- A BRIEF OVERVIEW

BY : VIKRAM DAHIYA

INTRODUCTION

• SANITARYWARE MARKET IN INDIA HAS GROWN RAPIDLY DURING THE LAST 5-6 YEARS, WITH KEY PLAYERS DOUBLING THEIR PRODUCTION CAPACITIES.

• THE ORGANIZED SECTOR COMPRISES MORE THAN HALF OF THE TOTAL MARKET BY VALUE. THE MAJOR THREAT FOR THE INDUSTRY IS FROM THE UNORGANIZED SECTOR, WHICH PROVIDES PRODUCTS AT LOW PRICES.

• IN TERMS OF MARKET VALUE, ORGANIZED PLAYERS LEAD THE MARKET BUT ON THE OTHER HAND IN TERMS OF VOLUME, UNORGANIZED PLAYERS HOLD THE MAJOR SHARE.

• HOUSING AND INSTITUTIONAL SECTORS ARE THE MAJOR GROWTH DRIVERS. AT PRESENT, HOUSING DEMAND IS RAPIDLY RISING AND WITH INCREASING PURCHASING POWER PEOPLE HAVE STARTED TAKING INTEREST IN PREMIUM SANITARYWARE PRODUCTS.

INDUSTRY KNOWLEDGE

• INDUSTRY IN INDIA TOGETHER IS ESTIMATED TO BE

VALUED AROUND 427 MILLION USD IN 2014.

• THE SANITARY WARE SEGMENT IS ESTIMATED TO BE

VALUED APPROXIMATELY 124 MILLION USD IN 2014 WHILE

THE BATHROOM FITTINGS SEGMENT IS ESTIMATED AT

APPROXIMATELY 303 MILLION USD IN 2014.

• CAGR AROUND 12.5 – 15 %

BETWEEN 2012-2018

MAJOR BRANDS

PRESENT SCENARIO

• THE SANITARY-WARE MARKET HAS BEEN GROWING AT A CAGR OF 12.5% SINCE 2010, AND THIS TREND IS EXPECTED TO CONTINUE THROUGH 2016. ORGANISED SEGMENT CURRENTLY COMPRISES 60% (APPROXIMATELY) OF THE SECTOR.

• THE BATHROOM FITTINGS MARKET IS FORECAST TO GROW AT A CAGR OF 15% UNTIL 2016. THE ORGANISED SEGMENT MAKES UP ALMOST 45% OF THE MARKET, AND IS GROWING FASTER THAN THE INDUSTRY AVERAGE.

• WHILE THE ORGANISED SECTOR FOCUSES MAINLY ON MIDDLE CLASS AND AFFLUENT SEGMENTS IN URBAN AREAS, THE UNORGANISED SECTOR HAS, BY AND LARGE, TARGETED THE MASS END OF THE URBAN MARKET AND THE RURAL AREAS.

• WITH RELATIVELY STRONG DEMAND GROWTH IN INDIA OVER THE LAST FIVE YEARS, VARIOUS MNCS HAVE ENTERED THE MARKET.

TRENDS IN THE SANITARYWARE AND THE BATHROOM

FITTINGS MARKET

• COMPLETE BATHROOM SOLUTIONS: DUE TO THE RISING POPULARITYOF CONCEPT WASHROOMS AND COORDINATED SANITARY-WARE,FITTINGS AND ACCESSORIES, SOME MANUFACTURERS ARE OFFERING AONE-STOP SHOP SOLUTION FOR ALL SANITARY-WARE AND FITTINGSREQUIREMENTS. THE IN-STORE EXPERIENCE HAS GROWN INIMPORTANCE, AND MANUFACTURERS HAVE ESTABLISHED 'EXPERIENCE-CENTERS', WHICH ARE ONE-STOP SHOPS WHERE A CUSTOMER CAN VIEWA VIRTUAL VERSION OF THEIR BATHROOMS, POST RENOVATION.

• INCREASING PRESENCE OF FOREIGN PLAYERS: INITIALLY, DOMESTICPLAYERS DOMINATED THE MARKET IN THIS SEGMENT. HOWEVER, FOREIGNPLAYERS ARE GAINING POPULARITY AS MORE AND MORE CUSTOMERSWISH TO PURCHASE IMPORTED PRODUCTS. THERE HAVE BEEN SOME TIEUPS BETWEEN FOREIGN PLAYERS AND DOMESTIC PLAYERS IN THISSEGMENT.

