Voltas ACs: From the Verge of Bankruptcy to the Market Leader

Voltas was incorporated on 6th September 1954 as a company promoted by Volkart Brothers
and Tata Sons Ltd. to take over the Engineering & Import Division of M/s. Volkart Brothers
in India. Initially, till 1961, Voltas imported products and acted as an indenting agent. In 1963,
Voltas started manufacturing air-conditioning and refrigeration equipment, mining, electrical
and agricultural equipment from its factory in Chinchpokali, in the heart of Mumbai city. After
a year, a modern, up-to-date factory was set up in Thane, Mumbai to manufacture compressors
and chillers and a range of mining equipment for which it had entered into collaboration with
leading manufacturers abroadi. Subsequently, in 1985, Voltas established a compressor and
refrigerator manufacturing unit at Warora in Nagpur.

Voltas is a leading brand in the air-conditioning industry in India. For close to five decades
(from its inception in 1954 to 1992), the company ruled the Indian AC market with close to 40
per cent market share. Well, it was easy going then as there were merely three players – Blue
Star, Fedders Lloyd and Arco other than Voltas in the market. All of them offered more of less
similar products in terms of features and specifications. It used to be a very basic and functional Commented [v1]: Less product differentiation
Less competition
product in a wooden casing which would vibrate a lot. Only window ACs were available.
Distribution was a key element. It would increase the market reach and make the brand
presence felt in the marketplace. Emphasis would be more on personal selling and price would
be a key element in the consumer’s decision-making. All the manufacturers would have their
own retail outlets – either fully owned by them or by their franchises which would sell and
offer post-purchase service to the consumer. There was another major player enjoying a
significant market share in the form of an unorganised market in India then. These players from
the unorganised market would simply buy various parts of the AC and assemble the whole AC
in their small retail shops cum factories. It was a thriving cottage industry. These assembled
ACs would cost significantly less, though their performance could not be compared in any way
with the brands from the organised market. They would make far more noise, consume higher
electricity, breakdown more often and had lesser life expectancy. Their main USP was
significantly lower price and in some cases, quicker service. These sellers who would sell Commented [v2]: Unorganized sector had lot of issues but
lower price and sometimes quick service
assembled ACs would have significantly lower overheads and avoid paying many taxes. On Lower OH
the other hand, the makers of branded ACs from the organised sector had to pay huge taxes in Avoid taxes

the form of excise duty (110%) and sales tax apart from hiving higher overheads. With this Commented [v3]: Political factor

huge price differential, the players in the unorganised market were giving a tough competition
to the branded AC manufacturers and were enjoying more than 50% market shareii. As a result,
in the early 1990s, the retail AC market (ACs purchased for residential use) was miniscule with
most of the AC sales being in the institutional segment which consisted of the government and
corporate sectors. ACs were also perceived as luxury items and their consumption was Commented [v4]: Consumer behaviour

restricted to the rich and super rich of the retail (home) market segment. India had a huge
middle class market; however, the problem of affordability, lack of convincing need and the Commented [v5]: Income situtation

availability of cheaper alternatives (like khus curtains or air-coolers) kept the middle class Commented [v6]: Lack of awareness of need

consumers away from buying an AC. Due to the high purchase price and the huge running cost, Commented [v7]: habits

an AC was a product with high aspirational value for the middle-class consumers. Commented [v8]: Maslow’s hierarchy not on basic level

1
With the beginning of 1990s, many things changed in India. The Government of India decided
to give a big push to the software industry in India which was already into existence since the
establishment of a Tata Group company in partnership with the Burroughs and the formation
of SEEPZ (Santacruz Electronic Export Processing Zone) in Mumbai in 1973.In 1991, the Commented [v9]: Government factor

Department of Electronics, Government of India established a corporation –Software

Technology Park of India (STPI) to provide satellite communication through V-Sat satellite. Commented [v10]: Govt push

STPI established software parks in various cities to provide the satellite links to the IT and Commented [v11]: govt

ITES firms. Videsh Sanchar Nigam Limited (VSNL), a global provider of telecommunications
solutions and services, introduced Gateway Electronic Mail Service in 1991, the 64 kbit/s
leased line service in 1992, and commercial Internet access on a visible scale in 1992iii. In 1993
the government began to allow individual companies their own dedicated links, which enabled
the software firms to directly transmit the work done in India to their clients abroad. Indian
firms soon convinced their American customers that a satellite link was as reliable as a team
of programmers working in the clients’ office. This gave a big thrust to the Indian software
industry and also to the Indian middle class.

