Lloyd enters refrigerator segment, move to help diversify revenue mix

© M Saraswathy
Lloyd enters refrigerator segment, move to help diversify revenue mix

In a seemingly cool – if definitely calculated – move, Havells-backed Lloyd, widely known for its air-conditioners, has now entered the refrigerator category. Venturing into the Rs 24,000-crore refrigerators business would help the brand expand its revenue base, Lloyd CEO Shashi Arora said.

Lloyd consumer durables brand currently derives about 65-70 percent of its revenue from air-conditioners. In FY20, the company had a revenue of Rs 1,950.27 crore.

Lloyd is likely to face stiff competition from brands like Samsung, LG, Voltas, Whirlpool, Haier, Godrej and Electrolux that operate in the refrigerator space. Samsung is the largest company in this segment with close to 34 percent market share.

Arora said the refrigerators will be manufactured locally and will target customers in rural, semi-urban and urban areas.

“We are targeting both segments, through our direct-cool (DC) and frost-free (FF) refrigerators. We are well in time with our offerings for the festive season,” he added.

DC refrigerators are single-door with manual defrosting. FF refrigerators have double doors and don’t require manual defrosting.

The product pricing will range from Rs 10,000 to Rs 84,990 for refrigerator capacities ranging from 190 litres to 587 litres.

Apart from air conditioners, Lloyd is present in the television and washing machine categories in the white goods space.

Why is diversification crucial for Lloyd?

In India, 1.3 million units of refrigerators are sold every year. Arora said that considering that this segment only has 30 percent penetration in a 1.3 billion population, there is immense opportunity to grow.

As opposed to the refrigerator market that is worth Rs 24,000 crore, the air-conditioner segment for which Lloyd is known, is merely Rs 15,000 crore. This means that Lloyd as a brand has an opportunity to expand into a much bigger category.

The key focus for Havells, which acquired Lloyd Consumer in February 2017, is to expand the revenue categories for Lloyd. And the refrigerator segment entry is a step in that direction.

In Q2FY20, Lloyd Consumer saw a 30 percent dip in revenue to Rs 180 crore. During the analyst call held post these results, Anil Rai Gupta, chairman and managing director, Havells, had said that the long-term prospects for Lloyd Consumer “seem fine”. He also assuaged investor concerns by stating that the company will enter newer product categories like refrigerators.

The segment profits for Lloyd Consumer have been volatile. In Q2FY20, the Lloyd consumer brand had a loss (before tax) of Rs 4.16 crore. It then posted profit before tax (PBT) of Rs 23.57 crore in Q3FY20 and Rs 44.37 PBT in Q4.

For the full year (FY20), Lloyd had posted a PBT of Rs 168.71 crore compared to Rs 317.57 crore in the year-ago period.

Analysts had then estimated that the key for a turnaround for the Lloyd brand would be to ensure that the company expands its product categories.

Now, amidst the Coronavirus pandemic, Lloyd brand saw a 53 percent year-on-year dip in its revenue to Rs 306.18 crore in Q1FY21. The PBT also fell 21.8 percent to Rs 6.41 crore with the COVID-19 lockdown impacting business.

However, as lockdown restrictions eased, all of the company’s manufacturing plants have resumed operations. In fact, during the Q1 results call with analysts, Gupta had said that things have turned around for the Lloyd brand.

He also added that the dependence on imports has ended since January 2020, and hence Lloyd is “growing faster than the market”. Havells has a manufacturing facility for the Lloyd brand in Rajasthan.

According to a report by Edelweiss Research, Lloyd is the fourth largest AC maker in India with 11 percent market share as per FY19 data. Here, Voltas is the top brand followed by LG and Blue Star.

Will refrigerators be the second-biggest category for Lloyd?

While CEO Shashi Arora did not disclose the target market share for refrigerators, he said that even a nominal single-digit market share will help the brand gain good revenues from this segment.

“Refrigerators are a 12-month product. It is not just used during summers but also has good sales potential during the festive season. For weddings too, single-door refrigerators are a preferred gifting category. Plus, we are seeing a pent-up demand which will work for us in terms of sales,” he added.

Ever since lockdown restrictions have been eased, appliances like washing machines, refrigerators and dishwashers are seeing a spike in sales, according to electronics dealers.

“A bulk of our revenue comes from ACs and we want to change that. When a customer walks in to buy a Lloyd product, we want to be able to offer a full suite of appliances. With refrigerators, our product suite is complete,” Arora said.

Lloyd has been working for two years to enter this category. The brand will rely on multiple distribution channels including dealers, regional retail stores, pan-India electronics chains and e-commerce platforms, he added.

Havells had said in FY20 that the company would take five years to get a 50-50 AC and non-AC revenue mix for the Lloyd brand . The refrigerator segment entry could be a crucial step to get to that path.