"We aim to be No. 1 in India"

What is the size of the bathroom fittings market in India and what has been the growth rate? How much is Grohe’s share currently?
According to our estimates, the bathroom fittings market in India is about Rs2000 crore. Of course, we believe that it has not grown up to its true potential and it should be twice that size. The reason why it is not of that size is because the industry hasn’t really reached out to the customers. The customers are not fully aware about what’s possible and what is available. Even a market like Australia is as big as India in terms of consumption despite that country’s population being just about two crore. People here are used to live with the same fittings for 30-40 years. The fact that there are better things available and you can have the bathroom fittings that you need is not been communicated properly.
We operate in a very small segment of the market – the high end. In that segment we have a 13% market share. We have actually grown from about 2-3% two years back to 13% last year. We believe we are the single largest bathroom fittings international brand in India in terms of sales.

Who are your key competitors?
There are two answers to this question. Firstly, we believe that our competition is with all the leading high-end brands occupying people’s mindshare – be it BMW, Honda, Sony or Panasonic. We are competing with the fact that people’s minds are not occupied enough with the concept of enjoying water. That’s our biggest challenge. When consumers start thinking more about enjoying water as much as about enjoying music over a high-end music system or enjoying a drive in a luxury car, automatically our business will double.
In terms of segment competition, Jaquar really is the competition. We are number one in almost every major market that we operate in but Jaquar is number one in India. So obviously they are our target. If we are not aiming to be number one in India then we shouldn’t be here.
We would probably never operate at the lowest end of the market. So we would be operating in a smaller space. But we want to be number one in that space.

How has the slowdown impacted Grohe’s business?
Honestly, we have actually not seen any effect of the slowdown on our Indian business. In the first six months of this year, we have actually grown at 70% over last year. We are heading towards Rs400 crore by 2012.
To give you an idea, currently our staff strength is about 75 and there have been no layoffs. In fact, we are hiring. When I joined Grohe two years ago, our staff strength was 18. About 50 have been added in the last 8-9 months.
Coming back to the market, what we have seen is that people who were exposed to the large builder segment - the DLFs and the Unitechs - have been hurt but people who focussed on retail and individual home owners have seen absolutely no loss. We have seen some delays in the hotel industry in a couple of cases mainly due to technical issues but no major slowdowns there. And as far as the high-end apartment projects are concerned, we have seen no impact at all.
Even though the overall footfalls in our showrooms have slowed down, 90% of them are serious buyers. Consumers are spending more time before making any buying decisions and this is helping a brand like Grohe because we believe the more time consumers spend in making decisions, it is more likely that they will buy a Grohe product. They will have more questions about the quality, about the technology and we have all the answers.

But globally, you have been impacted by the slowdown?
Yes, globally it has impacted us because the markets in Europe and North America have crashed. So we expect to see a slowdown of about 10-15% this year globally. I should also say that globally even though there is slowdown and our sales would probably contract we are probably the only player in the industry that we know of who is sitting on EUR 350 million cash with absolutely no debts. We are a very profitable organisation that will ensure that even if things were to get worse we are in a good position to ride the storm. Actually, we would be in a position to pick up the weaker players as we go along.

The International Association of Plumbing and Mechanical Engineers (IAPMO) has recently pointed out that 90% of the plumbing industry workforce in India is not professionally trained. Your comments.
Obviously, it is a huge matter of concern for us. In fact, the lack of sufficient trained plumbers concerned us when we came to the Indian market. Globally, plumbers (installers) are a major focus group for us. We like to work with them; we don’t just train them but also get feedback from them about what is it that consumers like and don’t like. Plumbers are our greatest marketing research tools. And we are concerned that plumbers in India are not organised to a great extent.
At our end we are ensuring that a Grohe technician is available to guide the plumber even if it is limited to just a single faucet. As far as I know we are the only company doing it for every single installation. Others might have conditions about minimum volumes or project size.
The only problem we are facing is that information is not available to all the customers. So we are trying to go one step ahead by proactively collecting information from all our showrooms on customers every week and then informing them.
About one year back we did training sessions in cities Kolkata, Bangalore, Mumbai, Ludhiana, Chennai, Calicut and Kochi. We had asked all the plumbing contractors to bring their plumbers. We are planning to repeat it this year. We have also tied-up with the Sri Ramakrishna Technical Institute in Coimbatore for its plumbing course. We are looking at a similar tie-up with an institute in Pune.

Your next manufacturing unit is likely to in India, right?
Yes, our next manufacturing unit will be in India. It is just a matter of time but we are committed to have it here. We need to analyse how the capacity in Europe will be utilised and then take a decision about making new investments. Currently, we have six manufacturing facilities - three in Germany and one each in Portugal, Canada and Thailand.
But even when we do manufacture in India, certain critical components would be imported from Germany.

In terms of regional breakup, which is your biggest market in India? Do you see any other emerging markets?
Our biggest market continues to be the Delhi NCR area. It’s a market that really appreciates the best things in life I would say. Bangalore is fast catching up and is likely to go ahead of Delhi by next year. Mumbai is a bit slow currently but likely to start picking up. It has been slow primarily due to the existence of the grey market here. But we are tackling with that issue now. Kerala is a rapidly growing market for us.

What’s Grohe’s design strategy?
We strongly differentiate between design and styling. Something that looks beautiful and fashionable is not necessarily a great design. Our product evolves from functionality. For example, all our faucets are created on the Seven degree factor. This means all the levers of faucets are angled at seven degrees as it is the most comfortable angle from the user perspective. So a Grohe product is all about figuring out a functional aspect first and then putting it in a good aesthetic package.
Design must combine functionality and technology with great looks. That’s our design philosophy. This is one of the reasons why we do not use outside designers. Incidentally, Paul Flowers, our design head is ranked amongst the top 40 globally.