Prior to 1980, the engineering education in India was restricted only to 5 IITs (Indian Institute
of Technology) and 18 RECs (Regional Engineering Colleges, now renamed as National
Institute of Technology). However, the decade of 1980 saw the emergence of private
engineering colleges in India as the government allowed the private institutions to start their Commented [v12]: educational factor

own engineering colleges. These private engineering colleges admitted aspirants of

engineering students who could not get admission in IITs or RECs as the later had limited seats
which were offered only to the crème de la crème. India, during this period produced thousands
of engineering graduates every year. These bright young engineers fulfilled the software
industry’s growing demand for trained workforce that was also proficient in English. And the
number of households with disposable income of $ 10,000 per month started growing steadily. Commented [v13]: Income grew
Trained workforce
(Refer Exhibit 1). Many of these young engineers who came from small towns and distinct engineering
places got jobs far away from their native places as most of the software industry was localised
in and around Mumbai, Pune and Bangalore at that time. Later Chennai (then known as Commented [v14]: Migration

Madras) and Hyderabad were added to this list. They either bought or rented residences at their Commented [v15]: Increase in demand

new location. Many of these young engineers were girls and the workforce in Indian corporate
sector started having more and more equality of genders. Indian nationalised banks were little Commented [v16]: Sociological

slow in understanding the importance of this sector and had a very conservative approach in
granting them the home loan. But private sector banks led by the ICICI Bank and HDFC Bank Commented [v17]: Economic factor

came forward and aggressively marketed their home loan products to the young housing loan
seekers who had good education and a stable source of income. This also fuelled the growth of
real estate industry in the residential sector and changed the traditional family system of joint Commented [v18]: Sociological change

family which was the fulcrum of the Indian social system thus far.

The Changing Family System

Traditionally, the sub-continent has always favoured the joint family system where the parents
and grandparents (sometimes with great grandparents) would look after kids and would stay
together under one roof and with one kitchen. The division of labour in this old, traditional
family was quite simple and clear: the able-bodied men would be the bread earners of the Commented [v19]: Women working now

2
family, the women would be responsible for the kitchen and the elderly would look after the
cultural norms and preaching values to the kids. The eldermost man (in some places, woman)
would be the head of the family and all others would respect him. All the disputes in the family
would be resolved by him and his word would be final.

Today, the modern India has abandoned the old tradition of joint family system -partly out of
necessity. Both - the husband and wife work. They may be forced to live their hometown and
not live with their parents. This nuclear family takes the help of baby setters and crèche to look Commented [v20]: New kind of jobs emerging adding to GDp,
which were initially done at home
after their kids when both the parents are away earning the bread for the family. This dual-
income-single-kid (DISK) family has created a big dent in the social fabric of the Indian
society.

On the positive side, since both the parents work, the family income increases leading to
increased consumption and demand. The young couples have freedom and are no more Commented [v21]: Economic change

subjected to a close supervision of the elders in the family. They can eat whatever they want,
they can spend their money as per their wish and they can live their life as per their own way. Commented [v22]: More freedom

“We have moved into an era where the wife and the mother-in-law are both working and may
no longer be available to the new generation of kids in the family,” says one social expert.
Both, husband and wife have become career-oriented, making marriages more fragile. As a
result, the urban nuclear family is splitting.

