Purchasing power in the low price segment is also getting hurt’

Sanjay Lalbhai, Director of Arvind Mills and Chairman, Amtrex Appliances Ltd, both a Lalbhai Group company, has rewritten the rules of cr...

Sanjay Lalbhai, Director of Arvind Mills and Chairman, Amtrex Appliances Ltd, both a Lalbhai Group company, has rewritten the rules of creating national brands. He feels that the economy will not revive unless the consumer perception changes. His Rs 2,500-crore Lalbhai Group is involved in sectors such as textiles, pharmaceuticals and consumer durables, and is now giving an added focus to consumer needs. Lalbhai feels that bringing in heavy investment in the infrastructure sector would create more jobs, generate wealth and kick start the economy. In a chat with SWATI PRASAD, Lalbhai shared his views on the economy, the industry and his plans for the company.

What must the government do to kick-start the economy?

The government has taken certain measures. If the government pumps in more money in the infrastructure sector, it will definitely create more jobs. Then the government must create confidence through policy framework. This way, the country will attract more investment– direct and indirect. This can again start creating jobs, wealth and a momentum. And then there is the need to make people feel good. Frankly, I don’t think we are doing that bad. From a 12 per cent industrial growth rate in early Nineties, we are now down to 5 per cent. But compared so many other countries, we are much better-off. The mood has become very pessimistic.

A series of changes undertaken by the government, political stability and large investment in the infrastructure sector, will cause the multiplier effect to work. And once jobs get created, people will start feeling good.

How have your exports been affected over the last two years due to the economic slowdown?

We export to 70 countries across the globe. We haven’t seen such a fluid situation anywhere else in the world. Everything here is a function of the political climate. Our projections stand completely invalid. Several companies like ours have built capacities according to these projections. Even our core operations aresuffering. In fact, this is a global phenomena. Companies everywhere have built huge capacities. In our 3 million meter world market, we were earlier growing at 8 per cent, now we are growing at around 3 per cent. But we are in the process of shifting our focus in the export market.

Was the domestic performance any better? Do you expect a better situation in 1999?

Last year, the growth rates in all our apparel brands by and large were flat, except in the higher bracket. Lee and Arrow are growing at a healthy 15 to 20 per cent. But all the medium brands and the low-priced brands are flat. The purchasing power in the low-priced segment is getting hurt.

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Our airconditioning market is growing, but the competition is fierce. The problem is not really just of growth, but there is an oversupply situation in almost all the product categories. Barring pharmaceuticals, information technology and consumable products, which are doing well, all products in the country are under the impact ofrecession.

Despite the efforts of the government, there is nothing to suggest that the consumer has regained confidence and is ready to go and spend money. Consumerism really means that people start spending their future incomes. Like in America where people go for mortgages and all kinds of leases. People were doing that in India as well. But once they started losing money in the capital market, and their wealth started getting eroded, their outlook became very pessimistic.

We must give a good deal to the consumer. There is nothing wrong in it. That’s what competition is all about. But what is more important is to keep on giving a better product at more competitive prices. And that’s also the only way to survive and keep ahead of competition. While doing this, one has to also keep a watch on the bottomlines. Our company would adopt innovative marketing strategies, now whether we have discount schemes or not, one does not know. Every product category will have a different strategy.

For Ruf-N-Tufand Newport, Arvind Mills adopted a strategy of low price and mass distribution. How has that worked out?

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In India, there are no major national brands. But Arvind has the largest portfolio of brands. If you look at the rating, Ruf-N-Tuf and Newport have the highest recall and the highest market share. In the mass market, price plays an important role. So you have to make a good quality product available at a reasonable price. That’s what we have done. And then go for mass distribution and create a brand equity. The customer has the assurance that it is not a shoddy product. So the whole objective is to create a very large market. And make this lifestyle available to the masses of India at very reasonable prices.

What are the investment plans of The Lalbhai Group companies?

We have made massive investments. Now we need to consolidate and ensure that these investments start working at peak efficiency. We need to adopt a strategy that would keep us ahead of competition. Like recently,Amtrex Appliances entered into a joint venture with Hitachi Limited to introduce new models of window and split air conditioner. We are putting up the right strategy and structure to make sure that we don’t lose ground in emerging competition.