Introduction
Whirlpool Corporation is a Fortune 500 company and a global manufacturer and marketer of major home appliances, with annual sales of approximately $20 billion. Whirlpool entered the Indian market in the late 80s, and had entrenched itself as a formidable player in the Indian home appliances market by the mid 1990s, with a comprehensive product portfolio covering washing machines, refrigerator, microwave ovens and air conditioners. Today, Whirlpool is one of the most recognized brand in home appliances in India and holds a market share of over 20%.
While Whirlpool is an acknowledged player in many of the water purifier markets across the world for the past several years now, Whirlpool entered the growing water purifier market in India in 2008. Given its focus on “attaining market leadership through Customer loyalty”, Whirlpool aspires to be the market leader in the water purifier market by 2012. This case presents the situation of the water purifier market in India, and poses challenges that Whirlpool will have to overcome to achieve its vision of becoming the market leaders.
drinking water : A perspective
Even as world bodies and governments across the continents are strategizing to manage the growth humanity in a holistically sustainable manner, availability of safe drinking is a major area of concern for all. As high as 884 Mn people in the world do not have access to safe water. This is roughly one in eight of the world’s population. 1.4 million children die every year from diarrhoea caused by unclean water and poor sanitation – one child every 20 seconds. Approximately 80% of diseases in India are caused by water borne micro organisms.
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This is true in rural as well as urban India. However, awareness of health risks linked to unsafe water The use of water can be broadly divided in to two major categories, namely for Consumption (drinking, cooking etc) and Sanitation. This case focuses on water used for drinking purposes.
A brief on Water Treatment methods
Throughout human history, different methods of treating water before consumption have been devised. Up until about 100 years ago, it was always found that water flowing from natural springs was safe for drinking in its natural state, but in the 21 century even spring water is first scientifically tested before it is recommended or bottled for drinking. Each of the above methods carries with them significant disadvantages either from a convenience point of view or from health and hygiene perspective. This calls for more sophisticated methods of purifying water, to suit with the evolving lifestyles in the societies.
Current State-of-the-Art Water Purification Technologies
Today, the more sophisticated and commercially available water purifying technologies are, • • • Manual fill Purifier (Drip Type) Ultra Violet (UV) purification Reverse Osmosis (RO) purification
The latter two are generally referred to as Electronic Water Purifier technologies (EWP); by exception, the first one is referred to as Non EWP. The above three are given in the order of chronological evolution, with RO technology being the latest in the Water Purification technology. The manual fill purifiers do not run on electricity, which is a scarce resource in many parts of rural India, and also have significantly lower costs in comparison to the EWPs. Interestingly , these manual fill purifiers which primarily use chlorine or UF technology are at par in performance with UV in terms of microbial protection. UV has been the oldest technology in the industry. It typically involves preliminary stages of filtration, followed by treating the filtered water through UV rays to deactivate the microbial organisms. In the RO technology, even the smallest of microbial organisms are filtered using the reverse osmosis technology.
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RO technology especially scores over UV when the Total Dissolved Solids (TDS) count in the source water is high . One disadvantage of RO systems is the wastage of significant quantum of water during its processing. Needless to say, the costs of the products under these different technologies increase from manual fill purifiers to UV purification systems to RO purification. The typical price range of manual fill purifier products is Rs. 1500 to Rs. 3500, while the UV products range in price between Rs. 4000 to Rs. 9000. The RO products are priced on the higher side starting from Rs. 8000 to Rs. 20000. Many products available in the market today in India use a combination of technologies but for the products in the lower end technologies (manual fill purifiers).
Water Purifier Market in India
The delivery of purified water in the Indian markets follow two conduits, namely, water purified in purification plants delivered to residences and other consumption locations (e.g. restaurants) in cans; and installation of water purification instruments at the place of usage. While the former One of the oldest methods of treating water, and one still used constantly in Third World and often in developing nations or areas that have seen recent natural disasters, is boiling to kill microbes (but this causes loss of taste and may leave in dirt).
Other methods of water treatment include filtering and distilling, use of chemical agents such as Iodine or Silver or Potassium Permanganate into the water supply, or the use of candle filters. methodology predominantly uses multiple technologies mentioned above, provides economies of scale and eliminates initial costs of investing in equipments, the costs involved in distribution of the treated water counters these economies of scale. The latter provides for visibility and ease of use, which are significant perceived benefits in comparison to the former. While both the delivery mechanisms exist, the latter is fast catching up. This case focuses on the latter, which is typically referred to as the Water Purifier industry.
