MORF India, is now gearing up to expand by betting on its distribution business of selling Kelvinator Ayoni, the home water purifier brand owned by Electrolux. The company’s five-year revenue target: Rs. 500 crore
“In our previous office, we used to have a notice on each wall which read, ‘one team, one dream, Rs. 500 crore’. That’s where we derive our motivation from and that’s where we see ourselves in the in the next five years,” says M.V. Praveen, managing director of MORF India and Kelvinator Home Purifiers India, as we begin discussing his company’s future growth path after its year-old partnership with Electrolux.
Praveen is a first-generation entrepreneur who founded MORF India in 1998, after a 21-year stint in companies such as Eureka Forbes and Bajaj Electricals. MORF India is into the business of servicing and managing the supply chain of residential water purifiers and in undertaking projects that involve executing large and customised water and sewage treatment plants for the residential segment. Today, the company has established a network of 25,000 clients across South India and has completed 750 water and sewage treatment projects across the southern region.
In June 2012, the company entered into a brand licensing agreement with Electrolux Home Products Inc., to manufacture, market and sell the Kelvinator range of water and air purifiers in India and Sri Lanka. The nature of partnership is such that MORF India will pay Electrolux a royalty and bear the expenditure to market the products. “This relationship changed our focus from water treatment projects to purifiers. Kelvinator has several decades of legacy in India. So, when they offered us Electrolux and Kelvinator, we chose the latter because we thought it was a much more familiar brand and will create an immediate connect with the customers,” adds Praveen.
Currently, the company has Kelvinator Ayoni, priced at Rs. 14,500, in its product stable. By September 2013, it plans to launch two more models, priced at Rs. 10,500 and Rs. 12,750, which will specifically cater to the lower-middle class segment. By October, it plans to enter the premium segment, with a technologically advanced water purifier, priced at Rs. 17, 000. “Whatever models we bring out, will be an extension of Ayoni. In addition to these four models, we are also planning to launch a UV purifier, which will cater to a segment which uses metro water, one that doesn’t require purification of chemicals,” shares Praveen.
At present, MORF India has no plans of establishing a local manufacturing unit. All its water and air purifiers are manufactured and imported from a factory in China. “Though the dollar volatility is going to put a strain on the cost, we have no plans of establishing a local manufacturing unit. Moreover, China is far ahead in terms of manufacturing capabilities,” reasons Praveen.
Recently, Capvent AG, a Switzerland based PE fund, has picked up a 51 per cent stake in MORF India. The fund has also given MORF India a target to sell 55,000 units in FY14. “The market poses no challenge at all, in terms of achieving this target. We are talking about a Rs. 7,500 crore market (in three years), where seven to eight more players can easily fit in. The real obstacle lies in creating the best products and national visibility and that is what we will be utilising these funds for. Also, 10 per cent to 15 per cent of the funds will be channelised towards our projects division,” explains Praveen.
A hybrid sales model
The Indian water purifier segment is divided into two verticals, the point of use, where water comes to the tap and of point of entry, where water is used for industrial purposes. In the point of use vertical, where MORF India’s Kelvinator will be operating, the market holds a potential of Rs. 1,800 crore today and is dominated by players such as PureIt by Hindustan Unilever, Aquaguard, Kent RO and Eureka Forbes. In order to overcome competition and increase sales, MORF India has adopted a hybrid model, that is, a combination of direct marketing and selling through a retail channel.
We are talking about a Rs. 7, 500 crore water purifier market (in four years), where seven to eight more players can easily fit in. The real obstacle lies in creating the best products and national visibility and that is what we will be utilising the funds from Capvent AG for.
In South India, particularly in Tamil Nadu, Andhra Pradesh and Karnataka, the company has initiated direct marketing through a multi-tier business network (MTBN), which involves a lead generator, a super channel partner (distributor) and a channel partner (seller), whereas for the rest of India, it plans to expand initially through retail networks, establish its credibility and visibility, and then initiate the MTBN model. Praveen believes that this model will help the company grow much faster without increasing the fixed-cost base. “Nowadays, in tier-I cities, customers are willing to go and buy water purifiers directly. To this extent the market is mature. Our lower-end products will be available in retail outlets by end-July (2013). Right now, we are in the process of putting a team in place,” he adds. MORF India plans to venture into Kerala immediately, and expand into Mumbai, New Delhi, Ahmedabad and Kolkata by September 2013.
While the brand name Kelvinator does ring a familiar bell to many of us, the fact that the once popular brand vanished from the market is posing a significant challenge to the sales team. “There is a credibility issue. To tackle this, we have to advertise extensively and leverage secondary sales. But our hands are tied because we don’t have enough products in our stable and we haven’t established a good reach yet. So we are now investing in below-the-line activities such as region-wise promotion campaigns and wide participation in trade exhibitions,” explains Praveen.
Apart from these BTL activities, MORF India is also planning to release its television campaign by October 2013 and start digital marketing with SEO and SEM (search engine optimisation and search engine marketing) based activities. “This will be our major investment. If our MTBL model is successful, in the next five years, our advertisement spends will be less than five per cent of our turnover. We will have thousands of channel partners and lead generators in the market, which will eliminate the need to advertise heavily,” states Praveen.
Praveen believes that the critical success factors to sustain business in the water purifier segment will be to launch the best products in terms of technology and design, to ensure robust reach and most importantly, to develop an effective after sales service platform. “After sales service is where most of the big brands take a beating, thus, this will be a major differentiator. In the next three years, we want to build a responsive service network to give feedback to the customers within three hours of them registering a complaint,” says Praveen.
In terms of revenue, the company has set a target of Rs. 500 crore in the next five years. MORF India is also looking to build a lean organisation with a core team of 300 employees (from the current 185), and potentially leverage the entrepreneurial culture in the country, by partnering with thousands of young people, who will work on a commission basis and help build the consumer side of the business.
As for the project execution vertical, Praveen states that it will continue to be the company’s mainstay. Whenever the company establishes reach for Kelvinator in a new region, the project division will piggyback on it. “Today, many apartments are coming up in the outskirts of cities, where establishing a good public sewage system has become a government mandate,”says Praveen. This throws up a lot of opportunities for the company. Currently, it has close to 200 sewage treatment plants in South India, and as it spreads to North India, and to tier-II cities, the business will expand further. “If you ask me, all challenges in this case will be internal. We just have to ask ourselves, do we have the bandwidth to tap this potential?” quips Praveen as he signs off.
State: Tamil Nadu
Business verticals: Manufacture and sale of Kelvinator water purifiers (through a brand licensing agreement with Electrolux), project execution of large and customised water and sewage treatment plants
Target revenue: Rs. 500 crore in the next five years
- By September 2013, launch two water purifiers for the lower middle class segment, priced at Rs. 10,500 and Rs. 12,750
- By October 2013; enter the premium segment, with a technologically advanced water purifier, priced at Rs. 17,000
- Venture into Kerala immediately, and expand into Mumbai, New Delhi, Ahmedabad and Kolkata by September 2013.
- Build a responsive after sale service network to give feedback to the customer within three hours of complaint registration
- Build a lean organisation with a core team of 300 employees and partner with thousands of young people, who will work on a commission basis to help build the consumer side of the business