Business plan for Whirlpools Cooking category

2012

WHIRLPOOL OF INDIA LTD

A ca se s t ud y o n Co o k i n g c at e go r y

Days gone by In the days before electricity and piped natural gas, family kitchens in modestly sized homes were large but very simple. They contained a heat source (like a wood burning stove) for cooking and a built-in sink with or without running water. Everything else was a piece of furniture. The family kitchen was the central work and social place of the home where family members and sometimes friends performed most domestic chores and socialized with each other. When electricity and gas brought many timesaving devices to the kitchen fewer people were needed to prepare meals, losing the kitchen's social importance. With more leisure time, socializing was delegated to other living areas of the house because, in most instances, the kitchen was too small. The social kitchen Most societies have now come full circle and realized the importance of the kitchen. More people are choosing to entertain within the comfort of their home. Plans have incorporated the kitchen as a social room again. Almost all new apartments have a breakfast/family room in complete view of the kitchen. The new kitchen is designed to once again be the central hub for gathering in the house. The kitchen atmosphere itself breeds easy hospitality and social ambiance by lending itself to flexible numbers; you can always pull up another chair. It is certainly the most used room of the house. Contemporary Modular Kitchens: Designing a perfect modular kitchen requires an in depth understanding of anthropometric data, knowledge of various aspects of interior design like lighting, material, texture, etc. & its effect on human psychology, an in-depth understanding of nuances of civil engineering and a keen eye for detail. A designer is supposed to address all kinds of issues ranging from serious usage related issues such as optimal storage space in a kitchen to seemingly tepid yet important details such as how sealants can effectively make the kitchen hygienic and longer lasting by blocking water leakage and dust. Another important aspect of kitchen design is the interaction between furniture and appliances. Till a few years back, this aspect of creating a modular kitchen was less focused, since kitchen was expected to house basic cook-top and practically nothing else. In the last few years, with the onset of globalization, this aspect of kitchen design has moved from being the most ignored to one which is most focused. Modular Kitchens in India: Advent of modular kitchens in India can be traced back to early 1990s when a few Indian traders set up shops selling modular kitchens imported from Europe. It took lot of time to gain consumer acceptance since kitchens in India have never enjoyed the kind of status and importance that it enjoys in the West. Recent years have seen rapid influx of boutiques and

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outlets selling modular kitchens, as the economy evolved and more influences from West started making inroads into mainstream cultural lexicon of India. The market today is growing at a scorching pace of over 25%, with almost all the major kitchen sellers making plans for entering this industry. Business models Top of the pyramid is the company-owned showroom model. Mostly found at the premium end of the market, kitchen makers in this model retail all by themselves. They do not believe in franchising their business, either from fear that their design-quality-service proposition will get diluted, or that their high prices will encourage weak franchisees to dabble in similar looking cheaper products on the sly. Such makers are equipped with state-of-the-art machinery and processes for cabinetry so that high quality becomes a given, and they push themselves to master design. They are creative, and love to incorporate technology into their creations. They love value, but do not chase volumes. They glorify design and pander their clients. Magppie recently created a Swarovski crystal back wall for a client who was insistent about having a high-tech kitchen with a different look. Another operating model entails standalone retailers who source cabinetry from OEM suppliers, and are not attached to any kitchen brand. These retailers fend for themselves as they have no support for design, installation or other best practices except perhaps of the hardware supplier. They are often positioned in the lowest price segment and frequently get into competition with the carpenter who builds kitchens at site. Such retailers form bulk of the kitchen marketing network as it exists today. Amongst the smallest but also the fastest growing model is that of franchising. Under this style of retailing, the franchisee benefits from the branding and volume muscle of the principal in the form of recognition and uniform pricing, and receive support towards design, retail identity and post-sales support. Franchisers are leveraging the economies that accrue from flat pack furniture manufacturing and shipping, and their alliances with appliance and hardware suppliers. They invest heavily on branding and support their franchisees with training and qualified manpower. International kitchen brands have found this model ideal for marking entry into the difficult Indian market. Over 20 such brands are present here, most having remained one or two outlet operations even three-five years since their arrival, but are fast changing track. The franchising model is proving to be attractive for its ability to return high profits on investment. For one, theres a growing demand for modern kitchens in new as well as remodelling projects and gross margins remain high. Another is that the franchise does not have to

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carry inventory, since flat pack architecture of the furniture allows it to be shipped quickly and directly to client sites. In effect investment remains limited to displays and maintenance of the outlet, in addition to the local promotion on a shared basis with the franchiser. The fourth model is of big organized retailers like Home Town and Evok, which are specialist home improvement stores. Modular kitchen offerings are one of their major revenue earners. Both have the advantage of high foot falls due to their wider home improvement category, and also possess a greater clout with their vendors. Emerging Opportunities Real Estate boom offers the biggest emerging opportunity for this industry. According to a recent report from real estate consulting firm Knight Frank, during 2010 and 2011, a total of 5,33,954 residential units were launched across just top seven cities including Mumbai, NCR, Pune, Kolkata, Bengaluru, Chennai and Hyderabad. Another emerging opportunity is coming from European kitchen makers attracted by the huge nascent market that India offers are making a beeline for Indian shores. Established European Kitchen manufacturing companies seek partners who can interpret their brand philosophy the right way and do not let it get diluted, besides having a sound financial background. As the market evolves and demand increases, investments and improvements in infrastructure, software, education, manpower, installation, after sales service, logistics, etc. is bound to happen. This will kick off a virtuous cycle of profitable growth. Built-In Appliance Industry Phenomenal growth of Kitchen Industry also led to emergence of the built-in kitchen appliance category In the initial years, the onus of developing the market was led by local players, often in technological collaboration with western brands, like Faber (in JV with Faber Italy), Sunflame (in partnership with Elica Italy), Kaff (a brand built by a local entrepreneur sourcing product from OEM suppliers from China and Europe) and host of other local brands. The past couple of years have seen not just established white good majors like IFB, Siemens and Electrolux, bringing forth a class of products to suit the modularity of cabinets. These brands are increasingly discovering value in developing the kitchen outlet channel as a parallel network to their existing white goods channel. High end Specialist brands like Miele, Fisher & Paykel, and Foster are also lining up a comprehensive range for discerning Indian consumer. Demand for appliances such as Built In refrigerators and dishwashers is on the up. Niche appliances like Built-In Coffee machines are starting to appear on the wish-list of a few high end consumers. The significance of appliances can be gauged from the fact that they together make up for no less

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that 30%-50% of the investment that goes into a new kitchen, even surpassing the cost of cabinetry. IFBs recent foray into the modular kitchen business is another confirmation of the Siamese relationship that these two businesses have. Given the industry scenario described above, Whirlpool intends to tap into this emerging opportunity. Strategic objective Establishing Whirlpool as No. 1 Brand in Built In Appliance category Drive Whirlpool towards leadership on recall and imagery Strategy for the organization to compete with brands straddling across price spectrum ranging from Faber & Kaff in mass and mass premium segment and Miele in the premium segment. Evaluation: Analysis of external environment including macro-economic variables, consumer Understanding of key competitors including their product portfolio, go-to-market and promotion SWOT analysis for Whirlpool Key Deliverables: Detailed business plan capable of delivering the strategic objectives. The key deliverable of the exercise must include Strategy on all 4Ps. Comprehensive Go-to-market strategy Financials (Volumes, margins etc.) Please state clearly the assumptions considered while responding to above questions.

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