'We are among the top 3 in water heaters'

It has only been seven years since A O Smith, the world’s No.1 water heater maker, entered the Indian market. The NYSE-listed, $2.36-billion (2014 revenues) company first introduced its range of water heaters in the India market, and now claims to be a leading player in the segment. Very recently, the company started selling its water purifiers as well. Deccan Herald’s Georgy S Thomas recently sat down with A O Smith’s newly appointed India Managing Director Parag Kulkarni to discuss the company’s journey so far and its future strategies. Excerpts:
 
When did your India journey begin?
 
We started operations in India seven years back. Our first manufacturing plant was inaugurated in 2010 at Harohalli, KIADB Industrial Area, just outside Bengaluru. We have 20 acres of land over there. In the first phase, we set up a plant spread over 75,000 square feet. Our water heaters are manufactured there. It has been received well by the market as a premium offering. We are among the most recalled brands in the modern retail outlets.
 
What is your product range in water heaters? How are they priced?
 
Our water heaters range from 1-litre capacity to about 100-litre capacity. Prices start from Rs 3,000 for the 1-litre offering to Rs 15,000 for the 25-litre offering. The 100-litre offering is custom-built and targeted at commercial establishments like hospitals, hotels, etc. Our water heaters boast of patented, unique blue diamond technology (glass coating) which increases the life of the inner tank. The lining is stronger and more corrosion-resistant than that of competing products. The A O Smith range of water heaters come with five‐star rating for energy efficiency. They feature digital and wireless remote control which not only enables the user to set temperature, but also shows the energy consumed by the unit and has a real time clock and a built-in timer.
 
Another feature on the aesthetics front is that our water heaters come with interchangeable decorative front panels in eight different colours. The colours can be changed to match that of the tiles in the bathroom. We transformed the water heater industry in the country.
 
What is your market share in water heaters?
 
This is data which is very difficult to pull out because nobody publishes it. Suffice it to say that we are among the top three players in the market.
 
What are the volumes that you do?
 
Again these are unpublished data and difficult to share. What I can tell you is that the response to A O Smith from the consumer and trade community in India has been so good that it has encouraged us to make more investments.
 
What is you installed plant capacity?
 
What I can tell you is that 75,000-square feet is what was invested earlier. But very recently we have gone ahead and made another investment, and now the plant size is 226,000 square feet. Our installed capacity is much ahead of our current requirements. It is 3,100 water heaters per day and 300 water purifiers per day.
 
What’s the size of the India water heater market?
 
It is estimated at around Rs 800 crore. South India is the largest market for organised water heaters.
 
What else is new at A O Smith?
 
We recently entered the reverse osmosis (RO) water purifier market. There are three models in the market now. One of them is called PURITEE+ HOT. It has 10-litre capacity, of which 9.8 litres is for regular water, and 0.2 litres for hot water.
 
What is the price range of your water purifiers? What is their value proposition?
 
Prices for the water purifiers range from Rs 17,000 to Rs 25,000. We offer two-year warranties which are much higher than that of our competitors.
 
Our unique patented Side Stream technology gives RO membrane life of 12,000 litres from the usual 6,000 litres. Our purifiers boast of seven-stage amino purification process.
 
Two of our water purifiers come with the unique ColourMatch system which can be matched to the kitchen decor. We have also introduced ‘The Greatest Buy Back’ offer where you can get Rs 3,000 off on exchange of any water purifier to upgrade to an AO Smith model.
 
What is the size of the water purifier market?
 
The water purifier market in India is approximately estimated at Rs 3,500 crore. Of this, the RO market is estimated at Rs 1,200 crore. The RO market in India is growing at 22-25 per cent CAGR.
 
In which all markets do you distribute your products?
 
We distribute water heaters in 23 class A cities, 61 of 67 class B cities, and 314 of 400 class C cities. Our water purifiers are distributed only in the Delhi/NCR and Bengaluru markets.
 
What about customer service?
 
We have launched the ‘Power of 1’ service, which is one of its kind. We are committed to respond to the customer’s problem within one hour of the call being registered on the toll-free number. The customer problem will be rectified and closed within one working day. And the solution will be provided the first time itself. We have an outsourced call centre, where calls will be attended by AO Smith-trained operators. They take the call and house visits are done by our A O Smith-trained technicians. This service is available in the top ten cities of the country.
 
What are your investments so far in India?
 
We have invested upwards of $50 million in India so far. We will be investing more in India to grow the market.
 
Do you do research and development (R&D) in India?
 
We have a full-fledged R&D centre in India, which commenced operations in 2010. We have an R&D team of around 35-40 people who work on products for the Indian market. Innovations by the India R&D team include the hot water dispensing purifier, remote control for temperature in water heaters, side membrane technology, ColourMatch system for the water purifiers and water heaters, etc.