'India is one of the most critical markets for AO Smith'

US-headquartered water heater maker AO Smith Corporation entered the Indian market in 2008, and two years later, the $3-billion company opened a world-class manufacturing plant in Bengaluru. In 2014, it added on to the original facility to provide expanded capacity for the manufacture of water purification products, creating a 2,97,000 sq feet operation.

In an interaction with Uma Kannan of Deccan Herald, Parag Kulkarni, Managing Director of AO Smith India Water Products Private Limited, says the company sees great opportunities in both water heaters and purifiers in India. Edited excerpts:

How are you looking at the water purifier market in India?

We entered the Indian market with water heaters. In 2014, we expanded our capacity in the Bengaluru plant, coinciding with the production of water purifiers. Water purifier is another interest area for AO Smith because there is a big need for this in emerging markets like China and India. The water purifiers market in India is pegged at about Rs 3,500 crore.

In 2015, we launched water purifiers in two cities- Bengaluru and Delhi. Towards the end of the same year, 95% of our sales came through water heaters and 5% through water purifiers. Slowly, we started expanding to other cities- Pune, Hyderabad and Chennai, and within two years, in 2017, water purifiers contributed 20% of our sales and in 2018, we are expecting it to be 30%. We have grown 140% in the water purifier category.

What kind of opportunities are you seeing in both - water heater and purifier?

We see great opportunities in both the lines. Last year was very good for us as we saw 40% growth in our topline, which is very significant. The water heater industry is doing very well. Estimates are that in 2017, the industry grew 13-14% and we saw almost double the growth rate. The water purifier industry also grew 15-16% last year. As far as water purifier is concerned, we have our presence in 33 cities and we will take this to 46 in this year, there by covering 75% of the water purifier market in India.

When we step into new cities, we also make sure that proper service is in place. We are the only company to come up with an 8-stage purification.

What about your recent launch Green RO water purifier? How is it doing?

AO Smith's Green Series has the highest recovery in the category. Today's consumers are more environment conscious and will adopt our new technology that saves water. RO water purifiers being a high growth category in the country, we are constantly strengthening our distribution and reach in the segment. Our focus is on green for both purifiers and heaters. All our products are energy efficient.

Cost plays a huge role in India. How have you priced water purifiers?

The price starts from Rs 13,000-14,000, and our Green RO is slightly on the higher end of the product category. We also have presence in Tier-II and Tier-III cities. We are planning to enter new locations like Kerala and Rajasthan. There is a great need for water purifier products and the market is exciting. Also we need to educate the people and tell consumers about the need for water purifiers. We are still in the early phase of the journey. It's good to see competitors in all categories, as healthy competition always helps. The water purifier category is expanding and there is a huge scope for people to look at and explore, but it's not a easy business. You need technology support and service should be good.

You are one of the top 3 players in the storage water heaters category in retail sales. What are the new products that are in the pipeline?

We are seeing high double digit market share. There is a lot of focus on energy efficient products. Also we offer express heat that provides 33% faster heating. We are also offering higher capacity (litres) products. Both water heaters and purifiers are seasonal. We will be introducing new products during the season- for water purifiers it starts from May-June and water heaters from October.

AO Smith is a 144-year-old company. How the global company looks at the Indian market and its future?

India is one of the most critical markets for AO Smith. The company is excited about growth rates that are coming from India. We have invested $75 million in India so far, and we have a full-fledged 28-member R&D team here. We are designing products and manufacturing here exclusively keeping India in mind. The country has got a lot of potential in terms of technology and knowledge, and it is the highest growth rate registering country. More than 500 people are working in India and during seasonal time, the number goes up till 850.

We do export to other countries like Malaysia, Indonesia and Korea from India, but our main focus is on India. Logistics and connectivity are improving here. With GST, things are smoother now and movement of goods are easier.

What about your online presence?

People always look online to understand our products, features and customers' reviews. We are strongly focused on digital market. It's too early to talk about our online sales.