Growing number nuclear families has led to the problem of old, retired (and sometimes invalid)
parents. Young couples who are busy in making their own careers either in their own country
or abroad, are too busy to look after their parents. In India, there is a growing concern about
how to take care of the rising numbers of older people most of whom do not get any social
security. Just 4 per cent of the 80 million Indian aged over 60 receive pension ( a social security
that a retired employee gets every month from the Government).

According to Union ministry of social justice and empowerment, Government of India, the
time has come to enforce what it calls “the moral obligation” of caring for one’s own parents.
It summarizes the changing values in the Indian family. The family unit is under threat in India.
“I often wonder did my mother have a better life? I think so. She had a family,” says a 55 years
old senior lady manager in a multinational. The hard fact is the Indian family system has
changed.

Changing Role of Women

Till about three decade ago, the primary role of women in the sub-continent was to look after
the house. Very few women would step out of their homes and work. Very few would study
beyond high-school and complete their graduation. Today, more and more girls, even in rural
India are completing graduation and even post-graduation. Obviously, they are far more
ambitious and also want to make use of their knowledge by working in the corporate world. It
is a common site to see women working shoulder to shoulder with men in every sphere of
activity – be it education or a company or a hospital or a space research organization. The
gender discrimination is a thing of past. Women earn the same salaries, even more than their

3
men colleagues, depending on their qualification and experience. It is a common site to see a
woman heading an organization and men reporting to her.

The entry of women in the corporate world has changed the economy in many ways. Their
earnings have increased the disposable income of the family. Many products are developed Commented [v23]: Changing demand
Decision making role
specially for them. They have become an active member of the family and have an equal say
in the family decisions – right from which home to buy to where the family goes for an outing
or dinner on the Saturday night.

Increasing Population

One of the main characteristics of the Indian population during this period is the rapid growth
in urban population. “Some 1.1 billion people in Asia will move to cities in the next 20 years,” Commented [v24]: Demographic growth

says Haruhiko Kuroda, president of the Asian Development Bank. “By 2030, half the
population of the Asian continent will live in cities”. In India, nearly two-thirds of the total
increase in population over the next two decades will occur in urban India. The population in
urban areas will rise from 29 per cent today to 37 per cent in 2025. In absolute term, from 3.18
million today to 523 million by 2025. Urban India is already more populous than the entire
United states and by 2025, it will exceed the current population of the European Union.

A Growing Middle Class

The Indian population consists of several income groups. The study published by McKinsey
Global Institute (MGI) has divided Indian population into five economic classes based on real
annual disposable income – Deprived, Aspires, Seekers, Strivers, and Global Indians. Fig. 3.1
shows their relative share in urban consumption patterns. [Refer to fig 1]

Deprived households have an annual disposable income of less than Indian Rs.90,000 (or less
than USD 1969). They are the poorest economic class in the economy. They are mostly
unskilled or semi-skilled workers working on daily wage basis and may not have an
employment throughout the year.

Aspirers have an annual disposable income in the range of I.Rs.90,000 to I.Rs.199,000 (or
USD 1,969 – USD 4,376). They spend almost half of their incomes on basic necessities. Small-
time retailers, small farmers, low-skilled industrial workers mostly fall into this category.

Seekers have an annual disposable income of I.Rs. 200,000 to I.Rs.499,000 (or USD 4376 -
USD 10,941). This economic class consists of white-collar employees, mid-level government
officials, newly employed young post-graduates, medium-scale traders and businesspeople.

Strivers have an income ranging from I.Rs.500,000 to I.Rs.9,999,999 (or USD 10,941 – USD
21,882) p.a. Established professionals like lawyers, CAs, MBAs, senior government officials,
medium-scale industrialists in towns, rich farmers in villages mostly fall into this income
bracket. People in this category and above are generally considered successful and well-
established in the Indian society. They have a stable source of income and have provided for
amenities (or rather luxuries) like own home, car, TV, refrigerator and air-conditioner at home.