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This industry is broadly divided in to two categories namely Electronic Water Purifiers (EWP) comprising of products using UV or/and RO technologies and Non Electronic Water Purifiers (Non EWP) comprising of products that use the manual fill purifiers. Frost and Sullivan report of primary research in 2009, estimates the total market size of the Water Purifier industry in India to be 2000 Cr of which 63% is from product sales and 37% is after sales revenue. Despite the size of this industry, the Water Purifier industry in India has a low penetration (2% Urban and 0.5% All India) as per IRS 2007 and is growing at a strong rate (others use traditional water treatment methods like boiling and filtering, or use of chemical additives like Chlorine, Potassium permanganate etc).
As per AC Nielson 2006 study( and internal estimates), the industry is expected to touch approx 2.3 mn units by the end of 2009. Expected growth rate of 15% and a CAGR (‘04-‘09) 21%.
The average ASV of the industry is Rs 6700. With a size of approx 1.7mn (units), the EWP market is divided into 2 sub-segments – RO (30% sal) & UV (70%).
The RO segment is the premium end of the category and has an ASV of Rs 12000 while UV has an ASV of Rs. 7000 .RO & UV growths , CAGRs(‘04-‘09) are (15% ,16%) and (10% ,10%) respectively. The Non-EWP segment operates at a sub 2K ASV (Rs 1900).
This segment is witnessing an explosive growth with the entrance major players like HUL etc . The Annual growth rate was witnessed at 25% while CAGR(‘04-‘09) at 77%. It is important to note that the technology sold in a given local market is also dependent
largely on the characteristics of the source drinking water in the given demography. For example, a region like Delhi with high TDS calls for RO technology, while regions like Cochin with low TDS would depend on products with UV technology. Also, one of the detriments to EWP products is the availability of continuous flow of source water and availability of power, both of which advantages are addressed the products dependent on Manual Fill Purifier technology.
While the major element of the market in the water purifier equipment business in India is still in the unorganized sector, branded products are catching up and their market share is improving. The major branded players in the market are Eureka Forbes (AquaGuard, AquaSure brands), Kent, Philips, HUL (Pureit), Ion Exchange (Zero B) Ushabrita and Whirlpool (Purafresh).
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As per Frost and Sullivan report 2009 , Market share by player and by technology- Approx Shares ( for 2008) Eureka Forbes: RO(20%) , UV(35%) , Drip Type(33%) Kent: RO(25%) , UV(0%) , Drip Type(0%) ZeroB: RO(15%) , UV(0%) , Drip Type(0%) HUL : RO(0%) , UV(0%) , Drip Type(42%) OTH: RO(40%) , UV(65%) , Drip Type(25%) The Non-EWP segment was primarily dominated by local players until recently, when HUL entered the category with its drip type purifier under the brand Pureit at a break through price of Rs 1800 and took the market by storm.
The other key players in this segment are Ushabrita & Eureka Forbes. The channel for this segment has traditionally been the Direct to Home (DTH) route, with this route still accounting for a whopping 65% of the product sales in this category. The ratio of Eureka Forbes’ DTH sales is higher at 75%. On the trade side(contribution bal 35%), the DAP channel (Domestic Appliances Products) accounts for the larger proportion of the share with 65% while the Durable Trade accounts for the remaining 35%. The DAP Channel mainly consists of small appliance sellers who sell products like iron , blenders , mixers , gas burners etc. These retailers primarily sell products which lie within the price range of Rs 500-Rs 5000. They are typically not in the prime locations in the market place and their shopfloor size is on an avg10X10ft.
The products are displayed mostly in a packed form. The products are sold very close to the MRP and the discounts offered are in the range of only 5-10% HUL has made an entry through a unique channel. It has opened up a large number of ‘Water Safe Zones’ / “Product Experience Centres’ and is pushing the volumes from there while catering to direct to home service as well While HUL is establishing itself in the entry level segment through consistent advertising and promotions , the more established players in UV & RO like Eureka & Kent too are active in the media space and are seen promoting their products through several media elements. Recently, HUL was seen rolling out a ‘Rs 1 Crore’ challenge offer and heavily promoting the same. At the same time Eureka Forbes was also seen throwing a ‘Money Back Guarantee’ offer on its products.
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Eureka Forbes operates with a strong sales& service force of 6000 people on the company rolls along with an equally large group of third party franchises. The company has been under pressure to expand its volumes since the avg the productivity of its sales team has come down over years. Lately, they have been seen heavily focussing on retail through their ‘Aquasure’ brand while the ‘Aquaguard’ brand is operating in the DTH section. Kent has its own sales & service set up in Northern India while it depends on third party franchises for its operation in the rest of the country. It has branch offices in 6 cities (AP , Karnataka, Kerala , Mumbai , Gujarat , West Bengal).
