Branded Home Furniture

BUSINESS MATHEMATICS

Sector Study on

‘Branded Home Furniture’

Team Members:

• Sumedh Shevde (Roll No.

101)

• Rakesh Tatikonda (Roll No.

110)

Page 1
 Branded Home Furniture

Introduction:

The entry of international brands and changing consumer preference has led to the emergence
of furniture retailing in India. The large furniture brands are characterised by huge expanses
of dreamy designs, a multitude of hues and steep prices. The size of the Indian furniture retail
market is increasing. In fact, CSIL Milano (Centre For Industrial Studies) has classified India
as one of the 14 large furniture markets in the world. This is in view of the fact that India has
a middle class population of over 400million, with a purchasing power on the upswing.
The furniture sector makes a marginal contribution of 0.5% to India’s GDP. Moreover, even
if the production is increasing every year, it is mainly in the un-organised sector.

Some facts and figures highlighting the Indian Furniture industry are as follows:
• Is worth about US$ 8 billion
• Constitutes 0.5% of the total GDP
• Employs 3,00,000 people
• Is highly unorganised – only about 15% in organized sector and remaining 85% in
unorganized sector
• Organised sector is growing at 30% CAGR
• Organised Sector includes domestic players as well as imports
• There are about 5000 firms in the domestic organised sector, and nearly 10,500
importers of furniture

The furniture products are classified based on material used and consumer segment. Out of
all the segments Wooden Home furniture is the biggest segment. Some of the key states for
wood furniture are Gujarat, UP, Punjab, Kerala, Andhra and West Bengal. The household
furniture designs are region-specific and there is an increasing trend of imported furniture
catering to urban, affluent households. The Indian furniture industry imports are worth about
US$ 150 million which is growing at 60% CAGR. Some of the key countries from which the
furniture is imported are Italy, Germany, Spain and Malaysia.

Page 2
 Branded Home Furniture

About the market:

The furniture industry including furniture hardware and furniture fittings in India is estimated
to be around US$8 billion and is expected to grow at a rate that is much faster than its current
rate of about 25- 30% annually. The organised segment which comprises of mainly imports
and a few Indian manufacturers accounts for about 15% of the total pie. A major chunk i.e.
almost 80% of the organised imported segment comprises of home furniture. As with the
global market, home furniture is the largest segment in the Indian furniture market,
accounting for about 65 % of furniture sales. The organized sector has shown a healthy
growth of about 13-15% last year and is expected to grow even more rapidly.
A basic flow diagram, as shown below, explains the market structure of the furniture
industry.

Page 3
 Branded Home Furniture

Key players in the home furniture sector:

1. Godrej & Boyce Mfg. Co. Ltd :

Godrej Interio is a business unit of Godrej and Boyce Mfg .Co. Ltd. It is India’s largest
furniture brand. From manufacturing the humble Storwel cupboard 80 years back it has
positioned itself as a vibrant, innovative brand with a diverse portfolio. There was a time
when any cupboard we talked about was synonymous with the brand Godrej.

It follows the Godrej mission to conserve the environment by designing products, setting
up processes and using raw materials that are eco-friendly to do their bit to preserve
natural resources. So it has been positioning itself as a eco-friendly brand.

The company’s market share is about 20%. The income of this company was Rs. 4510.99
crores with a PAT of Rs. 241.44 crores for 2009.

Its strengths are its brand name itself from ages, its quality and the loyalty the consumers
have with respect to their products. Its biggest disadvantage is that it doesn’t do
advertising of their products.

Godrej Interio, the furniture arm of Godrej & Boyce Mfg Co Ltd, is planning to foray into
the ready-to-assemble segment, where furniture is purchased in multiple pieces and

Page 4
 Branded Home Furniture

requires assembly. The company also plans to increase exclusive stores to 176 in the next
two years from 51, as it eyes a franchisee model to increase its store footprint to directly
reach consumers. Its dealer network, in contrast, is over 500-member strong, with 125
dealers selling home furniture and another 400-odd selling cupboards.

Godrej Industries is listed on Bombay Stock Exchange but the stock is not being traded
currently due to lack of demand.

2. Style Spa:

Style Spa is the furniture arm of the S.K.Poddar group (Zuari Industries Ltd and Chambal
Fertilizers Ltd) and has been in the business of Furniture retailing for more than a decade.
It is India’s largest furniture retailer. It manufactures contemporary products that
incorporates the latest in Global styles and are well suited to meet the needs and
requirements of our discerning customer - the Global Indian.

It has been positioning itself via television advertising recently which was not a part of
their branding earlier and thereby overcoming their disadvantage they had in the market.

The income of the company was Rs.88.09 crores with a PAT of Rs. 87.65 lakhs for 2009.

3. Durian:

Durian started as manufacturer and trader of plywood/veneer in 1981 and has since
moved on to being a pioneer in veneers and one of the best in imported home furniture.

The durian positions its products not as a ‘piece of furniture’ but as a lifestyle product
which dictates pride of possessing it. It has recently received a certification from Forest
Stewardship Council for its forest conservation programme thereby positioning itself as a
‘green’ brand.

Durian is also advertising its products through celebrity endorsements from Malaika
Arora Khan a few years ago to their current endorser: Lisa Hayden.

Now it is also moving its focus towards taking up turnkey projects for homes.

Page 5
 Branded Home Furniture

4. Nilkamal:

Nilkamal is into four key businesses which includes moulded furniture’s such as chairs,
tables and cabinets and @Home, the Mega Home Retail Chain which is targeted to the
middle and middle high mass market of the new youth of India. @Home is the Rs. 150
crores lifestyle furniture retail venture and a recipient of “Retailer of the Year 2008”
Award for home and office improvement, by the Asia Retail Congress in February 2009.
It has consistently shown its commitment to environment protection by reducing emitting
effluents in its manufacturing process, recycling its products thereby reducing waste and
minimizing the use of resources and by embracing other such technologies. Nilkamal
positions itself as a brand which provides ‘value through convenience’ to its consumers.

In the first year of production itself, the company witnessed a profit of more than Rs. 5
crores. The compounded growth has been 30% annually and today the annual profits have
reached Rs. 12 crores and 37 lakhs. Nilkamal’s turnover exceeded Rs. 1000 crores for
2009.

Nilkamal Limited is listed on the National Stock Exchange and Bombay Stock Exchange
since 1991. It is a medium capitalisation company, with a market cap of Rs. 480 crores
(almost same for BSE and NSE)

Current trends, Expectations and Future of Indian Furniture Industry:

According to a World Bank study, the organised furniture industry is expected to grow by 20
per cent every year. A large part of this growth is expected to come from the rapidly growing
consumer markets of Asia, implying significant potential for growth in the Indian furniture
sector. In the Indian furniture industry, there are three key factors that will affect growth,
namely:
• Environmental factors: All companies are turning ‘green’ and eco-friendly, since
environmental consciousness is increasing among consumers as well.
• Global Indians: As consumers are going global and being exposed to foreign cultures,
the demand for quality imported furniture (especially from Malaysia and Italy) is
increasing.

Page 6
 Branded Home Furniture

• As the demand for ‘value for money’ furniture increases, companies have to pay
special attention to the quality of their products (use of high tech production
facilities), at the same time ramping up production to meet the demand.
• Booming Realty sector: As the demand for homes is growing there is a direct impact
on the demand for furniture.

References:

• www.ibef.org
• www.csilmilano.com
• Indo-Italian chambers of Commerce & Industry
• Prowess, CMIE database, for financial data of companies
• Company websites, for contacts, information

Page 7