost-free segment
These brands are catering to the middle class and are not very high in prices
Good Value Strategy – Videocon
Introduced frost-free refrigerators in India
Value for money products
Lowest prices in the market - catering to the middle class of the society
Economy Strategy - Voltas, Allwyn
Cater to the middle and lower middle class of buyers with their low
Kelvinator and Godrej
Deawoo and Samsung
Company Distributors in India Dealers in India Service branches
BPL N.A 1500 *
Godrej-GE 6000 (Direct) *
Videocon * * *
Whirlpool * 4000 18
Samsung * 1600 *
LG 40 2000 *
Electrolux-Kelvinator * 2000 *
N.A: Not Applicable
*:Data not Available
Aimed at reducing inventory holding cost - direct delivery
of the product to customer once the dealer enters the order.
Corporates willing to invest in creating inventory - holding
facilities at dealers end and pay for holding charges.
Intense competition - higher ad spent and emphasis on
streamlining distribution network and reduce dealers
Whirlpool and Electrolux trying to provide quick service to
dealers - allowing to stock within 24 hrs
Montreal Protocol - Environment conciousness - depletion of Ozone layer
CFC Free Refrigerators
• Year 2003- deadline by which Indian markets is to be replaced with CFCs free
refrigerator -Move towards using HCFC ( Hydro chloro fluoro carbons)
• HCFCs – non-harmful, easily available, no major technology change
• Year 2030 – move into using HFCs (Hydrofluorocarbons)
• HFCs – major technology changes in manufacturing process, cost of HFC-based pilot
plant is approx 10 crore.
Whirlpool India has already set up a 0.4mn unit capacity plant near Pune to
manufacture CFC-free refrigerators
LG Electronics has converted its entire 300-litre plus range of models as CFC-free
Electrolux AB has found a cost-effective alternative way of a hydrocarbon coolant
Excise duty Custom duty
1999-00 2000-01 2001-02 1999-00 2000-01 2001-02
Refrigerator 16 16 16 45.6 44 40.4
Compressor 19 16 16 44 44 40.4
Rebate 40 40
Source : Industry
Till the late 80s - white goods sector was labelled as a luxury
goods industry- an oppressive regime of licenses and taxation
1993-94 government removed all investment obstacles
Replacement market is expected to increase to 25-30%
on account of faster replacement (further induced by
Refrigerator market is expected to grow at a CAGR of
14% in the medium term aided by the rising per capita
income and growing consumerism
The demand for refrigerators is expected to be about 3.6
million units in 2000-01 with a penetration rate of about