Back from the brink

Despite struggling under adversity in key markets worldwide, Japanese consumer electronics vendor Sanyo continues to achieve slow but steady growth in the Middle East. Sanyo Gulf managing director Tetsuji Okui tells ECN the company is setting its sights on the emerging markets of Africa to drive the next phase of its growth strategy.

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By  Aaron Greenwood Published  February 20, 2007

|~|SANYO.200.jpg|~|Tetsuji Okui, managing director of Sanyo Gulf.|~|Despite struggling under adversity in key markets worldwide, Japanese consumer electronics vendor Sanyo continues to achieve slow but steady growth in the Middle East. Sanyo Gulf managing director Tetsuji Okui tells ECN the company is setting its sights on the emerging markets of Africa to drive the next phase of its growth strategy. Electronic Channel News: How does Sanyo’s Middle East division fit into its global operations? Tetsuji Okui: The Middle East is a very interesting market commercially that is enjoying significant growth. Three years ago, Sanyo Japan decided to establish an office in Dubai providing support to our Middle East partners. I moved from Sydney, Australia to Dubai to take up the position of managing director of Sanyo Gulf in April 2004. My main priority was to expand Sanyo’s presence in the Middle East and Africa. ECN: How has the company’s business grown in the Middle East in the interim? TO: In our first year of operation in Dubai, our regional turnover increased by 37% and in the following 12 months by 22%. We have worked hard to achieve double-digit growth in the years since. We registered growth of 22% year-on-year in 2006 and we are on track to produce similar results this year as well. Recently, Sanyo president Toshimasa Iue and a number of top ranking officials visited Dubai in a bid to drum up business. They recognise the economic and infrastructure boom that is transforming the region and the commercial opportunities that are arising as a result. ECN: How does the Middle East fit into Sanyo’s global growth strategy? TO: The property construction boom occurring in the GCC is providing our home appliance business with significant opportunities. Our main priority remains our consumer electronics division, but nevertheless the growth in consumer demand for appliances has been impressive in the GCC markets. ECN: What are Sanyo’s key markets in the Middle East in terms of sales growth? TO: Saudi Arabia remains our biggest market in the region followed by the UAE. However, the whole GCC is brimming with opportunities. We also expect to register 70% year-on-year growth in our first fiscal year of focused activity in Africa – our efforts will start paying off over the next 12 months. Africa is vital to the future growth of our business. We are increasing our marketing investments in order to establish ourselves as a key player in the region. In terms of specific product categories, we are currently number one in terms of market share in the twin-tub washing machine and vacuum cleaner categories in Saudi Arabia. We are also number one in the window air conditioner category in Oman. ECN: Where does Sanyo source the bulk of its products from in the Middle East market? TO: We have a number of manufacturing facilities in China where we source the bulk of our products, which are mainly household appliances. We have another factory in Thailand that manufactures washing machines and refrigerators. We source our CRT TVs from facilities in Indonesia and Taiwan. Our LCD TVs and digital cameras are manufactured in Japan. We have found that consumers in the Middle East favour high-tech products made in Japan. ECN: This fact also stands true for South Korean products in this region, does it not? TO: Yes absolutely. Products manufactured in both countries are very popular among Middle East consumers. It is part of a growing trend. Consumers demand top quality products at affordable prices, which is generating fierce competition among all channel palyers in the Middle East. ECN: Where do you pitch your main portfolio of products in the marketplace? TO: We promote our commodity and digital lifestyle products as premium offerings. Our core products in terms of sales turnover in the GCC are colour TVs, air conditioners, refrigerators and washing machines. Our LCD TV sales are also increasing each year. While Sanyo is an established brand in this region, we have to look to the younger generation of consumers to expand our market share. Our aim is to position Sanyo as both a technology brand and one that is dedicated to the environment and the community. As a result, we are heavily promoting our state-of-the art digital cameras, home projectors and LCD TV ranges, which are among the most sought-after products among younger consumers. We recently conducted a targeted marketing campaign in Turkey promoting our digital camera range, which proved very successful, and we are planning to initiate similar activities in other parts of the region later this year. ECN: You mentioned that Sanyo is pushing forward with the development of eco-friendly products. How much of a market is there for these products in the Middle East? TO: With climate change high on the media’s agenda, we have noticed a change in attitude among consumers in this region to environmentally friendly products. Our rechargeable battery range has proven very popular with consumers, as has our eco-friendly range of washing machines. ECN: Which consumer products have generated the most sales for your business over the last 12 months? TO: Air conditioners, LCD TVs and rechargeable products are among the top sales performers that have contributed to our revenue and growth in the current fiscal year. Together, they constituted nearly 40% of total revenue generated during this period. ECN: How has Sanyo dealt with the huge competition and the drop in panel prices impacting the LCD TV sector? TO: It is a challenge. Flat panel display prices seem to be dropping on an almost weekly basis and competition in the sector remains intense. Vendors have to provide the right combination of features and price to remain competitive in such a saturated market. We are committed to forging joint venture manufacturing businesses with companies such as Quanta for LCD and plasma TVs and Haier for refrigerators. We are relying on this strategy of pooling our resources with other electronics companies to boost our presence and market share in both of these categories. ECN: Sanyo remains one of the few Japanese vendors to continue producing CRT TVs. Why is this? TO: There is still significant consumer demand for CRT TVs in emerging markets, particularly in Africa and some countries in the Middle East. We expect this trend to continue for the foreseeable future. ECN: Does Sanyo have any plans to expand its presence in the digital product category? TO: Yes, this is a major priority in terms of our product rollout schedule. ECN: How has Sanyo’s poor economic performance globally impacted the Middle East division? TO: Sanyo’s economic performance has been well documented. We are however committed to a global restructuring programme with the aim of improving our financial position. The changes planned are quite positive and will ultimately generate results. However, on a local level (MEA level), our operations have been healthy financially. ECN: How do you approach specific markets in the Middle East and Africa? TO: We have distributors in each of the key GCC markets. Our channel strategy embraces a two-tier model with distributors or agents acting as our direct partners, supplying to the secondary dealer and retail sector. In mid-2004, we consolidated our local subsidiary operation and stepped up our activities in the secondary channel market through various dealer support programmes. These programmes were implemented in conjunction with our various distribution partners across the region. ECN: Are there any plans to expand your channel strategy in the Middle East? TO: We have a solid network of first-tier partners operating in the region, which have contributed greatly to the growth of our business. However, moving forward, we are looking to expand our retail presence and leverage the new opportunities available in this sector. The retail sector has been transformed in recent years by the introduction and expansion of hypermarket retail chains and the creation of a power retail category. In the next two years, I understand that many major retailers will commence operations across the GCC. Projections are for the retail sector to grow significantly with marketing promotions topping the agenda. The real winners will be consumers and that is how it should be. ECN: What are the key challenges facing your company and the industry in general and how do you plan to overcome them? TO: The key challenges the industry faces relate to economics. Today, you do not just compete against your direct competitor, but you also have to contend with various market forces, including stock market fluctuations. These factors greatly impact the overall performance of your business. Grey market trade is a growing problem that must be tackled. It has an impact on market share and can also effect a company’s reputation among consumers. The heterogeneous nature of the Middle East market also presents a huge challenge to multinational companies. It is not as if you are operating in the Australian, Indian or even European markets, where the conditions are more or less unified and similar. In every aspect of business, things differ from one country to another in this region. However, increasing levels of government investment in infrastructure and greater private sector participation across the region will generate new opportunities for our business in the consumer electronics sector. ||**||

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