Blue Star not jumping into the premiumisation bandwagon

The heatwave this summer has propelled the market for cooling products
to unexpected levels. While manufacturers have raked in the moolah,
keeping pace with the growth has been a challenge. Speaking to DH’s
Sonal Choudhary, B Thiagarajan, managing director of India’s home-grown MNC, Blue Star Ltd, talks of how the surging demand has
impacted his company’s targets for the ongoing financial year and why
his company is not pursuing premiumisation - which has become the new
buzz-word among his peers. Edited excerpts:

How has this year's extreme heatwave helped the sales & growth of the company?

Against our original plan of witnessing summer growth at 25 per cent - 30 per cent, we have grown more than 50 per cent-55 per cent or so. It is a bonus benefit and helped us to exceed the expectations. The room air conditioners (RAC) segment has predominantly done the best during summer, given that it is a seasonal product.

You’ve set yourself a target of 15 per cent market share by FY26 - how are you working towards it?

Our market share goal is 15 per cent for FY26 from the current level of
13.75 per cent. In fact, it should happen in FY25 itself. However, it may not
happen, as we had a shortage of material this summer. You can't suddenly make up for 70 per cent-80 per cent growth. For improving the market share, one should be available in all categories.

Hence, we are not looking at premiumisation for any segment. It's not one segment that is going to drive the growth, all segments in India will co-exist. Therefore, our strategy continues to keep making products available at all price points. When you want to grow in a highly competitive thing, you cannot ignore any part of it.

Where do you see the highest sales coming from in India?

The growth is coming from tier 3, 4 and 5 cities and our share from these cities is around 65 per cent. Around three years back, this share was only 50 per cent. There has been good growth pan-India, however, the North East has grown impressively well.

About 40 per cent-50 per cent of our revenue comesfrom the business-to-business (B2B) or the industrial segment as weare number two in the market there. However, in India business-to-consumer (B2C) will be much higher than B2B because of the huge population. Hence, I don't see industrial products going down, but there’ll surely be growth in consumer products.

What are the challenges the company needs to focus on to gain a higher market share?

When the market grows, the regulations will be tightened in terms of
sustainability and energy efficiency, so this is one of the challenges. Secondly, the manufacturing industry is growing, and it will attract talent, also bringing in competition to hire the best of it.

The other thing is that there will be intense competitiveness in terms of innovation, branding, and what you bring to the table. We are ahead of the curve - highly compliant with the regulations and we are investing in R&D to counter these challenges.

Are there any price hikes on the card?

We increased our products’ prices by 3 per cent in June because of the raw material price hike. We are still watching the prices due to the ongoing global uncertainties are around the corner and it is a volatile situation to begin with.

What are your expectations for the festive season this year?

I think 15 per cent - 20 per cent growth should happen this year, but having said that rural demand has not come back, given the slowdown in fast moving consumer goods (FMCG). Moreover, whenever the summer season has done well, it is very likely that the festival season somewhat slows down.