Philips, Videocon in marketing pact

Dutch consumer durables major Philips Electronics has signed a 5-year licensing pact with Videocon Industries Ltd to market its television sets in India, a top official said on Monday.

“This is part of Philips global strategy to improve the profitability of its TV business,” Mahesh Krishnan, vice-president and sales organisation leader for Philips Consumer Lifestyle.

“Based on the turnover, Philips will get a royalty income and everything else in terms of running the profit and loss account (P&L) of the business will be Videocon’s responsibility,” said Krishnan.

Philips had a similar arrangement with Funai Electric in the US.
“What it does for us is that, structurally the profitability of the TV business goes up as we book the licensing income. The arrangement has worked very well for us in the last couple of years,” Krishnan said.

“Videocon has the economies of scale and the distribution reach as a brand to get us into more number of outlets and build the overall Philips franchise for consumer television”.

So far, Philips has been pursuing the third-party manufacturing route, besides importing LCD screens for its television products in
India.

The arrangement with Videocon will imply that a significant proportion of the product range will now be manufactured in India, thereby impacting the overall price points.

“I would believe there will be a definite impact on the pricing of the television range but I will not be in a position to quantify it. It will be Videocon’s prerogative to choose the features and the price points they would want to retail it at,” pointed Krishnan. The Philips management will work closely with Videocon to ensure the Philips brand is not diluted.

“We have a certain space in the premium category and Videocon is obviously looking at it, which is why it has accepted the licensing agreement,” asserted Krishnan.

The agreement with Videocon also involves providing after-sales services to all the Philips television consumers for the agreement period.