The Levers Of Crompton

The consumer electricals industry is witnessing a market share shift from the unorganised to the organised sector, where the likes of household appliances are seeing an uptick in demand. Over the last few years, disruptions such as demonetisation, GST implementation and the pandemic have hastened this shift allowing for some growth stories to come to the fore. One such story is that of Crompton Greaves Consumer Electricals (Crompton). 

In the last couple of years, Crompton has been very busy. Not only did it up its investment in setting up an innovation centre and completing acquisitions but it also doubled up its efforts to ensure it kept its consumer at the centre of all its initiatives including foraying into new categories. The result was a steady growth streak.

A Growth Story

In 2015, after the business demerged from Crompton Greaves to create the current entity, one may argue it regained its mojo. From the period FY16 to FY22, Crompton recorded a revenue CAGR of 8 per cent, an EBITDA CAGR of 14 per cent and a PAT CAGR of 17 per cent, recording 2.6 times absolute growth. 

In 2022, the company that is into fans, domestic pumps, water heaters and lighting, entered the built-in kitchen appliances segment in India. Its product portfolio now includes a range of chimneys, hobs, built-in ovens, built-in microwaves and dishwashers. The Butterfly Gandhimati Appliances’ acquisition strengthened its presence in this segment and opens up a new gateway of opportunities.

The Right Priorities

“In bad times, a brand needs to understand consumers even better and innovate to bring stronger value. In good times, it should focus on being the lowest-cost producer and ensuring a healthy cash cycle. But if you wait for the bad times to come before you start doing the right things, you are going to be in trouble,” remarks Shantanu Khosla, Managing Director, Crompton Greaves Consumer Electricals. 

He explains that despite external challenges beginning from the lockdown in 2020 to the European war in 2022, Crompton continued to “outperform nearly everyone in terms of margins” because it did the right things during the good times and remained strategic during the bad times.

Crompton’s present-day game plan has three core areas of focus that held it in good stead – acquisition, research & development (R&D) led innovation and portfolio expansion. This includes one of its largest investments in future growth, which was Butterfly Gandhimathi Appliances valued at Rs 2,076 crore. 

The company also ramped up its innovation capabilities by setting up a new research and development (R&D) centre at this time and also made its first significant entry into the new category of hobs and chimneys.

“We were able to do all this and deliver the best-in-class margins because we have been focussing on the consumer throughout the trajectory of the company,” says Khosla.

Acquire & Innovate To Expand

With the Butterfly acquisition, Crompton made a big move in the kitchen category and also the southern market. The company is bullish on this category, identifying it as its next strategic space of growth. 

“A category’s potential is very important to us. Most categories’ value is created by the top players. There is no value in being lower in the order. We wanted to enter a category where we believed we would be among the top players and get at least a 10 per cent share in the medium term. We don’t play niche,” states Khosla. 

After putting the filter of being reasonably sized, identifying unserved or underserved consumer demands and understanding whether Crompton can find solutions to these, ‘kitchen’ emerged as Crompton’s big opportunity. 

“This was the thought process with which we got into the kitchen category. We have put time and energy into serving actual needs. Our chimneys, for example, are less noisy and have a whole range of automation based on consumer needs. The most difficult and important thing where value is created is ‘meaningful superiority’. This is what makes a difference to the consumer and this is what we need to deliver,” Khosla asserts.

The Opportunity Abounds

“Crompton is in the process of creating a brand that will create value forever,” says Mathew Job, CEO & Executive Director, Crompton Greaves Consumer Electricals. Explaining the company’s long-term planning, he explains why the kitchen segment was an opportunity that “cannot be overlooked”. 

“We know there are clear and long-term trends that have become self-evident. There is nuclearisation of families, more and more adults work and we have identified that we can improve the consumer’s life in this backdrop, creating a long-term business opportunity,” Job says.

Market projections back this argument. Courtesy of the homemaker’s growing demand for technologically advanced kitchen appliances, the category in India is witnessing an upward curve. While it has seen its share of ups and downs, numbers show that growing research, evolving and advancing technology, and rising innovation in the existent kitchen appliances are driving the category’s growth. 

The Indian electrical kitchen appliances market, valued at $5714.97 million in 2021, is expected to grow with a CAGR of 6.66 per cent to reach a market value of $8310.45 million by 2027, as per a ResearchAndMarkets report. 

Consumer First, Always

Based on a deeper understanding of consumer needs, Crompton explored new ways of managing its capabilities and bringing innovative products to the market. It discovered that competition would not stay quiet, so it needed to be a step ahead. “The lifeline of products is becoming shorter as well. We need to accommodate the latest trends and demands accordingly,” adds Khosla.

This was the reason why a significant amount of the company’s time and effort was invested into R&D. Khosla believes that while that is an internal change, external changes too are underway that will open new opportunities. He says more investments will take place in improving the supply footprint over the next few years. All of this will result in the need to stay ahead of the curve.

The company’s answer to that is to develop proprietary technologies and expand its footprint. Manufacturing excellence, capacity building and the like are already becoming important to its plans, where it will up its investments in the next five years.

The Way Ahead

“Need-based consumer segmentation is required. The long-term competitive advantage for the company is consumer understanding so that we can deliver those needs and innovate,” says Job.

The company has also made digitisation its top priority and it is only going to move forward with that strategy. Khosla comments, “Consumers today are finding all their information digitally. About 74 per cent of customers who bought fans searched online for information at some point. It wasn’t easy for brand owners to guide through word of mouth before because it was such a close community. Brands analyse the touch points which people are looking forward to and guide them.”

Crompton sees all this as positive developments for it as a brand. While the company expanded into new markets, it remained committed to providing high-quality, dependable products. It revolves around the idea of innovation, to remain more dynamic.