It was in 2000 that Havells India acquired switchgear maker, Standard for Rs 1.2 billion. In the last few years, it has been repositioned as a value-for-money brand, targeted at first-time home buyers. In an exclusive interview with POWER TODAY at Havells corporate headquarters in Noida, Abhra Rajib Banerjee, Head, Standard spoke about the subsidiary company's ambitious growth strategy, foray beyond traditional channels of distribution, competition from China and the impact of GST on the Indian electricals industry.
In the last four years, Havells has repositioned Standard as a value-for-money electricals brand, targeted at first-time home buyers in the age group of 25-35 years. What were some of the primary reasons behind this makeover?
Standard was largely a business-to-business brand that was very popular with the government segments and large institutional buyers for switchgears. It has always been rated as a high-quality product. Moving with the times, we decided to reposition it not only in the business-to-consumer environment but also as an aspirational lifestyle brand, targeted specifically at the first-time home buyers. We are also targeting people who are young at heart and are open to experimenting with new colours, shapes, designs and technology. That is how we have redefined the journey for Standard from the year 2014-15 and have targeted a turnover of Rs 10 billion by 2021. Last financial year, we were close to Rs 5 billion and this year we are attempting to cross Rs 6 billion.
How do you propose to achieve the almost 100 per cent jump in the revenue?
Each of the verticals that Standard is in currently - from switchgear, wires, cables, switches, fans, to water heaters - is a huge category in itself. For example, fans as a category are worth Rs 7 billion, flexible home wires Rs 8 billion, switchgear Rs 25 billion, switches Rs 45 billion and water heaters Rs 15 billion. If you put all these numbers together, we are actually looking at a Rs 200 billion business opportunity. And what is Rs 10 billion of Rs 200 billion? Nothing! With all the service quality and promise of the brand Havells, India, it is highly achievable. The market knows extensively about Standard and even the consumer pool has started coming in. Every day we get queries from dealers in small towns with a population of 200,000. These people want to work with the house of Havells through Standard. On an average, we add up to 90 dealers in a month. These are mid-size players who are looking at expanding their business. In the last two years, we have added 2,500 dealers and this number will reach 5,000 by the end of this financial year. The huge growth in distribution is bound to help Standard reach its coveted goal.
Havells India's engagement with its dealers is legendary. But as we speak, e-commerce is redefining the way consumers select and buy products. Are you also looking at alternate channels of distribution?
Havells is well-known in the industry for its traditional dealer connect. In fact, its major competitive advantage is derived from that. Dealers are willing to go the extra mile for Havells. The same sentiment prevails for Standard in the market. But apart from the traditional dealerships, we have been consciously expanding the brand to modern retail formats. At Standard, we do not target large retail formats like Metro Cash & Carry and Walmart, but we do focus on regional chains like Lotus Electronics in Madhya Pradesh. We are a brand of choice in the Central Police Canteens (CPCs) and we recently got listed in the Canteen Stores Department (CSD) outlets under the Ministry of Defence. In e-commerce and digital platforms, we have started focusing heavily on digital advertising. Standard has a strong presence on Twitter, Facebook and YouTube. We have a dedicated page on Amazon for Havells and its power brands like Havells, Lloyd, Standard and Crabtree. We are also present on Flipkart. We have developed a new e-shop for Standard and that is gaining traction. We are extensively engaged with Paytm and have a good presence on Paytm Mall. Besides, Standard is also finding acceptance in the international markets. We are gaining in popularity in East Africa with the Standard fan being the brand of choice in Ghana. We have also reached the West African markets. We recently appointed an exclusive distributor in the Maldives. In the SAARC region, we have a very strong distributor in Nepal. With sales in over 15 countries across the globe, our turnover is increasing by the day.
One more critical piece in our channel strategy is our brand shops. The owners of traditional outlets in smaller towns desire to see their next generation settle down. These people have 450-500 square feet of space available and since the Standard brand shop does not require a large area, the store becomes viable within a couple of years of its launch. Presently, we have over 40 brand shops across the country and 200 Shop-In-Shops (SIS). We are planning to expand the number of our brand shops to 100 and SIS to 500 by the end of this financial year as another element of our channel strategy.
You spoke about your overseas expansion. Does that mean that the Indian electrical and electronics industry is finally beginning to compete successfully against cheap Chinese imports?
What I have realised in business is that the market never gets saturated. How much can China cover? It cannot be 100 per cent of the world. They are undoubtedly a formidable competitor for us in every market that we operate in but consumers also understand the value proposition. Unfortunately, every Chinese product comes with this perception of inferior quality attached to it. For example, in India, there is a good acceptance of Chinese handsets. Even then, a person buying a high-end Chinese phone is conscious of the fact that he is not buying an iPhone.
Your company also manufacture fans and water heaters on separate production lines installed at Havells' existing plants. Could this strategy lead to cannibalisation and depreciation in quality at some point?
That's not possible with Havells because on the shop floor, the worker does not know whether he is manufacturing a Havells or Standard product since the quality standards are uniform. Havells is strong in metros and mini metros while Standard is strong in tier-1 to tier-5 towns. Nearly 80 per cent of the distribution channel of Standard is separate from Havells. There is only 20 per cent overlap and that too is getting eroded over time.
How has the Goods and Services Tax (GST) impacted you since its rollout over a year ago?
GST has been a big boon to us. Initially, there was a lot of struggle and apprehension. The unorganised players are getting eased out as they are finding it increasingly difficult to operate in the GST regime. The unorganised sector will become a toll or outsourced manufacturer for big brands. I have a prediction that in another five years, the GST regime will completely marginalise the unorganised sector in the electrical industry. People will stop trusting a fan made by an unbranded manufacturer; it is as simple as that.
- Manish Pant
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