CONTD…

• WATER CONSERVATION TECHNOLOGY: BATHROOMS CONSTITUTE THE PRIMARY SOURCE OF WATER AND WATER USAGE. WITH INCREASING ENVIRONMENTAL AWARENESS, CUSTOMERS ARE MOVING TOWARDS ECO-FRIENDLY SANITARY-WARE AND BATHROOM FITTINGS THAT HELP IN THE CONSERVATION OF WATER. THESE ECO-FRIENDLY PRODUCTS OFFER A 20% SAVINGS IN WATER AS COMPARED WITH OTHER PRODUCTS. SOLUTIONS SUCH AS HIGH EFFICIENCY FLUSHING SYSTEMS, INFRARED CONTROLS, AND SENSOR TAPS AND SHOWERS ARE GAINING POPULARITY.

• RISE IN PREMIUM SEGMENT PRODUCTS: INDIAN CUSTOMERS ARE GRADUALLY PURCHASING MORE PREMIUM AND HIGH TECHNOLOGY PRODUCTS FOR THEIR BATHROOMS DUE TO INCREASE IN THE SPENDING POWER. THE PREMIUM SEGMENT IS ESTIMATED TO COMPRISE ABOUT 10 TO12% OF THE TOTAL MARKET.

BUSINESS MODEL –FAQS• Q1. WHAT IS THE SIGNUP INVESTMENT FOR DEALERSHIP/DISTRIBUTION FOR PROMINENT COS IN THE SEGMENT

DEALERSHIP = 2-3 L | DISTRIBUTORSHIP = 5-10 L

DEPENDS ON THE BRAND

• Q2. WHAT IS THE MARGIN FOR DEALER AND CNF FOR DIST/STOCKIST

DEALER - MAX. 8%

C&F FOR STOCKIST - 3 TO 5%

• Q3. HOW MANY LEVELS ARE THEIR IN THE CHANNEL (FOR E.G. DIST, STOCKIST, DEALER, RETAILER ETC)

COMPANY -> C&F OR DISTRIBUTOR -> DEALER

• Q4. WHAT IS THE MOQ

AGREEMENT DIFFERS FROM COMPANY TO COMPANY

• Q5. WHAT ARE SOME OF THE PAIN POINTS

IF THE BRAND IS ESTABLISHED, THEN NO PROBLEMS.

NEW BRAND -> DEPENDS ON THE SALES TEAM AND PRODUCTS

CONTD…

• Q6. HOW MUCH DOES AN AVERAGE DEALER AND DIST DO IN A MONTH FOR THE BRAND

DEALER EG : GROHE -> 10 L | DISTRIBUTOR -> 1 CRORE

AGAIN DEPENDS ON THE BRAND AND COMPANY

• Q7. WHAT ARE THE INCENTIVES GIVEN BY COS ON WHAT KIND OF SALE.

INCENTIVES ON SALES -> FOREIGN TRIPS, GOLD, ELECTRONIC ITEMS, CASH, TURNOVER DISCOUNT, QUANTITY DISCOUNT.

• Q8. WHAT IS THE CREDIT PERIOD FROM DEALER TO DISTRIBUTOR

DEALER - 15 DAYS TO 2 MONTHS

• Q9. WHAT IS THE CREDIT PERIOD FOR DISTRIBUTOR FROM CO.

MULTINATIONAL COMPANIES - ADVANCE PAYMENT, GENERALLY

• Q10. WHAT ARE THE KIND OF DISCOUNTS OFFERED BY DEALER TO END CUSTOMERS.

EXAMPLE SCHEME - 1 FREE ITEM ON BUYING 10 ITEMS

CERA – AN EXAMPLE OF BUSINESS MODEL MARGINS

GROWTH POTENTIAL

• THERE IS A SIGNIFICANT GROWTH POTENTIAL IN THE LOW-COST OR ENTRY-LEVEL SEGMENT.

• ONE IN EVERY FIVE URBAN HOUSEHOLDS, AND AN EVEN HIGHER PROPORTION OF RURAL HOUSEHOLDS, DO NOT HAVE A BATHROOM OR LATRINE EMPHASISING ON THE TREMENDOUS POTENTIAL TO EXPAND WITH RISING INCOMES AND PUCCA HOUSES.

• COMPARED WITH OTHER COUNTRIES, REPLACEMENT DEMAND IS LOW IN INDIA, AND ACCOUNTS FOR ONLY 7% OF THE MARKET

• OTHER FACTORS SUCH AS INCREASING DISPOSABLE INCOMES, HIGHER STANDARDS OF LIVING, AND INCREASING EXPENDITURE ON BEAUTIFYING HOMES AND USING PREMIUM PRODUCTS PROVIDE A FURTHER IMPETUS TO THE GROWTH OF THIS SEGMENT.

THANK YOU !!!