4
Global Indians have an annual disposable income in excess of I.Rs. 1,000,000 (or USD 21,882
+). This is the creamy layer in the society and consists of senior corporate executives, large
business owners, topmost professionals, politicians, film actors, and big farmers. Of late, this
group has been joined by the upwardly mobile mid-level executives working in MNCs
(multinational companies), investment banks, and graduates from leading educational institutes
like IITs and IIMs. This group is globe-trotter and enjoys a very high standard of living.

The MGI report defines middle class as a combination of seekers and strivers, who fall in the
combined income bracket of I.Rs.200,000 to I.Rs.10,00,000 p.a. These households are enjoying
an increase in income by 4.9 per cent p.a. If we consider an average of 4.4 family members per
household in urban India, then the urban middle class population totals to 384 million. Much
larger than the population of U.S. in 2025.

Exhibit 1

According to Confederation of Indian Industry (CII) and The Boston Consulting Group (BCG)
report, ‘The Tiger Roars’, the Indian consumer market is poised to grow 3.6 times between
2010 and 2020; faster than most other emerging markets . This report categorises the Indian
consumers into the following four segments:

• Affluent
• Aspirer
• Next Billion
• Struggler

5
 Segmentation of Consumer Households

Small town next

billion
24%
Strugglers
Largetown next 50%
billion
6% Rural aspirer
6%

Urban aspirer
8%
Traditional affluent Professional
4% affluent
2%
Note: Total No. of Households: 239 million

Source: Euromonitor, BCG Analysis as quoted in The Marketing Whitebook 2013 – 2014; Business
World. P. 78

Changing Income Distribution and Consumer Spending Patterns

Marketers should pay attention to income distribution as well as income levels. Over the past
several decades, the rich have grown richer, the middle class has shrunk, and the poor have
remained poor. This distribution of income has created a tiered market. Income
distribution leads to many segments in the market based on the purchasing power
and disposable income that the target market has. A company has to carefully select
the most appropriate target market. Changes in major economic variables, such as
income, cost of living, interest rates, and savings and borrowing patterns, have a large
impact on the marketplace. Companies watch these variables by using economic
forecasting. Businesses do not have to be wiped out by an economic downturn or
caught short in a boom. With adequate warning, they can take advantage of changes
in the economic environment.

Due to the software boom and many other initiatives of the Government of India, the
Indian economy was enjoying envious economic development. The sustained growth
had changed the income distribution of households significantly, giving rise to a
growing and more affluent urban middle class. Consequently, the purchase of
consumer durable items like air conditioners saw a high double digit growth. (Refer
Exhibit 2).

6
At the same time the Indian government liberalised the economy in 1992. The government
liberalised a lot of norms so that the foreign players could invest in India; soften the tax regime
to make Indian economy look attractive to do business in. One such measure which helped the
AC industry was lowering of excise duty on ACs from 110% to 60% in 1993. This also made
the unorganised sector lose its cost advantage. Many Korean, Japanese and other global giants
like Samsung, LG, National, Electrolux, Whirpool, Carrier, etc. entered the lucrative Indian
market between 1993 and 1997. Taking advantage of the new, improved business environment
(and especially, the lower tax regime), Carrier, the American AC giant who had entered the
Indian market in 1987 unleashed a range of new generation ACs in the Indian market in 1993.
These more sophisticated and new generation ACs quickly toppled Voltas from its No. 1
position. The entry of other multinationals especially the Koreans led to further sliding of
Voltas’ market share. Thanks to the aggressive marketing efforts put in by the seasoned
multinational players and the increasing prosperity levels among the Indian consumers, the
retail AC segment started growing rapidly. LG quickly emerged as the leader of retail AC
market. Voltas was caught napping when the environment around it was changing.

The multinationals especially the Koreans changed the rules of the game. They offered many
variants of the ACs at competitive prices. They did not charge a huge mark up on the cost;
instead focused on increasing the volume of sales and thereby increase the total profit. Now,
the Indian consumers had a wider choice and could select a ‘branded’ AC as per their
requirements (namely, the tonnage and other features of the AC) and at a price that would not
drill a big hole in their pocket.