In order to counter HUL’s explosive growth, Kent recently rolled out a NON-EWP (UF based) purifier at a price of Rs 2500 under the sub-brand ’Kent Gold’.
This product is being primarily marketed through the retail channel. HUL has set up its Safe water zones with external KSPs ( Key service providers) while continuing to have its internal sales team supervising the operations . In Delhi for example , it has 27 such zones with a sales team of 750 sales men, 17 Territory sales executives (TSE) , 3 business development executives (BDE) , 1 area head.(AH) and 2 service officers . The TSEs, BDEs & AH are on company rolls. The following table summarizes the typical product price points in the various segments. Price range (In Rs) Unorganized 1500-2500 4000-6000 8000-12000 Organized 2000 – 3500 6000-9000 8000-20000 Whirlpool Not Applicable Not Applicable 12500-20500
Segment Non EWP Ultra Violet (UV) Reverse Osmosis (RO)
Whirlpool’s entry in the Water Purifier Market in India
Whirlpool has been present in the Water category in all the key regions of the world including US, Canada, NAR, Europe, Brazil, Mexico & Asia in several value added segments like water heaters, bottled water dispensers, water softeners , Refrigerator filters etc. Whirlpool entered the Water Purifier Market in India in the early 2008 to tap in to the growing Water Purifier Market, focused on the RO segment to start with, with the launch of the Purafresh range of purifiers. Currently, Whirlpool Water Purifier products are available across all markets in the country. Whirlpool has garnered a Market Share of 5% in the RO segment in the past 1 ½ years. The Water purifier category is a perfect brand fit for Whirlpool.
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It is a home appliance used by the home maker to provide safe and pure drinking water to her family, thus building a strong case of placing trust in the brand. This category will lend a lot of credibility to the Whirlpool brand. Whirlpool’s communication strategy also revolves around reinforcing this element of Trust. Equipped with Whirlpool’s patented ‘6th Sense’ technology, the new ‘Purafresh’ water purifier is the first Reverse Osmosis system on the market that not only purifies but also protects the purity and freshness of the water with its prestigious gold seal certification (from GOLD Seal of Water Quality Association, USA WQA).
Purafresh is available in three models – Purafresh Platinum, Purafresh Elite and Purafresh Deluxe.
Trigger Questions for Analysis
Given the situation described above, suggest a comprehensive “Go-To-Market” plan following a systematic methodology for Whirlpool to achieve its overall objective of achieving market leadership in the Water Purifier Market (in the organized sector) by 2012, and its interim goal of achieving market leadership in the RO segment, ensuring its premium brand image, and its operational philosophies (given in the annexure for ready reference).
A) Understanding and presentation by a Systematic methodology. B)Inputs: Should reflect comprehensive understanding of the company and competitive environment.
1) Analyze company development , history, Growths. 2) Identify Strengths , weaknesses , 3) Analysis of external environment (Porter 5 forces , SWOT etc) C) Outputs: Understating should result in output 1) Strategy on all 4 P’s 2) Channel Strategy ( Spl Focus) a) Evaluation of SWOT b) Key market insights c) Business Level Strategy d) Recommendations (including articulation of hypothesis) e) innovative approach especially in the communication/promotion strategy
Phase II
Build a detailed business plan arising out of the above strategic plan, and project the profitability of this business over time, including investments that may be required for new products and their market entries, while achieving this objective. Recommendation evaluated by 1) Strategy 2) Product choice 2) Financials ( volumes, Margins , costs , etc) 3) Process of executing strategy 4) Innovative approach/ideas. {In the first phase, the second phase question and related references should not be circulated}
Whirlpool’s high end Purafresh platinum model, is India’s first and Only Direct Flow RO with no storage tank enabling immediate consumption of freshly purified water with 72 litres per hour capacity (Normal RO products have 8-10 litres per hour capacity).
It has an advanced 5-stage purification process and also boasts of a first–of–its–kind electronic interface with a ‘Filter change indicator’, which alerts the consumer on the need to change the filter and thus ensures continual purity & protection of the water. Other diagnostics functions like no water on tap indication, self cleaning mode indication, and water extraction indication makes it the most advanced and best in class product available in the Indian market today. Whirlpool entered the Indian market mainly leveraging their strength in the durable retail channel and has the highest share (30%) of all Water Purifier sales in this channel. Whirlpool has also entered the DAP Channel and are currently having a 10% share in that channel.
