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Tuesday, April 20, 2010

Videocon to make, sell Philips TVs in India

Videocon Industries signed a five-year agreement with Philips Electronics NV to make and sell the century-old Philips brand televisions in India, the companies said on Monday.

The deal with Philips, a household name that once dominated the country’s radio and audio cassette player market before the Korean invasion, will help Videocon better challenge brands such as LG and Samsung in the Indian television market.

“The move will help us get access to advanced global technology from Philips and help Videocon grow faster in the country,” said P N Dhoot, president of Videocon Group. The consumer durables-to-telecom conglomerate will pay a royalty of around 3% to the Dutch consumer electronics firm, officials close to the development said. first reported the development in December last year.

Videocon will manufacture the televisions as per the specifications and standards of Philips, said Murali Sivaraman CEO, Indian Subcontinent, of Philips India. “The agreement is very tightly done to ensure that there are very strict guidelines about the quality parameters to that Indian consumers get access to the best that Philips brand can offer,” he said. The partners have formed a brand committee to keep a close watch on the designing, branding and quality parameters, he added.

If the deal is successful, it could be extended by another five years, officials said. In a statement, Philips said the move is consistent with the company’s objective to bring the television business back to profitability. It could not be ascertained if the European major will make India a low-cost manufacturing hub for televisions through this deal.

Videocon is betting on this deal to check its losing grip in the Indian television market, particularly after a similar deal with Japan’s Toshiba ended and Videocon Bazooka lost its uniqueness as a premium offering in the commoditised durables market. Philips gives it a global television brand with high recall in India to take on the likes of Sony, Panasonic, LG and Samsung in the Indian television market. Besides Toshiba, Videocon also had a make-and-sell partnership with Japan’s Akai.

Experts, however, ring a warning bell for Videocon. They say it could be a repeat performance in the negative for Videocon as other brands such as Akai encroached upon Videocon brands. “Philips is not really a premium brand and could cannibalise into the Videocon brand sales” said Nabankur Gupta, founder and CEO, Nobby Brand Architects and Strategic Marketing. “Videocon lacks a spearhead brand after its marketing and manufaturing agreement with Toshiba ended and Videocon Bazooka too lost its uniqueness.’’

The Videocon group, one of the few to survive the onslaught of inexpensive but good quality consumer durables from global makers, has been looking to acquire global technologies and manufacturing facilities. In 2005, it bought three manufacturing facilities of Electrolux in India and signed a licensing agreement to distribute products under the Electrolux, Kelvinator and Allwyn brands in south Asian countries. First generation entrepreneur Mr Dhoot had launched colour televisions in 1985 and Videocon, along with BPL, dominated the Indian consumer durables market in the 80s and 90s.

But the opening up of the economy opened the doors for brands such as Samsung, LG and Sony that swamped the market with far superior products and smarter marketing strategies including financing schemes with banks. While BPL faded into near oblivion, Videocon survived with different strategies. The Philips deal may just make things better.

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