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The Rediff Business Special/Shobha Warrier

Market research firm predicts colour television market's doom

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The Indian colour television market is headed for troubled times. The hitherto-upbeat sector may soon find itself in the red with its bright hues giving way to an ashen tinge, if the conclusions of a study conducted by a noted market research company are anything to go by. The findings indicate that growth rates in the colour television sector will plunge from 33 per cent to 6 per cent in the current fiscal!

Francis Kannoi Marketing Planning Services Private Limited, a Madras-based firm that has been conducting market research on consumer durables since the last eight years, has come up with some interesting, albeit scary, projections. The sample size for this survey was 265,000 households spread over 381 cities/towns and 1,620 villages.

"The colour television market grew from 900,000 to 5 million sets in the last seven years, but now we will witness a fall. If the monsoons are deficient, the decline in sales volumes will me much sharper and, for the first time since 1992, we might see a cataclysm in this industry," said Francis Xavier, managing director, Francis Kannoi expounding on the firm's research findings for the year 2000-2001.

Francis Kannoi has handled research assignments in a wide range of fields including consumer durables, FMCGs, agri-inputs, etc. Its research findings have been subscribed by industry majors like BPL, Philips, Onida, National Panasonic, Videocon, Godrej, GE, Whirlpool, Electrolux, Samsung, LG, Tefal, Usha and Thomson.

The firm claims that its study was the only independent effort at the scientific forecasting of the demand for durables in the country. This study had predicted the decline in the colour television field in 1990, when the industry was riding high in 1988, and also the strong revival from 1993 onwards, when the industry was at its lowest in 1992.

Way back in 1993, when the demand for televisions was just 1 million sets, the firm had forecast the possibility of the field reaching the 5-million mark by the year 2000.

Competition hots up as more companies come in

In what is possibly the most fiercely competitive field in the country, involving around 15 brands, it is the dramatic build-up of volumes that has sustained the companies, especially in the last four years. During these years, the prices of colour televisions have plunged while marketing costs have escalated continuously, putting enormous pressure on the margins. Therefore, survival of most of the colour television companies has meant increasing volumes relentlessly. This was possible because the market grew at a compounded rate of 28 per cent for the last seven years. Also, year-on-year growth never dipped below 20 per cent during any of these years.

'No company will come close to its projected sales figure'

"The consequences of a possible decline in volumes, in a fiercely competitive market, are dreadful. The television market will need to be of the order of 8 million units during the current year if the growth rate of the past years is to me maintained.

"The worst-case scenario that the industry sees is a sales volume of 6 million units. The only hope for the industry to surpass the 6-million mark is by slashing the price of 20-inch sets to Rs 8,000," according to Francis Xavier.

"No company will come anywhere close to its publicly stated targets. Those who are likely to carry momentum into the current year are brands like LG and Samsung. Others, like BPL, who go aggressively after volumes, may sail through too. Yet others like Panasonic, Konka, who are in a revival mode from low-base volumes, will also be able to increase their absolute volumes, he said.

"There will be a bloodbath at dealer-counters, dumping will escalate, and the long talked about shake-up in the colour television industry will begin in right earnest," he added.

He refuted the prediction of the colour television industry that there will be a demand for 10 million-colour television sets by the year 2002, saying that all indicators point to the contrary.

The 1982 Asian Games held in India were largely responsible for the television entering Indian homes in a big way. That was the first time colour transmission also was begun in India.

From then onwards, the television industry -- especially the colour television segment -- grew from strength to strength and soon the population covered by television transmission rose from 264 to 703 per thousand people.

It is quite interesting to note that in the year 1984-85, when the gross domestic product, or GDP, growth was just 3.8 per cent, the colour television growth was 140.3 per cent. It fell to 68.8 per cent in 85-86 and finally dipped to 15 per cent in the year 1988-89. In the year 1989-90, it was just 5 per cent.

However, the worst period was in 1991-92 when India experienced an economic crisis. GDP growth plummeted to 0.8 per cent, and along with that the colour television growth also touched a new low at -14.5 per cent! During the period, colour television prices rose sharply.

The government, in an effort to conserve the foreign exchange that was at the center of crisis, then imposed restrictions hitting the colour television industry badly as it was dependent heavily on imports. The price of the base models shot up by Rs 2,000 to Rs 3,000. The demand fell to just below 1 million units in 1991-92, and it went down even further to 900,000 sets in 1992-93.

Then followed the ascent. Several factors like the legalisation of cable television and its entry into Indian homes (from 1 million to 24 million homes), the prices of 20-inch colour televisions falling drastically (from Rs 14,000 to Rs 10,000), new international brands entering the market due to liberalisation (from none to 11 brands), dramatic increase in the advertising expenditure (from Rs 970 million to Rs 4 billion) and World Cup Cricket unleashed a kind of demand that had never been witnessed earlier.

Yet another boost was provided by World Cup Football, which one of the main reasons why the colour television market grew from 0.8 per cent in 92-93 to 21.6 per cent in 93-94. It further improved to 27.9 per cent in 1996, thanks to the World Cup Cricket. It grew to a whopping 32.5 per cent in 1999-2000!

The two major factors that positively affected the unprecedented growth of colour television to 33 per cent in the year 1999 were the World Cup cricketing event and the delayed effect of the sharp growth in agricultural production in 1998-99.

"The impact of the record rabi production was evident in the northern states. Then, the rural areas of Maharashtra have done extremely well because of an outstanding cotton crop. Tamil Nadu was the only state where rural purchase continued to be buoyant without any apparent bonanza of any sort."

Biggest gainers and losers during 1999-2000

It is interesting to note from the Francis Kannoi study that the biggest gainers in the colour television market in the year 1999-2000 were multinational brands like Aiwa (from 2.1 per cent to 6.3 per cent), LG (from 4.8 per cent to 7.6 per cent) and Samsung (from 2.1 per cent to 6.3 per cent). Onida also recorded a small gain, from 10.5 per cent to 10.9 per cent. The largest player, BPL, managed to hold on to its top position even though there was tough competition from some international brands (from 22.3 per cent to 21.9 per cent). The biggest losers were Videocon (from 14.7 per cent to 11.2 per cent), Akai (from 7.7 per cent to 4.1 per cent) and Philips (from 6.2 per cent to 5.1 per cent).

Colour television penetration lowest in Bihar

The Francis Kannoi study has also found that the penetration of colour television sets is the highest in Delhi (59.2 per cent), followed by Kerala (34.1 per cent ), Punjab (29.4 per cent ) and Maharashtra (25.2 per cent). Bihar occupies the bottom with a penetration of just 3.7 per cent!

It remains to be seen whether the growth wave in the colour television sector continues to gather magnitude or depletes to a trickle. Of course, if Francis Kannoi were to lay a wager, it's anybody's guess where it would put its money.

Click here for links to relevant graphics

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