High On Pressure
TTK Prestige has managed to create a buzz in the pressure cooker silo
The new product, launched in 2011, showcases TTK’s makeover drive. For decades, the company had been selling seemingly-unchanged kitchen items such as pressure cookers, pots and pans along with kitchen electrical items. But over the past few years, it has been innovating and has brought out new, consumer-friendly products. Net result: revenues and profits have jumped. In 2010-11, it had a more than 50 per cent growth in revenue and net profit. For the six months ending 30 September 2011, it recorded a revenue of Rs 536.62 crore and a net profit of Rs 59.05 crore — 55 per cent up from the same period last year. The strong performance reflected in the stock price as well — the scrip has risen more than 40 per cent this year.
But things were not always so. A decade ago, the company’s reserves and surplus were very low, and it was on the verge of knocking on the doors of the Board for Industrial and Financial Reconstruction (BIFR). “We went through a bad patch. In 2001-02, TTK Prestige was seen as a single-product company — aluminium cookers. There too, excise and sales tax made up 45 per cent of the retail price. Moreover, customers were moving from branded to unbranded (products),” says T.T. Jaganathan, chairman of the Rs 2,000-crore TTK Group, which, apart from kitchen appliances, sells everything from innerwear to condoms, from deodorants to life-saving heart valves.
Its other problem was that it was considered chiefly a south Indian player. Hawkins and smaller regional players dominated the other parts of India — they sold inner-lid cookers, while Prestige sold outer-lid ones, which were preferred in the south. Moreover, labour trouble plagued the company, and Jaganathan struggled with ill-health. Even though by 2006-07, things improved — Rs 11.77 crore net profit on revenues of Rs 293.25 crore — there were rumours that the company was up for sale.
Prestige realised that it had to come up with new products. While the Prestige brand (the name under which it sells its cookers) had a strong and loyal customer base, its other kitchen appliances lagged brands such as Bajaj Electricals, Philips, Kenstar and Morphy Richards. Korean giants LG and Samsung were also making a strong play in microwaves.
The first new product was launched in 2003-04 — a ‘smart’ pressure cooker, which had features such as quick steam release and a better safety mechanism. But it bombed in the market. “We had pushed 300,000 of them. But they did not sell for multiple reasons. We had to take them back from our dealers. And in a year when we were selling a mere million cookers,” says Jaganathan.
TTK Prestige’s distribution network was mainly based on patra-kadai (utensil shops), which did not sell electrical appliances.
So Prestige made two bold, and in hindsight, rewarding bets. It aggressively pushed kitchen appliances and introduced new ones — wet grinders, mixer grinders, induction cook tops, LPG stoves, electric kettles, toasters, coffee makers, non-stick cookware, hoods, hobs, kitchen knives, irons and barbeque tables, among others. It also set up its own exclusive stores. “The idea was to showcase the entire product range and market it; not necessarily sell,” says Chandru Kalro, executive vice-president of marketing at TTK. Seeing the increasing footfalls at the franchisee exclusive stores, neighbourhood utensil dealers, who were initially reluctant to stock Prestige products, started doing so.
The company now has a retail footprint in 30,000 outlets across India, and 320 Prestige exclusive stores (though these contribute only 20 per cent to total sales).
Urbanisation and nuclear families meant a ready market for TTK Prestige’s new products. In its mainstay, pressure cookers, it launched an inner-lid model in 2005, as also newer designs, colours and innovations for Indian cooking. For instance, non-stick cookware on which steel spoons and ladles could be used.
Similarly, it redesigned induction cook tops so that heat was dispersed uniformly. Such cook tops were not popular in India because they were mostly imported from China and not adapted to Indian cooking — the food would get burnt. Prestige’s redesign also took into account voltage fluctuation. In the past six months, since its launch, the company has sold Rs 90 crore worth of induction cook tops.
Another new product was the colourful, apple-shaped pressure cookers that it launched a couple of years ago. Prestige realised that kitchens, too, had to reflect the owners’ upwardly mobile lifestyles.
From a single product, TTK Prestige today sells over 350 products and aims to get 80 per cent of its projected Rs 1,200 crore revenue for this year from launches in the past five years by boosting margins. Last year, this share was about 50 per cent. For example, the apple cookers cost 25-30 per cent more than their plain cousins. Prestige Popular, their mass-market 2-litre brand, costs about Rs 780, while an aluminum apple cooker of the same capacity costs Rs 1,030, and a hard anodised one, Rs 1,300.
The Microchef microwave cooker is the result of continuous feedback on the need to reduce cooking time. “It took us 12-18 months to launch a finished product as we worked on things like visual pressure indicator and a secondary safety device,” says Kalro. Microchef is expected to increase its share among the 5 million cookers TTK Prestige sells annually.
On Full Steam
Jaganathan says the pace of launches will only accelerate — 100 in just this year. “I expect us to continue growing 50 per cent-plus for the next few years. Irrespective of economic conditions, the company will continue to grow as we sell every day utility stuff whose cost varies from a Rs 75-soup ladle to a Rs 15,000-kitchen hood.”
Branding and business strategy consulting guru, Harish Bijoor, CEO of Harish Bijoor Consultants, says, “TTK Prestige, while an old brand, has managed to don a young avtaar. It has adapted and even started leading change in the marketplace. Kitchens are no more a hot hole. They represent lifestyle statements.”
Apart from kitchen ware, Jaganathan says the company will soon enter newer markets such as water purifiers, kitchen gadgets, kitchen storage, and segments such as the Rs 5,000-crore ceramic cookware market.
“In water purifiers, for instance, there are strong existing incumbents. But when we launch in the next few months, we will have a key differentiator. This is the same kind of strategy we have adopted to penetrate and grow in other markets,” says Kalro.
But the company will not venture into white goods. “I see no innovation — in technology, pricing or supply chain — that TTK can do there. And I cannot compete with the Samsungs, LGs or the Japanese brands. The Prestige brand resonates in all things kitchen and that is where we will focus,” says Jaganathan.
|"When we launch water purifiers in the next few months, we will have a key differentiator” says Chandru Kalro executive vice-president, marketing, TTK Prestige|
All this is not lost on competition. Says the CEO of a regional kitchen appliances company who did not want to be identified: “They have been able to effectively leverage the Prestige brand into newer categories in the kitchen. However, it remains to be seen how far they can stretch the brand. In storage, for instance, they will come up against strong players such as Tupperware. Ceramic cookware is mainly a premium segment and I do not know whether they can compete with international brands there.”
The recent good run by TTK Prestige has given the conservative, family-run group a second wind. “The family owns 75 per cent (in the company), and there is no question of us selling. Experienced and competent professionals run operations. Ownership and management are two separate things and they are divorced,” adds Jaganathan.
The markets will be closely watching to see how long the steam lasts.
(This story was published in Businessworld Issue Dated 14-11-2011