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Samsung Sets Up New Division For AC Business

Samsung has set up a separate division under its consumer electronics business to sell air conditioners in a bid to strengthen their reach and distribution.

The company that trails Voltas, LG and Hitachi, among others, in the AC market in India, plans to re-enter the window air conditioner category with the launch of affordable ACs beginning at Rs 26,000.

To be sure, Samsung has a 5% share in India’s room air conditioner market, while Voltas has the biggest pie of the market.

The company will also expand AC distribution in the hope of doubling business by next year, said a top executive. Clearly, Samsung is actively pushing to win back market share in India’s air conditioner market estimated at Rs 16,300 crore in FY19 by market research firm Frost & Sullivan.

“In the second half of this year, we pulled out system air conditioners and room air conditioners division and created a new organization,” said Rajeev Bhutani, senior vice president, HVAC (heating, ventilation, and air conditioning) division that is part of the consumer electronics business at Samsung India.

The new business division will be responsible for sale of both room air conditioners and commercial ACs.

“We want to behave like an AC-exclusive organization,” Bhutani added. The new unit will have its separate and new product and marketing team that will use the company’s existing sales and distribution expertise to push new products. Bhutani added that the company is planning “significant investment in development of retail infrastructure to display new products.”

As part of the restructuring, Samsung will also re-introduce its range of window air conditioners as well as non-inverter ACs, Bhutani said. Samsung exited the segments a few years ago.

“We are increasing our addressability to various segments to cover the belly of the business,” said Bhutani. He said the company will consolidate its position in the premium inverter air conditioning segment, and also introduce new price bands for the inverter range. Technology in inverter ACs makes them power efficient.

Samsung typically operates in the premium or over the Rs 40,000 price segment within the air conditioners category currently.

“While consumers have shifted to higher value inverter ACs the preference is for mass-premium brands providing quality products,” brokerage firm Edelweiss said in a research note on the consumer durable market earlier this year. “As a result, leaders in the mass-premium space—Voltas, Blue Star, Daikin—continue to fare better.”

To be sure, Samsung’s business is spread across mobile phones and consumer electronics. It draws bulk of its business in India from sales of mobile phones. Its home appliances business that comprises air conditioners, refrigerators and washing machines reported segment revenue of Rs 7,408.2 crore in 2018-19, according to data sourced from business intelligence firm Veratech Intelligence. In all, Samsung India reported revenue from operations of Rs 70,627 crore in FY19.

The new entity will also focus on expanding the reach of Samsung air conditioners that currently only reach 9,000 retail outlets. By next summer, Samsung ACs will be available in 13,000-14,000 outlets.

“Earlier we had developed product categories in consumer electronics (such as washing machines and refrigerators) for the premium segment and then started expanding them into the mass market. Now, we our following the same strategy in air conditioners as well,” Bhutani said. – Livemint

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