CTVs: volume sales to drive margins of cos

By Ramnath Subbu

MUMBAI, DEC. 31. The Indian colour television (CTV) industry, after suffering a phase of slowdown for most of 2000, finally seems to have come into its own. Sales which had been languishing earlier, have, since September this year, started picking up. While festive buying could be one of the reasons attributed for the pick up in sales, the industry which is today around 50 lakh units in size, seems to be on the growth path.

The major players in the CTV segment include MIRC Electronics, Videocon International, BPL, Philips India, Matsushita Television and Kalyani Sharp. Of these, MIRC Electronics' Onida, Videocon and BPL account for about 40 per cent of the market. The entry of other players has distributed the market shares more evenly as a couple of years ago, these three players boasted of close to 70 per cent of the CTV market.

The western brands such as Philips and Thomson account for about 10 per cent while the remaining is shared by brands such as Korea's Samsung and LG and the Chinese Akai. Japanese players such as Sony, Sharp and Panasonic have also started picking up market share.

The industry grew at phenomenal rates of 30 per cent in 1998-99 and 36 per cent in 1999-2000. According to Mr. Venugopal Dhoot, chairman Videocon group, the growth in the current year will be around 25 per cent. ``One must consider that a 25 per cent growth is on a base that had grown 36 per cent in the previous year.

The CTV industry is price sensitive and a price war of sorts was fuelled by Akai a couple of years ago when it started selling products at Rs. 10,000. The pricing of the product depends on input costs, the industry scenario and the competition. Akai also announced the exchange offers - replacing old TVs with new ones and at a discount to the original price.

The customs duty on colour picture tubes (CPT) is around 35 per cent with addition of other duties such as special additional duties, it comes to 44 per cent. It is the basic component of a CTV and accounts for more than 65 per cent of the cost of the finished product.

There is a general feeling that higher customs duties on CPT have curbed the growth of the CTV industry giving local manufacturers unnecessary protection. ``Once the WTO regulations are in effect, everything will fall in place.'' said Mr. Dhoot.

There is likely to be pressure on the margins of companies in the near future. This will come from the rising costs of glass shells which constitute CPTs. Glass is in shortage globally and an increase in its price would have to be absorbed by the players. They are unlikely to be able to pass on the hikes to consumers in such a competitive scenario.

Different strategies have been adopted by the players here. While Videocon International has gone in for multi-brand selling - selling other brands such as Akai, Sansui and Toshiba - others have gone in for category specific brands. Onida's Igo was launched in the lower price category while maintaining Onida in the mid to premium category.

Also, the invasion of the net has prompted players to resort to one more marketing tool - web sites. LG Electronics was the first to foray into this area with lgezbuy.com and this was followed by others including Philips and BPL. The orders placed through the net has been increasing at healthy rates.

In terms of technology, the latest is available in India now. Videocon launched Internet TVs and has tied up with the U.S. company, Telecruz, for this purpose. In fact, Videocon is exporting Internet TVs to China. ``We have an order for one lakh units and have already exported 10,000 units.'' said Mr. Dhoot. In an industry crowded with so many players and a fragmented market share, a shake-out would seem inevitable. However, according to industry sources, the players themselves are spread over different segments of low, mid and premium range of televisions according to features and price. For example, Samsung, LG, Philips and Thomson are present in the large TV category and would benefit from any growth in this segment. The sales of the 14 inch and 29 inch CTVs are likely to move up from 20 per cent and 2 per cent market shares respectively and sales of the 20 inch TVs are likely to reduce from its current market share of around 35 per cent owing to the small price differential between it and the 21 and 25 inch CTVs.

Indian players are more in the low priced and mid priced segments and as the market for the premium range settles, focus would automatically shift to lower priced products which are popular in rural and semi-urban areas. The rural market is another big opportunity for the players and already companies have increased their distribution network and dealer outlets. ``The shake-out, if any, has occurred in the foreign brands. A couple of Chinese brands which had entered the market, have exited the market owing to lack of success.'' said Mr. Dhoot.

Also given the current scenario with so many players, what will determine the success of the company would be volumes. ``Volume gains will drive the future margins of companies. There are so many players now that only those who are able to exploit their dealer and distribution networks to the fullest will succeed.'' said Mr. Dhoot.

According to Mr. Dhoot, the future is indeed bright for the industry. ``Considering the population of the country and the replacement demand of 10 per cent, the market is indeed very large and growing which makes prospects attractive.''

Videocon International recently started its new fully automated colour television (CTV) manufacturing plant in an ambitious move to attain Rs. 5,000 crore company by this financial year-end. It is also opening many other facilities in other parts of the country to facilitate this vision. This facility has been set up in association with Toshiba Corporation of Japan with whom Videocon has been associated since 1984-85.

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