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    LG has to step up on innovation and new launches as competition intensifies

    Synopsis

    LG stands for Lucky Goldstar, but over the decades with a steady stream of innovative, consumers concurred with the conglomerate's backronym that Life is Good.

    LG stands for Lucky Goldstar — the product of a merger of two South Korean commodities businesses — but over the decades with a steady stream of innovative consumer electronics and home appliances, consumers concurred with the conglomerate's backronym that Life is Good.

    Back home, life is indeed good for LG India and,more specifically,LG Home Appliances (LG HA) India,which is what this feature is all about.

    This arm of the Korean giant, which makes refrigerators, washing machines and vacuum cleaners amongst other such appliances, clocked a turnover of Rs 6,500 crore in 2011, and expects to close the current year with a 30% increase, taking the top line in the region of Rs 8,500 crore.

    LG HA India,which contributes roughly half to LG India's total turnover — which in turn accounts for 6-7% of the parent's sales — claims to be a leader in refrigerators and washing machines, the two largest categories in domestic appliances. (See :Market Mirror)

    So life is good. But is it as good as it was, say, three years ago? And is it good enough to achieve the ambition of former LG India head Moonbum Shin — now CEO of the parent's home appliance portfolio — of making LG HA India account for 12% of LG Electronics Inc's global sales by 2015?

    The biggest worry in India can be summed up in one brand: Samsung, LG's big brother in South Korea. In the home market the competition is palpable — if Samsung's blue peeps at you from a hoarding, it's difficult to miss tall rows of LG ACs fixed in every apartment in Seoul.

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    Back in India, Samsung has been flexing its muscle locally and capturing more of consumer mind share — riding on its successes in the mobile space — and with it a bit of market share, too. Other rivals eager to chip away at LG's dominant position in home appliances include IFB, Whirlpool and Videocon.

    For its part, LG HA India seems to have eased its foot off the pedal a bit in recent years. One indicator of this: In 2009, it had 70 new launches, and all of 100 in 2010. In 2011, that figure came down to 58.

    "Brand affinity for LG is still quite good, although it was much better earlier. In the last 4-5 years Samsung is catching up with LG, especially in refrigerators," says Salil Kapoor,COO, Dish TV and a former LG hand. "Consumer affinity towards a brand depends on innovative product launches and how cutting edge the brand appears in the market," he adds.

    Innovation, to be sure, is an imperative in categories in which features are similar and differentiation a challenge. Kapoor reckons that Samsung's aggression in the mobile space has rubbed off on its appliances, although he does admit LG's strong equity in home appliances holds it in good stead.



    Innovation is inherent in the DNA of LG, which contributes some 5% to the GDP of South Korea.

    "Things in Korea change at a faster pace compared to the West. Every four years there is something new — culture, society, music — everything changes," said Shin, speaking to this writer at the Changwon manufacturing facility in Busan.

    Homing In

    To keep up with consumer expectations, LG is continuously in search for the next best thing.

    The recent line-up of products designed to impress include refrigerators, washing machines, air-conditioners and vacuum cleaners (See: Bets for the Future):

    Bets for the Future

    Refrigerators

    1. Side-by-side: Energy saving, Inverter linear compressor, Health guard, Vaccum fresh,World first door mounted ice maker, Big capacity (614L).

    2. Large Top Freezer: Health guard, Fresh zero-degree zone, Door cooling, Water Dispenser, LED lighting, 2-freezer shelves.

    3. Mid-sized Top Freezer: High-efficiency compressor, Door cooling, Green Ion, Vitamin Plus.

    Vaccum cleaners

    1. Hom-Bot 2.0: Dual eye camera sensor, Advanced navigation technology , Low noise level of 60dB, 2 auto and 2 manual cleaning modes, Auto docking and recharging functions.

    2. Kompressor Follow Me: Follows user paths using Automatic location recognition technology and Active Following Wheel technology.

    Healthcare products

    1. Water Purifiers
    2. Air Purifiers
    3. Massage Chairs

    Clothing management unit (LG Styler)

    1. Uses Steam Refresh function, comprised of two features: Steam Spray and Moving Hanger Action. Steam Spray helps keep clothes look, feel and smell fresh, while the Moving Hanger Action feature gently shakes steamed items to reduce everyday wrinkles.

    2. Aroma Spray function: Removes stale odors and users can select an aromatic scent to be sprayed on clothing items.

    Besides new product launches, retail and brand communication are other areas LG focuses sharply on. LG Best Shops are large-format exclusive retail stores operated. One such store that this writer visited in Seoul was spread over 1,500 square meters and showcased the entire LG portfolio.

    Michael Bang, GM, HA marketing strategy division at the parent company, says going premium is a core strategy for LG. "We use platforms like CES (the annual consumer electronics show in Las Vegas) and trade shows to showcase our innovations," he explains.



    In India there are 82 LG Best Shops spread across mostly A & B class towns. Y V Verma, director - home appliances, LG India, says LG HA last year grew at 20% compared to the industry rate of 9-10%. And a good part of this growth has come from the Best Shops, he says. "An in-depth research helped us identify right placement areas for products in the retail environment, what we call consumer hotspots.

    We have designed the brand shop to be more vibrant and energetic and invested in training our sales shop executives so that they can give consumers the right information when they come to our stores," says Verma.

    Industry observers, however, sounding a warning bell and point out that the slowdown in the Indian economy coupled with a rash of private labels in the appliance space will make it harder for brands like LG to stay on top.

    Ankur Bisen,AVP, consumer goods & retail at Technopak Management Consulting, points out that brands will have to walk the talk. "If the new products being launched by LG can bring down the cost of ownership and can genuinely bring about lifestyle improvements, then they will matter. Technologies that are just nice to have may give them the initial spurt of sales but may not be sustainable in the future," says Bisen.

    LG's dependence on white goods is also a cause of concern for the brand, unlike Samsung which has managed to earn its spurs as an as an innovative and bestselling mobile phone brand. Recently Samsung overtook Nokia as the world's highest selling mobile maker.

    Verma agrees that the next 4-5 years are going to be critical for LG in the Indian appliances space: "Only three or four brands will survive in the market; and the survivors will be those who are able to differentiate on product quality, after-sales service and can keep the consumer happy," he predicts.

    For the likes of Harminder Sahni, founder & MD,Wazir Advisors, it's difficult to imagine life without LG. "The Indian appliance space is synonymous with LG and Samsung.Some brands manage to represent the category and that is the case with these two."

    (The writer went on a familiarization trip to the LG headquarters in Korea)
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