Masterkool seeks profit swing
Air conditioner brand to refocus on marketing and exploit exports, writes Yuthana Praiwan
Amid fierce competition in fans and cooling machines in Thailand, Masterkool International Plc (KOOL) is poised to avoid a loss in 2018 by upgrading its business strategy to meet consumer demand.
Last year Masterkool posted a loss for the first time in more than two decades, sinking into the red to the tune of 88.4 million baht after a net profit of 87 million baht in 2016.
Revenue fell by 37% to 553 million baht, compared with an all-time high of 889 million baht in 2016.
Masterkool chairman and managing director Noppachai Veeraman said the company is revamping its marketing strategy at every level to mitigate business risk after learning lessons last year.
“We knew that the local market would see strong competition because of massive demand every single year, but we did not realise that the price war was a gamechanger in the market last year,” Mr Noppachai said, adding that Masterkool’s retail prices are higher than those of rivals.
Many new makers and traders of fans and cooling machines entered the local market last year to coincide with the La Nina climate phenomenon.
Throughout 2017, many countries in Asean had more frequent storms than in the past and the hot season was shorter than usual, resulting in shrinkage of the overall market of fans and cooling machines.
The market for air conditioners fell by 13.5% to 26.19 billion baht in 2017, compared with 30.28 billion in 2016. Fan sales fell by 13% to 1.37 billion baht.
“We witnessed many makers and traders try to reduce inventory and make it a price war in order to gain cash instead of nothing,” Mr Noppachai said. “They misestimated on the conditions of La Nina and stored new products for the hot season. When the product could not be sold, they had to cut retail prices.”
He said Masterkool will focus on expansion of exports, which now represent 20% of sales.
The key destination for shipments abroad has been Asean, but this year Masterkool will seek new markets in the Southern Hemisphere, such as Oceania, South Asia, South Africa and South America, as the hot season in those countries is in the second half.
Mr Noppachai aims for these new markets to make up 20% of exports within five years.
Back home, innovation will be a strong point in beefing up Masterkool’s local sales as rivals compete on price.
Mr Noppachai said the balance between aerosol size and wind strength in a fan’s evaporative system is a crucial element of Masterkool’s products.
“We think several rivals have failed at this technique,” he said.
Masterkool analysed the local market and found that the company was overinvested in the modern trade and department store channels. As of last year it had 510 distribution points through these channels, compared with just 250 in 2016.
“We always knew that the fees to place our products in these channels is much higher than for other channels: wholesale, direct sales and e-commerce,” Mr Noppachai said. “Masterkool is keen on online shopping and the e-marketplace from 2018 onward after being inactive on these online platforms for several years.”
Last year, direct sales marked the highest revenue contribution at 36%, followed by modern trade and department stores at 33% and sales agents at 11%.
Masterkool has also diversified into rental cooling machines f or events and showcases, as well as providing
maintenance services over the past several years, accounting for 36.4% of revenue.
Mr Noppachai forecasts a normal situation in the local market this year after several rivals disappeared because of the price war.
He aims for 25% revenue growth in 2018. “We cannot make a new high like the 2016 performance, but we can maintain our quality,” he said.
In early March, Masterkool launched a new evaporative cooling product to welcome the hot season in Thailand, featuring the innovation of ultrasonic frequency to repel mosquitoes.
After conducting a client survey, the company found 66% of correspondents had yet to learn about the new feature.
KOOL shares closed yesterday on the SET at 2.40 baht, down eight satang, in trade worth 13.4 million baht.
We did not realise the price war would be a game-changer last year. NOPPACHAI VEERAMAN Chairman and managing director, Masterkool