The retail industry was also changing from a stand-alone shop selling and servicing ACs of a
particular company (Voltas used to sell and service its ACs through their dealers or franchisees)
to the newly emerging pattern of ‘multi-brand showrooms’ who would stock several products
like ACs, refrigerators, mixers and grinders, fans, TVs, etc. of all the major brands in the
market. Since, these multi-brand showrooms would offer a wider choice under a single roof to
the customers, they immediately became popular among the customers. Voltas missed
encashing on this opportunity and its ACs did not find a shelf space in those showrooms and
thus also lost the important ‘mind-share’ of the customers.

By 2001, Voltas was reduced to being an insignificant player with a meagre 6.8% market share
and an also-run 7th position in the retail AC market with 17 players. By the time Voltas woke
up and decided to fight back to regain the past glory, the MNCs had changed the rules of the
game. In the past, Voltas had earned profits by charging a high price and thereby keeping the
margins high. MNCs, however, had unleashed a price war. They were offering their brands at
lower prices and were aiming to increase the profit by increasing the volume of sales. Volume
had become critical for survival.

Mr Sanjay Johri, Managing Director of the company explains: “We were at a disadvantage
because we didn’t have a unique customer value proposition. And we also didn’t have the
economies of scale of global MNCs.” So the challenge was both to connect more effectively
with the consumer by offering a unique value proposition and also to change the company’s
cost structure.

7
Mr. K. J. Jawa, VP Cooling Appliances acknowledged in 2005, “We made the mistake of not
taking the retail AC market seriously. The MNCs had opened up the market and made deeper
inroads.” As per market sources, Voltas was not perceived to be customer friendly and its
products were considered to be technologically weak and un-competitively pricediv. Based on
the recommendations of the Tata Strategic Management Group, the management consultancy
that’s part of the Tata Group, Voltas initiated an internal regeneration drive. A detailed study
was undertaken to understand how the market would shape up, the competitors, their offerings,
strategies, the market spread, the future growth areas, etc. The study brought out a glaring fact
– transform Voltas from an engineering to a marketing company. To effect this transformation,
Voltas planned a Big Bang strategy to revive every facet of the company – product, channel,
systems, service, costs and brand. In short, to become No.1 in the AC market once again and
to beat the Koreans, Voltas had to have a superior value proposition than the one offered by its
competitors.

Big Bang Strategy

Voltas had to accept that the retail AC market had changed. The multinational companies like
LG and Samsung were offering multiple variants of cost-effective products at an attractive
price. To understand the market requirements, Voltas undertook market research. The results
were less than flattering. It clearly revealed that Voltas ACs were perceived to be old-
fashioned, outdated, bulky dabbas (boxes)v. The competitors’ ACs were reportedly superior in
technology, more aesthetically designed and at the same time were also competitively priced.
Voltas realised the shift in the market, became aware about the huge middle-class market lying
untapped for want of an appropriate value proposition. Market no more perceived the ACs as
a luxury product; it is expected to offer ‘comfort’ to the customers. Thus, Voltas had to offer
technologically superior, more aesthetic ACs which would offer comfort at an affordable price.

A Big Bang strategy was designed considering all these factors to offer better customer value.
The key objectives of the Big Bang strategy were to increase revenues from sales achievements
by offering the best customer value in the market and make Voltas the lowest-cost
manufacturer. It essentially revolved around three critical factors – introduction of new, cost-
effective product range, a total channel revamp and re-establishment of Voltas brand. To
achieve these objectives, economies of scale were necessary. “The challenge was not only to
come up with a range that matched competition, but to come with it in a cost-effective manner.
We needed a partner that could not only provide us with technology, but also help in keeping
the manufacturing cost low,” says Jawa. Voltas found that partner in Fedders International, a
leading US room AC marketer with a global presence. Voltas signed a 50:50 manufacturing
only joint venture with Fedders in 2001. The JV gave Voltas an access to the Fedders’ R&D
centres in Singapore and Florida, and Fedders design know-how and technology to launch the
new generation ACs in the Indian market. As an outcome, came the Vertis brand with latest
features like the economy mode to save electricity, silent operation, purification filters, ionisers
to kill bacteria, etc. that matched with the competition. Between 2001 and 2004, Voltas
revamped its entire product line and launched over 74 new products. This includes the industry
first - a 1.5 Tonne AC, which was launched for the first time in India and has now become the
star product for all the manufacturers.

