The Hindu Business Line : Budget brands back with a bang

The nearly forgotten domestic television majors of yesteryear, the likes of Oscar, Beltek, Weston and Salora, have been making big strides in the CTV segment in semi-urban/rural areas.

EVEN though the CTV industry has seen good growth this year, it is the action in the so-called semi-urban/rural areas that has caught the fancy of various players. And not only of the multinational majors. Over the past two years, these almost forgotten big domestic television players of yesterday, the likes of Oscar, Beltek, Weston and Salora, have been making big strides in the CTV segment in semi-urban/rural areas.

And with over 50 per cent of total CTV sales in the country coming from these areas, the players collectively have been able to garner a good market share in a short period of time. "The smaller players have been able to grow their market share from very little two years ago, to 10 per cent last year, and about 20 per cent this year. And it is still growing," says Suresh Khanna, Secretary General, Consumer Electronics and Television Manufacturers Association (CETMA).

And this trend is not visible in CTVs alone. In the VCD players segment, these companies have not only been able to offset MNC competition, but have also been able to corner a significant portion of the grey market.

Says R. S. Kandhari, CEO, Beltek India (a popular Indian brand in the 1970s and '80s), "Our focus is on the buyer's market consisting of the upper lower class and lower middle class, primarily located in semi-urban and rural areas. This segment is seeing growth as people are upgrading from their black & white television sets to colour televisions."

And so far most of the growth has come from the 14-inch CTV segment, as people tend to `upgrade' to the cheapest available option in these areas. Also, the price difference between a B&W TV and CTV has narrowed down. According to industry estimates, the 14-inch segment alone is growing by about 30 per cent from about 1.25 million last year to 1.5-1.6 million (expected) this year. Apart from high demand, another factor helping growth in the segment has been the availability of picture tubes. CTV picture tube manufacturer LG Hotline recently (in August) started manufacturing the 14-inch tube, prior to which Samtel was the only manufacturer in the country. "In fact, the period between April and June this year saw a shortage of 14-inch CTVs as demand grew. The smaller regional brands have benefited from this," says Khanna.

Meanwhile, the growth for the smaller companies has also been triggered by the low pricing of products being offered by the players, with a 14-inch television available for as low as Rs 5,000. A similar product from one of the larger players would be available for no less than Rs 8,000. The smaller players have been able to get the price advantage by outsourcing components from countries like South Korea, China and Japan. Beltek, for instance, sources its components from all three countries. Oscar International says it even has a tie-up with Sony Japan for some of its components.

Says Kandhari, "We have tied up with Texla (another local consumer electronics manufacturer) to buy the components together, which gives us a price advantage due to bulk buying. Also, we pass on the tax benefits we receive to the consumer."

Further, these companies operate on smaller margins and are looking at generating volumes to increase profits. "While a bigger player would need to keep a margin of almost Rs 5,000 to survive in the market, we keep a margin of about Rs 800 per CTV. We are able to do this because our overhead costs are low and we keep our marketing expenditure to the bare minimum. Apart from this, we do not face a logistics problem as we have five plants, thus saving on transportation costs," says Arpita V. Khurana, Director, Oscar International.

According to industry sources, another reason is that many of these players also enjoy certain tax exemptions.

Meanwhile, the companies deny there is any compromise on quality and boast of a wide dealer and after-sales service network.

However, all may not be smooth running for the smaller buyers as the multinational companies are waking up to the opportunity in the economy segment and the rural areas.

Companies such as LG, Samsung and Philips are sprucing up their strategies in the rural areas and are increasing their offerings in the economy range. Says an LG official, "This is a highly price-sensitive market, so all the colour television manufacturers have priced their 14" and 20" sets below Rs 10,000. LG has also priced all 14", and two models in 20" below Rs 10,000 to increase the penetration level in rural and semi-urban markets. Moreover, we are also customising our promotion to suit the changing market scenario. We are certainly planning to be ahead of all the brands in the rural and semi-urban markets also."

Samsung too offers about three 14" models and one 20" model in the Rs 10,000 bracket and will be expanding its range next year in the 14", 20" and 21" screen size categories.

Says R. Zutshi, vice-president (Sales), Samsung India, "In the semi-urban markets, we are not looking at competing only on the price plank. We are looking at providing our customers with the best value for money, which means that we will be giving them new, advanced features at competitive prices. Thus, we are not looking at competing with the small regional brands, even in the semi-urban markets."

For Samsung, last year the contribution of markets having population size below one million was around 30 per cent of the company's total CTV sales. This year, the percentage contribution of these markets (sub one million population size) is likely to grow to 35-40 per cent of the total CTV volume of the company this year.

Philips too launched a high-decibel marketing initiative called the Mahasangram to increase sales in rural areas.

The smaller players, though, claim that this will not affect them in the long run as "bigger players will require higher margins to maintain profitability" in this segment. Recently, on the lines of companies selling durables on credit in urban areas through tie-ups with finance companies, the smaller players too have started selling CTVs and VCD players on credit by getting their dealers to give loans.

Furthermore, instead of merely remaining regional players, these companies are now rapidly entering markets across the country. "These players have traditionally been strong in the Northern region, however, they have entered new markets over the past year. A special focus has been on the Southern markets, which tend to be more brand conscious," says an industry analyst.

Beltek, for instance, claims it is now present in almost all the markets, with the exception of West Bengal and Maharashtra. The company has entered the Southern market very recently.

Further, these companies are shedding their complacence and are actively focusing on bringing new, premium products into the market at a very competitive price. On the anvil are products such as DVD players, 29-inch flat CTVs, theatre systems and so on. Weston, for instance, recently launched a range of competitively priced flat screen televisions in the market.

And the numbers tell the story. Oscar, for instance, is targeting to sell around three lakh CTVs this year, up from the two lakh sold last year. Beltek too is is planning to sell 2.75 lakh CTVs in the current year— a growth of 75,000 units from last year.

But in the long run, it is the quality of products and the service, which will eventually decide whether these players actually become a success story or not.

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