At Godrej, ChotuKool spawns major business strategy

ChotuKool started off as a pilot to provide refrigeration solutions to rural India. Three years later, the approach taken to conceive the small refrigerator is becoming a full-fledged business strategy at Godrej Appliances.

The division of Godrej & Boyce Ltd now plans to add a few more low-cost innovations to its 'Chotu' family. On the cards: a low-cost washing machine ChotuWash and a low-cost water-purifier, according to chief operating officer George Menezes.

Godrej is now taking ChotuKool, priced at Rs3, 700 — half the price of the normal refrigerator made by the company — to newer states.

While the washing machine will be adapted to needs to rural homes and will cost cheaper than an entry-level counterpart, the water purifier will look at addressing the challenge of clean drinking water by removing arsenic, fluoride, excessive iron along with bacteria and viruses, which will make it the first of its kind in the country, Menezes said.   

While Godrej remains the first India white goods maker to address the rural-poor with such innovations, its biggest impediment is distribution and logistics: there is neither a distribution network nor an aiding infrastructure.

"Which is why, you need an alternate channel to reach these consumers. In that sense it is quite an innovative business model as we have moved to a network of self-help groups, panchayats, and NGOs to help us," Menezes said.

Local men and women in villages are thus being roped in as entrepreneurs, who sell ChotuKool in their villages at a pre-decided commission. Menezes said, the company has also been facilitating loans and easy finance schemes through micro-finance firms.

A tie-up with India Post that helps Godrej sell its products through post offices too has been helping the company build a fair coverage in villages where there are no retailing alternatives.

For ChotuKool, as the prototype progressed in Maharashtra, the Godrej team realised, a number of local vendors had found, in the product, novel ways of growing their businesses. A vada pav vendor in a Maharashtra village started selling chilled drinking water pouches from the refrigerator on his cart. He charged the refrigerator through night and tugged it along with him during the day. The refrigerator which weighs only about 7.8 kg does not have a compressor and runs on battery.

Similarly, a flower vendor in Karnataka, where Godrej has just taken the product, saved herself daily trips to buy fresh flowers from another market, a few kilometers away. Sensing greater proposition in buying the weekly supply at a go, she invested in a ChotuKool.

Menezes pointed to other examples of small kirana store owners starting to stock and sell products like chocolates, cold drinks and dairy products, something that earlier remained a challenge due to both shortage of money and space. The low-on-cost and maintenance and portable nature of the refrigerator is helping it find acceptance amongst rural entrepreneurs.

While the company has not pushed the product aggressively, it has sold about 15, 000 units in Maharashtra from the time of its piloting in the state. Apart Karnataka, ChotuKool is also making inroads to Tamil Nadu. It may also be taken to Gujarat soon.

Being a player of Indian origin in the home appliances market that has global giants like LG and Samsung, Menezes thinks, Godrej has had an edge over others in decoding the rural folk. While all the major appliance makers in the country are taking the Indian consumer very seriously, finding alternate channels to expand distribution reach, and investing heavily on research and development to bring out India-specific innovations, not many are as yet looking at the hinterland.

Another homegrown name, Mirc Electronics, which sells the Onida brand of products across electronics and appliances though, has created rural-specific brand Igo, which sells LED and solar-based torches and lanterns in villages across states like Maharashtra, Gujarat, Madhya Pradesh, Uttar Pradesh and others. It is likely that Igo will also evolve across other categories.

As uninterrupted or even few hours of electricity-supply continues to be a challenge in villages, in future, Menezes said, alternatives like solar power need to be given a thought.

Godrej feels the rural thrust has just begun, but will grow multiple fold year on year. While he could not put a number to it, Menezes said, the potential was humongous. "Even today, 70% of our country's population lives in villages. A lot of products don't reach or touch them. Most consumer products just shoot over them and go straight to the mass-end and premium-end segments. We are really keen to have an entire portfolio of rural-specific products for this segment."

A study by Assocham earlier this year estimated the rural consumer durables market to grow at 40% in 2012 as a result of higher disposable income among rural consumers. The size of the home appliance market in India is pegged at `30,000 crore, with air-conditioners, refrigerators and washing machines as the largest categories, though household  peneration levels are in low single-digits.