Consumer durable - Consolidation starts now !

The coming times will be tough for consumer durable industry as demand in 2008 will shift from existing brands ( regional or national) to retail brands. In the process many immature players ( manufacturers ) will die.

Designing capability , R & D capability , Raw material prices , Supply chain efficiencies , Skill set, Economies of scale, Industry Eco system, manufacturing processes and practices. will stand in our way ( for a business that runs on low margin high volume)

If we do not grow up to the challenge , we will have to see a dismal situation slowly. What is visible is innovation and consolidation for survival :

Consolidation

-At operational levels, supply chains will integrate for non competing product categories.

-Logistic companies will consolidate ( M&A) to live up to expectation of large retail operations

- To reduce costs marketing function will be more & more outsourced, (network marketing will grow) .

- Product + service will sustain for some time till service part is outsourced by retail chains to create further excellence.

- Big growth of national level service companies to support retail operations. ( no players yet in the Field, except financial services).

- Mergers and acquisitions ( to become a big fish) and consolidation of capacities. Logically coastal regions in central India will see a major industrial boom as logistic costs will be minimum for nationwide coverage and exports will be facilitated. ( opportunities for Chittagong & W. Bengal)

- Business will further disintegrate, specialisation and scale will be created in all parts of business . It may be manufacturing, service, logistic, etc.

- Industry clusters should be visible

- Regional consolidation - ASEAN , SAARC to create bigger markets.

- Inter industry fusion to save costs & create value. Thankfully Software is on our side


Innovation

- Creation of niches

- Product / service differentiation

- To cut costs, increase speed and integrate


- We need thinking at industry levels as average production capacity for plants is low ( to cater to regional areas) and consolidation is expected faster than expected.

- Companies need to find their core competence ( or niches) and stick to them and be the best in their area.

- Incredible India will have to deliver many more brands.

- Horizontal integration will be required at all levels in different business to create value and differentiation. Faster collaboration between different businesses will be seen in business to create new products & offers

So the season is rough and we need to live up to occasion. Faster will consume the slow.

Ideas welcome ! ( every body needs them)

My colleagues at Usha International

My colleagues at USHA International

Left to right --> Lokesh Nagpal( myself), Mr Mittal ( King of fan business in Middle East) & Vishal Anand