Enter the dragon

Mumbai: Gone are the days when Indian housewives used to ground the daily spices using the stone and pestle. Indeed, looking at the way the small home appliances industry is thriving, the stone grinder and pestle may soon find their place only in museums.

Though the exact size of the small home appliances industry is not known, market analysts estimate the organised sector to be between Rs 1,200 crore and Rs 1,600 crore, growing at 15-20 per cent annually. Nearly 70 per cent of the countrys home appliances market consists of small firms in the unorganised sector, which presents a tremendous competition on the price front.

About 50-60 per cent of the segment comprises mixers/grinders, irons and food processors, and a major part of this (worth about Rs 400 crore) comprises only the mixer/grinder segment. But the growth of this industry at present is being driven by new products, like blenders, electric kettles, citrus juicers, steam irons, improved models of food processors and so on.

The organised segment includes domestic companies like Bajaj Electricals, Usha International, Maharaja Appliances, Kenstar and Inalsa Appliances, while multinationals include Tefal, Philips, Braun and Moulinex.

With such a large number of players, competition is inevitably intense and to sell these products, most companies resort to offering freebies or heavy discounts. For instance, appliances company Inalsa has been running various promotions, mainly for its food processor, which contributes to over 50 per cent of the companys turnover. One of its schemes includes giving a free Titan Sonata with every food processor, while another scheme gives a hand blender free with a food processor.

Others like Usha International and Maharaja Whiteline offer freebies like a free-steam iron with the purchase of a microwave oven. Further, in an attempt to be more cost competitive, companies have started outsourcing the manufacture of some products to China, where it is more cost effective to manufacture products like toasters and microwave ovens.

Currently, nearly all the big domestic players like Usha International, Bajaj Electricals, Maharaja and Inalsa are sourcing their products from China. An official at Inalsa says the company provides the basic design and technical specifications for the products, which are then imported. China has, over the years, emerged as a global hub for the manufacture of small appliances.

A market analyst says the size of the market for products like microwave is small and the initial investment required for the manufacture of these products is high. "Hence, it is cost-effective to source the products from China."

The markets competitiveness has not discouraged MNCs from launching their products here, mainly because of the high growth of the various product categories and the industrys long-term potential. For instance, currently the steam-iron category is growing at an impressive 35-40 per cent, while the food processor category has a great potential of achieving growth rates upwards of 50-60 per cent. Companies, expectedly, are sitting up and taking notice.

Most recently, the Birla group entered the small appliances segment in a tie-up with the Italian company DeLonghi, a leading maker of small home appliances in Italy. According to unconfirmed reports, Black & Decker (earlier present in India through a joint venture with Bajaj) is currently contemplating a return.

The intense competition is also forcing some domestic players out of the market or getting taken over. Recently, Marlex Appliances was acquired by the Rs 80-crore Kanchan group, which is now planning to expand its portfolio by launching a premium range of household appliances under the Marlex brand in March this year. Similarly Softel Machines has parted with some its equity to the kitchen appliances company TTK Prestige.

Multinationals players such as Braun, Tefal, Philips and Moulinex, priced on the premium platform, are not doing too well, according to market analysts. But Braun, which entered the home appliance market in 1995, claims to have achieved a leadership position in the Rs 28-crore hand-blender segment and the female personal-care segment (with its leading product Silk-Epil). Company officials say the company will soon be introducing new products in the hand-blender category.

Lately the segment is witnessing the entry of Chinese products as well, though it may be some time before these pose a genuine threat. Company officials say they expect the slightly higher priced but premium quality DeLonghi products to create a niche for themselves.