Business Today

LG's identity crisis

The Korean electronics giant wants to be a premium brand in India, but it is the mass market that is bringing in the revenue.

Sunny Sen | April 23, 2013 | Updated 20:21 IST

Sunny Sen
Sunny Sen
Six years ago Korean electronics giant LG embarked on an image change. After having been a mass market brand for the earlier part of the decade - known for its affordable products - it decided to add a premium product range as well.

Thus in the last few years it has launched a whole range of expensive products - 'inverter' air-conditioners, ultra high-definition and 3D TVs, front loading washing machines, ultrabooks and Blu-ray home theatres

But the premium products do not seem to have helped the company - the second largest consumer durable company in India by revenue, trailing only behind Samsung - much.  3D TVs comprise only 10 per cent of LG's over all TV sales. Inverter air-conditioners amounted to only seven per cent of overall air-conditioner sales this year.

At the start of 2011, LG set itself a target of Rs 20,000 crore revenue from its India operations by the year end. It touched Rs 16,200 crore. In 2012, its revenue dipped further to Rs 16,000 crore.

"Premium is not always about the product," said Soon Kwon, Managing Director, LG India. "Premium is the brand for which the consumer is ready to pay more." He also made it clear that LG will never abandon the mass market. "To change a consumer in a particular direction takes a long time and we don't want to lose business by increasing prices," he added.

Kwon met Business Today at the LG Tech Show, 2013, where the company showcased its futuristic products like the pocket photo printer, 55-inch OLED TV, large capacity washing machines amongst other products, all of which sought to reinforce its premium image.

So will LG become price competitive again and woo the mass market again? At least in certain product categories it will. "Entry level (products) cannot suffer," said Kwon. Old timers like Rajiv Karwal, who now heads Milagrow, believe the company was better off focusing on the mass market.

"The entry market is still relevant in India and LG has created an image where it is not associated with the high-end products," says Mritunjay Kapur, Country Managing Director, Protiviti Consulting. "The next phase is to create margin and make money from rural consumers." Others believe LG might market some premium products, but only be to create aspirational value for its buyers.

At present 30 per cent of LG sales come from television, 10 per cent from air-conditioners, 30 per cent from other home appliances like washing machines and refrigerators, and the rest from mobile phones and business-to-business products. About 17-18 per cent of its revenue comes from rural markets.

"The last two years have been challenging for every player in the consumer durables market," said Kwon. "We are very optimistic about this year and hope to achieve a 20 per cent growth. There is no magic to the business. You have to have a good product."

For now, the company is Rs 24,000 crore short of its 2014 target of Rs 40,000 crore revenue.

Samsung on the other hand made Rs 20,000 crore in 2011, and Rs 27,000 crore in 2012. However, a large portion of this revenue came from mobiles, a segment in which LG has failed to make a mark. Japan's Panasonic grew from Rs 3,200 crore in 2011 to Rs 4,500 crore.

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