LG to focus on rural markets to fight slowdown
In a bid to insulate from the slowdown in consumer demand, LG Electronics India has decided to focus heavily on rural markets.
By Writankar Mukherjee, ET Bureau |
KOLKATA: In a bid to insulate from the slowdown in consumer demand, LG Electronics India has decided to focus heavily on rural markets.
The largest consumer electronics company in India by sales, LG plans to make significant inroads in these markets through channel expansion, set up a services network and roll out a slew of entry-level products.
LG also plans to invest around $40 million in 2009 towards such product development. It expects all such initiatives will enable it to maintain its targeted 15% plus growth rate. LG grew by 14% in 2008 and clocked a turnover of Rs
10,750 crore. It is now aiming for a Rs 13,000 crore turnover in 2009.
Talking to ET, LG Electronics India managing director Moon B Shin said rural markets are expected to be much less affected than urban by the slowdown.
"The electricity situation is becoming better in rural India and even the agriculture loan waiver package will provide surplus cash to farmers. In the current context, the rural markets are a goldmine," he said.
The contribution of rural sales to LG's turnover in 2008 has been around 35%. "This year, we feel the contribution from rural markets will grow significantly to around 45%. Our investment on R&D and marketing will not be hit despite the slowdown. In fact, we plan to invest Rs 400 crore on marketing this year as compared to Rs 350 crore in 2008," said Mr Shin.
LG is also looking at enhancing its manufacturing capacity by some 30%. "We are deploying innovative processes in our plants which will translate in greater efficiency. This will help us to save costs and bring out newer products at competitive pricing," Mr Shin said.
The largest consumer electronics company in India by sales, LG plans to make significant inroads in these markets through channel expansion, set up a services network and roll out a slew of entry-level products.
LG also plans to invest around $40 million in 2009 towards such product development. It expects all such initiatives will enable it to maintain its targeted 15% plus growth rate. LG grew by 14% in 2008 and clocked a turnover of Rs
10,750 crore. It is now aiming for a Rs 13,000 crore turnover in 2009.
Talking to ET, LG Electronics India managing director Moon B Shin said rural markets are expected to be much less affected than urban by the slowdown.
"The electricity situation is becoming better in rural India and even the agriculture loan waiver package will provide surplus cash to farmers. In the current context, the rural markets are a goldmine," he said.
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LG plans to roll out several new models in low-end segments like direct cool refrigerators, twin-tub washing machines, solo microwave and CRT TVs in the first half of 2009. This is in sharp contrast to LG's erstwhile strategy to focus on premium products in the Indian market for the past couple of years. "Since disposable income is low in rural markets, we will focus on low-end products," said Mr Shin.The contribution of rural sales to LG's turnover in 2008 has been around 35%. "This year, we feel the contribution from rural markets will grow significantly to around 45%. Our investment on R&D and marketing will not be hit despite the slowdown. In fact, we plan to invest Rs 400 crore on marketing this year as compared to Rs 350 crore in 2008," said Mr Shin.
LG is also looking at enhancing its manufacturing capacity by some 30%. "We are deploying innovative processes in our plants which will translate in greater efficiency. This will help us to save costs and bring out newer products at competitive pricing," Mr Shin said.
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