The “Surging to Lead” Challenge
Given its focus on “attaining market leadership through Customer loyalty”, Whirlpool aspires to be the market leader in the water purifier market by 2012, with an interim goal of attaining market leadership in the RO segment by 2010, while at the same time maintaining its brand position. This, no doubt, is a challenging aspiration for Whirlpool, given the well entrenched players in the market like Eureka Forbes, aggressive players like HUL who is focused on tapping the market at the “Bottom of the Pyramid” and a large unorganized market who would significantly benefit from the growth fuelled by these players. However, Whirlpool has to its advantage of its strong brand position in the hearts and minds of the home makers, and a strong, well established channel in the white goods market. The challenge for Whirlpool is to leverage its strengths, and perhaps work out completely innovative market strategies if it has to achieve its intent of becoming a market leader in the Water Purifier Market in general, and that in the RO segment.
Annexure : A brief about Whirlpool
Whirlpool, right from its inception in 1911 as first commercial manufacturer of motorized washers to the current market position of being world’s number one manufacturer and marketer of major home appliances, has always set industry milestones and benchmarks. The parent company is headquartered at Benton Harbor, Michigan, USA with a global presence in over 170 countries and manufacturing operation in 13 countries with 11 major brand names such as Whirlpool, KitchenAid, Roper, Estate, Bauknecht, Laden and Ignis. The company boasts of resources and capabilities beyond achievable feat of any other in the industry. Whirlpool initiated its international expansion in 1958 by entering Brazil. However, it emerged as truly global leader in the1980’s. This encouraging trend brought the company to India in the late 1980s. It forayed into the market under a joint venture with TVS group and established the first Whirlpool manufacturing facility in Pondicherry.
Soon Whirlpool acquired Kelvinator India Limited in 1995 and marked an entry into Indian refrigerator market as well. The same year also saw acquisition of major share in TVS joint venture and later in 1996, Kelvinator and TVS acquisitions were merged to create Indian home appliance leader of the future, Whirlpool India. This expanded the company’s portfolio in the Indian subcontinent to washing machines, refrigerator, microwave ovens and air conditioners. Today, Whirlpool is the most recognized brand in home appliances in India and holds a market share of over 20%. The company owns three state-of-the-art manufacturing facilities at Faridabad, Pondicherry and Pune. Each of these manufacturing set-ups features an infrastructure that is witness of Whirlpool’s commitment to consumer interests and advanced technology.
In the year ending in March ’09, the annual turnover of the company for its Indian enterprise was Rs.1,719 Crores. The company’s brand and image speaks of its commitment to the homemaker from every aspect of its functioning. It has derived its functioning principles out of an undaunted partnership with the homemakers and thus a slogan of “You and whirlpool, the world’s best homemaker” dots its promotional campaigns. The products are engineered to suit the requirements of ‘smart, confident and in-control’ homemaker who knows what she wants. The product range is designed in a way that it employs unique technology and offers consumer relevant solutions.
Whirlpool Corporation : Vision and Mission
Whirlpool’s pervasive vision, “Every Home, everywhere, with pride, passion and performance”, rests on the pillars of innovation, operational excellence, customer-centric approach and diversified talent. These are embedded within our business goals, strategy, processes and work culture. Be it our products that are the result of innovation and operational excellence to meet every need of our consumers or the people behind these products that come from a wide spectrum of backgrounds, everything we do features a distinct Whirlpool way.
Core Competencies
Innovation: Unique and compelling solutions valued by our customers and aligned to our brands create competitive advantage and differentiated shareholder value. Operational Excellence (OPEX): A methodology for solving problems & continuous improvement of products & processes through pursuit, acquisition, and utilization of knowledge using critical thought and planned experimentation helps us achieve operational excellence. Customer Excellence: Excelling the customer expectation from the company, its brands, products and services are a three-step process. The three steps are: Know a customer, Be a customer, Serve a customer. Knowing a customer helps us know who our customers are, how to treat them, how we add value, and what the drivers of brand loyalty are.
This information is gathered from the customer’s data base history. This way we are better able to customize products for them and recommend the right product to solve problems. Being a customer is important to share customer knowledge and insights, drive actions based on customer insights, be passionate about our brands and customer loyalty and provide a positive voice for our brands. We show empathy for customers and seek to resolve their problems by creating consistent customer touch-points, with our endeavour always being to provide unique solutions for the customer .
Whirlpool Corporation’s Transformation Agenda
Whirlpool is transforming into a completely customer-centred company where the customer lies in the core of every of our functions. This focus has arrived as direct consequence of our core
IDEATE
up of five elements:
competency of customer excellence. It allows us to build Customer Loyalty. The transformation is made
The elements of the transformation hold the promise of making Whirlpool a growing company and thereby increasing value for our shareholders. The five elements are the basis for describing our strategy internally and guide the development of our plans and initiatives. Whirlpool has swiftly moved from being a World Class Manufacturer to a World Class Marketer using the brand-building framework. We are dedicated to creating unique branded solutions that build customer loyalty and achieve brand excellence.