8
The challenge was also to cut costs and become the lowest-cost manufacturer of ACs in India.
Cutting costs and offering an improved product at a significantly cheaper price would enhance
the customer value. “Multinational competitors were sourcing cheaper air-conditioners from
suppliers across the world and we were out-priced. So we realised that we too had to build a
different supply chain. Instead of manufacturing everything ourselves, we changed our
sourcing model significantly. We right-sized our factories and developed a new make-versus-
buy model for selectively sourcing raw materials, components and even full products from
different vendors, including reputed players in China,” says Johrivi. A number of measures
were adopted to cut cost. The joint venture with Fedders’ gave Voltas an access to source all
components from copper tubes to compressors from the same suppliers that Fedders’ procured
from globally through a global sourcing agreement. This led to a significant cost reduction.
Material cost for a window air-conditioner came down from Rs 10,400 to less than Rs. 8,000,
a drop of 20%. Because of the new make-versus-buy model, the conversion cost came down
from Rs. 2000 to Rs 650 per air-conditioner, a significant drop of 60%.Voltas had its
manufacturing plant in Thane near Mumbai which was shifted to Dadra, a sales tax exempt
zone. This enabled the company to pass on the 12.5% sales tax exemption to its customers.
Voltas soon became the lowest-cost manufacturer of ACs in India. This cutting-cost offered a
major competitive advantage to Voltas.

Product Strategy

The ACs manufactured with the help of Fedders’ technology were marketed under the Vertis
brand which was launched in October 2001. It’s main USP was energy saving (low running
cost) at a competitive price. It was positioned as a ‘value for money’ brand. Voltas launched
another two brands – Vectra, targeted towards the middle class customers and Verdant, a
premium brand for the higher income category.

Thanks to the high initial purchase price and heavy running cost most of the Indian middle
class customers were shying away from buying the AC. Indian retail AC market had a low
penetration level of a meagre 0.5% at that time. Considering this situation, Voltas planned to
launch AC models that would be affordable to the average Indian middle class customers. In
2003, Voltas launched a 0.6 tonne window AC under the brand name of Vertis and priced it
under Rs. 10,000. It was a huge success, exceeding all the expectations. Riding it’s success,
Voltas expanded the sub-one tonne category by launching Vertis Deluxe (mid-priced model)
and Vertis Gold (premium model).

Between 2001 and 2004, Voltas launched 74 new products targeting various segments like
telecom and banking (most of the banks were opening ATMs at that time), corporate and
government sectors.

Distribution Strategy

Voltas had to have a relook at the distribution channel. Air-conditioner is a product category
which needs an equal emphasis on the product quality as well as the post-purchase service
quality. Thanks to the emergence of multi-brand retail showrooms, the retail environment was
changing rapidly in India. Voltas had to have its share of the shelf space of these multi-brand

