Corelle

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17%20September%202013.pdf

The Indian crockery market, estimated at~US$750mn in FY13 and showing double-digitgrowth, is undergoing a change in terms of style, design etc.The crockery market can be broadly classified into stainless steel, bone china, glassware,melamine, opalware, porcelain and stoneware.

The market is very much fragmented and is dominated by the unorganised sector. The market(excluding stainless steel crockery) is estimated at ~Rs10.8bn (43,000tn) in FY13, of whichthe unorganised sector commands around 50% share. Crockery market comprises pottery,kitchenware and tableware. Imports by the unorganised segment accounted for 53% of the

Indian crockery market before the imposition of anti-dumping duty.Besides China and Thailand, the competitors include South Korea, Indonesia, Sri Lanka andBangladesh.Imports account for almost 23% of the crockery market in India and after the imposition ofanti-dumping duty, the share is declining, which is captured by domestic organised as well aunorganised players.As per industry sources,Indian crockery market displays double-digit growth driven by rising urbanisation, disposableincome and growing preference for better style, designs etc.Almost 50% of the market is catered to by organised players, with brands like La Opala,Luminarc, Corelle (~Rs600mn), Bormioli Rocco, Treo, Yera, Ocen, JCPL, Bharat, and

others. Most of these brands are highly under-performing as they have been plagued by poormanagement, inadequate marketing and lack of investments in distribution andmanufacturing.While some of the MNCs are represented in India by their trade partners, some like ARCInternational have also dedicated staff in the country to focus on this emerging market, whileother companies are dependent on imports wherein they are consolidators who have managedto build brand equity in the absence of strong marketing efforts by older players.LORL clearly stands out among its competitors with its strong distribution network, betterdesigns at attractive prices, and good brand recall along with a strong and highly experiencedmanagement team.Glassware accounts for the most at 52% of the total crockery market size of Rs10.8bn,followed by opalware at 16%, melamine at 13%, bone china at 12%, stoneware at 4% and

porcelain at 3%. Major share of ceramic segment in the market is still dominated by bonechina ware. This is also a highly fragmented market where the traders and distributors largelycontrol the market dynamics. Also, the prices are determined by various designs etc. andsales also witness large seasonal fluctuations. Porcelain ware is mainly imported and thoughvolumes are low they comprise high-value SKUs (stock keeping units), mainly articles thatcan be more part of the home decor segment, but bordering on a gray zone wherein form andfunction go together.In stoneware, it was mainly the mugs that contributed to high volume, while almost 26% ofstoneware was imported, mainly from China, in the form of loose mugs.

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In the home decor segment, growth comes from crockery and allied segments. This has beenone of the fastest growing segments over the past decade and has created more value forestablished brands that now dominate this segment.Also, this is one of the most interesting and difficult segments to succeed in with the entry

barriers fairly low, but so is the success ratio. It takes in-depth understanding of this segment

to penetrate it, which is still largely under-tapped and has latent demand that is now beingharnessed.

[http://stockaxis.com/reports/La-Opala-Ltd-19102012.pdf]

The crockery market can be divided into:stainless steel, bone china, glassware, melamine, opalware, porcelain and stoneware.

The market ¡s very much fragmented and is dominated by the unorganised sector.The market (excluding stainless steel crockery) is estimated at Rs 1080 crores (43,000tn) inFY13,of which the unorganised sector commands around 50% share.

Crockery market comprises pottery, kitchenware and tableware.Imports by the unorganised segment accounted for 53% of the Indian crockery market beforethe imposition of anti-dumping duty.Besides China and Thailand, the competitors include South Korea, Indonesia, Sri Lanka andBangladesh.Imports account for almost 23% of the crockery market in India and after the imposition ofanti-dumping duty,the share is declining, which is captured by domestic organised as well as unorganised

players.

As per industry sources, Indian crockery market displays double-digit growthdriven by rising urbanisation, disposable income and growing preference for better style,designs etc.

India is witnessing a shift from a traditional joint family to a nuclear family. As per industrysources,nearly 1.5%-2.0% of joint families are giving way to nuclear families annually, leading to arise in the number of householdsand hence higher demand for crockery and tableware, which augurs well for the industry andLORL.

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Considering the favourable demographic changes, rising nuclear family trend, changingspending habits etc,LORL is expected to post robust growth going forward.As LORL Is in a very niche segment and has a strong presence In the luxury cookwaresegment,

It has tremendous growth potential on the back of rising number of households, highaspirations and lifestyle.

Anti-dumping duty to help:Beefore the application of anti-dumping duty, imported crockery accounted for 53% ofIndia’s crockery market worth Rs 1080 crores. Besides China and Thailand, the competitorsinclude South Korea, Indonesia, Sri Lanka and Bangladesh. Imports by the unorganizedsegment accounted for almost 22% of the market, which hurt the profitability of domestic

players. India imposed anti-dumping duty on the import of opal glassware from China andthe UAE for a period of five years, effective December 2011. The duty is in the range of

41.6%-110.17% of the landed cost of consignments from China, while opal glassware fromthe UAE attracts duty at 36.73% of the cost. This duty, unless revoked, would help inincreasing the market share of LORI going forward, in our view. On account of anti-dumpingduty, weak rupee and a better product mix, LORI witnessed strong 26.3% revenue CAGRover FY11-FY13 and l22bps/3SObps improvement in

LOPLRG Profit & Loss

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LORL compete with established international brands like Corelle of the US, Luminarc ofFrance, Bormioli Rocco of Italy and RAKO the UAE. LaOpala is 60%-80% cheaper thanCorelle, 60% cheaper than Luminarc, 55% cheaper than Bomioli Rocco and 30% cheaperthen RAK, but 10%/25%/40%/50% expensive compared to bone china, stainless steel,melamine and polypropylene dinner sets.

Exhibit 13: Various brands of dinner sets and their price points

Noritake 20,000-29,000 27 900-1,350Corelle 6,000-11,000 27 200-450






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Luminarc 6,000 27 200

Bormioli Rocco 4,500 27 125

Truhome Porcelain 4,000 27 100

Tupperware 4,500 14 125

RAK 3,040 27 52

La Opala Diva 3,000 27 50

Steelcraft stainless steel 2,475 27 24

Chinbull 2,400 27 20

La Opala 2,000 27 -

Bone china 1,800 32 -10

Stainless steel 1,500 27 -25

Melamine 1,250 32 -38

Polypropylene 1,000 22 -50

Source: Industry, our channel check

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We metafew retailers to understand the strength of the La O

pala brandand the commonfeedback

thatwe gotwasLa Opala is the largest selling brandfollowed by Corelle. Duringtheoff-season, theretailers are able to sell minimum 30 pieces a month compared to other brands (Corelle,Luminarc

)which are able to sell around10-15 pieces a month. DuringtheDiwali, marriage season, the retailersare able to sell 100 pieces of La Opala in a week which is significantly high compared toother brands.

The reason behind such a difference is attributed toalarge number of designs, higher number of

pieces, lower price range, value buy (27 pieces of La Opala available at a price of Rs2,000 compared toCorellewhose~27

piecesare priced at

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Rs6,000-Rs11,000,andLuminarc

’s 27 pieces

priced atRs6,000)and strong demandforLa Opala.The retailers also stated that there are limited

designsin Corelle,whileLa Opala hasawide range ofdesigns. Thus, we feelthatstrong brand equity, higher brand recallamong consumersand value buywillcontinue to drive revenue growth of the company going forward.

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