Distribution network expansion is one of the key strategies that Ariston Thermo India Pvt Ltd, owner of water heating solutions brand Racold, is deploying to retain its hold over the Indian market, says GM–marketing for India & South Asia Anil Bhamre. He spoke to Sourcing Hardware about Ariston’s understanding of the Indian market and how it is likely to evolve in the coming years.
By Gyanendra Kumar Kashyap
What is the size of the water heating solutions market in India?
In India, the demand for water heaters has been increasing over the last few years on account of growth in the construction sector and increasing disposable incomes. The market for water heaters in India is expected to surpass $450 million through 2022, and solar water heater is the fastest growing segment. According to the India Water Heater Market Outlook 2021, though electric water heaters are currently dominating the market, solar water heaters have also gained prominence among Indian consumers over the past few years and are expected to grab a share of 40% by 2021.
Further, growth in this segment is expected on account of rising awareness among consumers, pertaining to the benefits of solar water heaters both in terms of energy-efficiency and being eco-friendly.
What is the typical customer behaviour with respect to water heating products? How are you responding to this behaviour?
We have conducted several surveys and studies to determine this and can say that roughly 30% of the household electricity consumption is accounted for by water heaters. Consumers are becoming more aware and conscious of this, hence they look for products that have a good BEE star rating. This trend has ensured that manufacturers invest in R&D and bring out products that are beneficial to the end consumers. Racold has won the Energy Conservation Award from BEE for electric storage water heaters for the year 2010, 2011, 2012 and 2016.
‘Customer is king’ at the end of the day and any company that has its finger on the pulse of the consumer will be able to succeed in the market. This is the reason why we are investing a lot more in R&D to come out with products that cater to the consumers’ specific needs. We also understand that customers are increasingly becoming tech savvy and are much more concerned about the aesthetics. Hence, we have launched our innovative technology-based Eterno Intello, as well as the square-shaped Andris. Andris, which was launched this year, is a state-of-the-art water heater designed by Italian designer Umberto Palermo. It has been given major launches in nine cities last February.
From a manufacturer’s point of view, how do you think GST will impact the industry?
Manufacturing is a competitive industry and has been a major economic driver for many developing economies across the world. Although India enjoys a favourable demographic and geographic position, its manufacturing industry has been close to stagnant for the last two decades. With reference to ‘Make in India’, the government realises that to become a manufacturing hub, it will require several planned reforms to simplify manufacturing in India.
The implementation of the Goods and Services Tax (GST) will set off a transformational shift for a complex multi-layered indirect taxation system to a cohesive indirect taxation system. Transition to GST should hopefully result in decisions being taken that optimise business efficiency (as opposed to indirect tax efficiency). For example, at present warehousing choices in different states are often based on arbitrage between VAT rates and CST rates. With the initiation of GST, it is expected that such warehousing and logistics decisions would be based on costs and locational advantages with reference to key markets.
How is Racold India poised with respect to its global operations?
Ever since its inception, Racold Thermo has been setting standards in the Indian water heater industry by bringing in new technology; and enhancing the aesthetics, quality, durability and performance of products. Our plant manufactures six lakh products per year and has an R&D centre, which has helped Racold produce energy-efficient products. Our parent company Ariston Thermo invests €58 million yearly in R&D. Our contribution to our global parent’s turnover is currently 5%, and we aim to double this to 10% in the coming few years. Capacity building and distribution expansion would be the key strategies that we’ll adopt in order to achieve this target. In fact we aim to reach all one lakh plus population towns.
What’s the strategy to differentiate brand Racold? How are you positioning your brand?
The water heater is an appliance that finds place in every Indian household. Even with the substantial size of the market and a long list of other geyser manufacturers, Racold has proven time and again that it is at the forefront in terms of technology as well as brand recall. By winning multiple awards with strategically designed, energy-efficient solutions, we’ve cemented our position as India’s largest water heating solutions provider that’s trusted by the entire nation. Our range of products comply with today’s eco-standards, high-performance requirements and provide cutting-edge features and thus, enable us to always be considered thought leaders in the field of water heating solutions. It is this expertise and drive that gives Racold the edge to find new and improved water heater solutions, and positions us firmly as industry leaders.
We recently launched our integrated marketing campaign #PowerOfTheHotShower. The campaign reinforces the brand’s positioning of ‘Reborn Everyday with Hot Water’. The campaign touches an emotional chord and has received a lot of appreciation. Our endeavour is to create path-breaking work that showcases our commitment to the customer.
Are there plans to enter into new categories?
Water heaters in India are emerging as technologically upgraded and innovative products. Electric water heaters are currently the most popular among consumers. Although the electric water heater market is moving towards maturity, continuous innovations on the part of manufacturers are driving growth. In addition, solar water heaters are expected to gain prominence over the next five years, since growth in this segment is being propelled by government efforts and demand among consumers for energy-efficient and eco-friendly products. The gas water heater market in the country is still at a nascent stage, but is expected to pick pace on the back of government plans to extend the piped gas network. We are also looking at other categories where Ariston group has advanced technology for propelling future growth.
How is your distribution network poised, and how do you plan to expand it?
We have a robust network of around 200 distributors and 500 direct dealers selling to 15,000 retailers. We aim to strengthen our network further across the nation. In the current fiscal we will add around 10% to the existing population of dealers. n