9
retailers. These multi-brand retailers would lead Voltas to new markets and the new customers.
The existing dealers had become complacent due to the glorious past. Voltas identified some
300 of its 650 dealers as non-performing. They were given strict deadlines to improve their
performance – while 200 dealers improved their performance and met the new higher standards
of Voltas’ expectations; about 100 were shown the door. Another 200 dealers were promptly
added to take the dealership network to 750 by 2001. Simultaneously, a new dealer-friendly
Channel Policy was drafted. This new policy offered subsidies and incentives to the dealers
while demanding a higher performance (Exhibit 3). Dealers were expected to sign memoranda
of understanding which would clearly spell out the standard operating procedure, norms to be
followed and the scope of work between the dealer and the company. 1% of turnover was
earmarked for the training and development of the channel partners. Special budget allocations
were made towards dealer infrastructure, training of dealers’ technicians (with certification
programmes for all employees), cooperative advertising which would give visibility to the
dealer’s name and contact numbers, sharing expenses on the mobile vans, etc. Under the new
policy, dealers were made responsible for post purchase customer care. Strict guidelines and
norms were established on how to interact with the customers and respond to complaints, the
dress code for the service personnel and the tools and service kit that he will carry. New time
target was established - all customer calls in the metros had to be responded in less than four
hours. Dealers were connected with the company through SAP making transactions transparent
and efficient. The dealer-friendly policy has enabled Voltas to make its distribution reach as
the key differentiator in the Indian AC market. Distribution is primarily important in the Indian
market as nearly 50-55% of the market resides outside metros and tier1 cities. In just three
years – from April 2014 to March 2017, it has doubled its pan-India customer touch points
from 6,500 to 13,000vii.

Table 1: Dealer touch points across industry (FY 2017)

Company Dealer touch-points
Voltas ~ 13,000
Blue Star 3,800
Daikin 4,000
Videocon 7,000
Hitachi 4,000
Lloyd Electric < 10,000
Symphony 23,400
Micromax 4,000
Carrier Midea 3,200
Source: Sharma Ankur and Amit Shah (2017). Room Air conditioners – Focus shifting to inverters;
retrieved from www.motilaloswal.com/institutional-equities in September 2017

Branding and Advertising strategy

Voltas had to rebuild its image among the customers, many of whom were the first-time buyers
in the market. Thanks to rapid urbanisation, dual-income families and the growth impetus due
the LPG (liberalisation, privatisation and globalisation), Indian room AC market was growing
at 26 %. However, the household penetration of ACs was merely 2%viii; thus, there was a huge
potential. Voltas had to build a connect with the new generation customers. Voltas put in a lot

10
of efforts into getting insights on the customers’ minds. For them, it lacked the freshness that
the foreign brands provided. The brand was perceived as ‘staid’ and ‘out-dated’. “The brand
recall was poor and we had a fuddy-duddy image. The task at hand was to transform Dilip
Kumar into Shah Rukh Khan”, says Java. Thus Voltas brand and its image needed a major
overhaul. The company planned a Rs 500 million brand-building exercise in 2002 which was
to be implemented over the next three years. The first campaign was launched around the theme
– ‘Buy American technology at Chinese prices’. Special ‘Voltas Weekend Carnival Offers’
were launched to promote the sale of the brand during off-season. To break the cost barrier in
the minds of Indian customers, Voltas came out with the next campaign – ‘ACs with IQ’ which
emphasised on 12 to 15% more cooling and energy saving due to the energy efficient
compressor. In 2004, it further lowered its cost of manufacturing ACs and launched the
campaign – “Ab har koi le sake AC ka maza” (now, everyone can enjoy the pleasure of an AC).

Back in 2006, the multinational companies were using their ‘foreign’ origin to lure the Indian
customers. It was a period when the Indian economy was booming with over 9 % growth rate.
Voltas’ research revealed that there was a sense of pride in being Indian. Voltas decided to
concentrate on its origin to differentiate itself and ran the campaign ‘India ka dil, India ka AC’.
[Refer exhibit 3]

The ad instantly connected with viewers and they remembered it. Soon, Voltas climbed to the
No. 4 position. Voltas once again went to the drawing board and re-engineered the ACs to
make them more energy efficient albeit at a higher cost. The next campaign hence was launched
around the same theme – how you can save up to Rs. 3,000 per year by paying Rs. 1,500 more
at one time. The tag line was – ‘while the customer saved money, the nation saved on power
consumption’. The company’s sales jumped by 41% in 2007-08ix. By 2010, Ministry Power,
the Government of India had made it mandatory to display the energy efficiency through a star
rating label on the product. In association with this directive, Voltas launched its next campaign
around ‘sensible cooling’. This campaign offered a number of tips on how consumers could
programme their ACs to consume less power. Consumers appreciated this initiative and Voltas
soon climbed to No. 3 position in the market. An AC can perform many other functions like
dehumidification in high humidity places like Mumbai or Kolkata; can work as a heater in a
bone chilling winter; or a dust filter can come handy in places like Rajasthan. And, the all-time
best campaign – the ‘all weather AC’- suggesting how customers can stay comfortable
throughout the year, irrespective of the weather outside, was born. The ad depicted a character
by name Mr Murthy who would frequently get transferred to new postings all over India and
his AC would cool or heat his house irrespective of his place of posting. “People remembered
Voltas and Murthy rather than other brands”, says Mr Johri. Mr Murthy did a wonderful job
and in the summer of 2012, Voltas overtook, first Samsung and then LG to become No. 1 brand
once again in the Indian AC market. “It was a proud moment for us – an Indian company
beating multinationals, much bigger than us, with bigger pockets and a wider range of
products”, says a triumphant Mr Johri. After consistently showing losses for 12 years from
1994 to 2006, Voltas earned Rs. 19 billion in revenue with Rs. 1.7 billion as profit. By 2013,
Voltas was manufacturing nearly million room ACs and commercial refrigeration products like
bottle coolers, freezers, etc. (as against 350,000 units in 2006) and had about 7000 retail

11
customer touch points all over India. As per the market reports, Voltas is now ranked first with
a share over 21% as of the third quarter of 2017 with a lead of over 5 percentage points over
its next best rival, namely LG.x.

It’s classic story of how a company can resurrect to the No. 1 position by concentrating on and
deliver the customer value to its customers.

12
i
http://economictimes.indiatimes.com/voltas-ltd/infocompanyhistory/companyid-12815.cms
ii
Rai Amit Ranjan, (200, April 5). How Voltas turned around successfully.
http://www.rediff.com/money/2006/apr/05spec2.htm
iii
"Online Journal of Space Communication". Spacejournal.ohio.edu. Retrieved May 2018
iv
Ibid
v
ibid
vi
Dasgupta Arundhati. Re-engineering Voltas. www.tata.in/tata review September 2010.
vii
Sharma Ankur and Amit Shah (2017). Room Air conditioners – Focus shifting to inverters; retrieved from
www.motilaloswal.com/institutional-equities in September 2017
viii
Ibid
ix
Agrawal Sujata (2013). Cooling minds, winning hearts; retrieved from www.tata.com/article/inside in
September 2017

x
Ibid

13
Exhibit 1: The Changing face of Indian consumers
Source: http://www.livemint.com/politics/The rise of Indias neo middle class.html October 4, 2016
(Accessed May 2018)
90
80
70
60 2005
50
2015
40
2025
30
20
10
0
Affluent* Share of % consumption Nuclear Average * Annual ** Cities with
households as Affluent from Tier - II, households as household household population
a % of total households in III, IV ** cities a % of total spend (Rs lakh) income > Rs 10 between
total consumer Lakh at 2015 50,000 and 10
spending prices lakh

Exhibit 2: Number of Households with a Disposable Income of over $10,000 per month
1990-2015

Source: https://www.weforum.org/agenda/2016/11/6-surprising-facts-about-india-s-exploding-middle-class/
(Accessed May 2018)

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Exhibit 3: Dealer Margins offered by various AC manufacturers
Company Margin offered
Voltas ********
LG / Lloyd Electric ******
Blue Star / Samsung *****
Daikin / Hitachi ****
Mitsubishi ***
O General ***
** denotes higher margin
Source: Sharma Ankur and Amit Shah (2017). Room Air conditioners – Focus shifting to inverters;
retrieved from www.motilaloswal.com/institutional-equities in September 2017

Exhibit 4: Print Ad: India ka Dil, India ka AC

15