With over 32 years of rich professional experience, Salih Arslantaş currently serves as General Manager of Dawlance. He has held this position since September 2016 with expertise in the field of electrical engineering. In his previous positions, after serving at several managerial roles at Washing Machine and Dishwasher Machine Plants, he served as the project engineer for Arçelik A.S. Washing Machine Plant before working as a Product Engineering Manager at Washing Machine Plant in 2003.
BR Research met Mr.Salih for a discussion about Dawlance’s operations post acquisition. Salih Arslantaş is a Turkish citizen born in Kayseri in 1959; he holds a Masters degree in General Production Systems from Istanbul Technic University. In addition to Turkish language, he speaks good English. Following are the edited excerpts of the conversation.
BR Research: Tell us about Arçelik, Turkey, and your journey with Arçelik.
Salih Arslantaş: I have been working in Arçelik for 29 years now My last position was product director for washing machines. Before that I was looking after the dishwasher segment. I am now the Country Manager and CEO Dawlance Pakistan post Arçelik’s acquisition of Dawlance.
Arçelik belongs to Koç Holding – the largest conglomerate of Turkey dealing in petrol, automotive industry, banking and finance, white goods and durables, and food industry. Arçelik is operating 16 different production facilities in 6 countries across the globe including Romania, Turkey, Thailand, South Africa, Russia, China, and we are looking to expand further by entering the emerging markets especially.
BRR: So why did you choose Dawlance, or rather Pakistan?
SA: Again, we have focused on the emerging Asian markets. Pakistan has a growing young and an enthusiastic population, and the educated lot emits quality and dynamism. 50 percent of the population is under 50 years of age, and the country’s per capita income is around $1500, which is expected to grow to $2000 in the next seven to eight years. All of these are rising demand signals. So, the potential is huge in Pakistan.
BRR: How do you compare Turkey’s market with Pakistan?
SA: Pakistan has an edge right now with CPEC coming up and the electronics market getting a boost among other sectors. It is also in the works for signing a Free Trade Agreement (FTA) with Turkey and then China. Whereas in Turkey, all its neighbours are in some sort of trouble, which has affected our exports tremendously. Some years ago, we were exporting huge volumes to Syria, Iran, Iraq, and Russia. So all the local manufacturers are playing internally.
However, when we look at where the two market stand in terms of market and consumers sophistication, there is an opposite trend; Turkey is way ahead. Out of a population of around 200 million, the market for refrigerators in Pakistan is not even 1.1 million. It is very small. On the other hand, Turkey’s population is 80 million, and the annual sales of refrigerators in 2.8 million units. This is equivalent to 6 million refrigerators in Pakistan. This difference of around five million is a huge potential.
BRR: Various sources show that there has been an increase in the sales the sales of white goods this year in Pakistan, and one reason being quoted for the growth is the decrease in the load shedding. Do you think electricity supply is inherent for white goods to thrive in Pakistan?
SA: Yes, I do believe so, because only when the consumers are getting consistent, uninterrupted and quality supply of power that they will be willing to spend on electronics.
BRR: You have the assembly lines here in Pakistan. What is the localisation rate for Dawlance, and much are you importing right now?
SA: I would say that roughly its 80 percent local and 20 percent imports.
BRR: Now that Arçelik has acquired Dawlance, do you see any export potential?
SA: We certainly do, but as you know the product quality standards are too high; what we have in Pakistan does not fit the international standards. But, we are geared to add that value. How we make our products fit for export, we will do some market research to understand the global market well.
Some lucrative markets that we see as potential export markets include the Afghanistan, Sri Lanka, Bangladesh, and some African as our products fit their expectations.
BRR: Where do you see the market size in five years?
SA: The market is bound to grow very rapidly. One, the electricity situation is improving and will likely get better in the coming couple of years; from 30 percent of the population with no electricity, we are hearing that this ratio will go down to 13 percent next year, which will bring out a completely new market for us. Here, we have to be careful in estimating the kind of population emerging as the new market, which we think would largely belong to low-income group. Thus, we will have to cater to their needs accordingly in terms of product pricing and specifications.
BRR: Any plans for Dawlance’s existing product range? Any new investments?
SA: We have plans to widen the existing product range, as it does not fit the customer expectations fully. This year we will invest $16 million in Pakistan not for expanding the capacity, but to increase the quality. Also, we have a lot of technology support from Turkey. Things are changing very quickly in Pakistan. And we have to keep up with customer demand by innovating and spending on R&D, keeping in mind the price points.
BRR: How would you broadly define your strategy?
SA: I would say that our focus is the end customer: What is the consumer expectation. Our strategy is not to fight with the local manufacturers, but to expand this market. From time to time, we at Dawlance have been giving various incentives, which go directly to the consumer. However, focusing on the end consumers does not entail incentives only; we are also into finding out what kind of benefit our products and innovations are providing to the end users, which again boils down to investing in R&D.
BRR: What is the market size of your other business segments like washing machines in Pakistan?
SA: Washing machine story is very different in Pakistan; most of what you call washing machines in Pakistan – the single top-load cylindrical tub with a motor or the two-in-one tub and a tumbler - do not fit the global definition of automatic washing machine as they cannot be used to measure the washing performance, water requirement, hygiene and the sanitary conditions. Even China and India have moved further, while many other countries have moved on to the front-load automatic washing machines. However, these front load automatic washing machine use a lot of energy. And thus, we will keep looking into top-load semi-automatic washing machines here in Pakistan as they fit the needs here; we will definitely add new and technologically advanced features like the three motion washing efficiency.
Thus, the washing machine market is very difficult, and if I were to quantify it including all categories like the single tub washers, it is close to what the refrigerator market is. And I would say, we roughly have around 20 percent of this complex market.
BRR: Coming to the air conditioner market, what is the future?
SA: The market for the air conditioners in quite small in Pakistan – around 600,000 units annually. The electricity cost component is the most important factor for ACs in Pakistan, and hence the inverter technology is the future. Last summers, we were leading in inverter technology, and we were not expensive; our prices were very competitive. This year as well, we have plans to move in the same direction.
In the air conditioner market, all the companies operating in this segment right now are importing the SKDs and selling them here; the issue with the air conditioner market is that the custom duty the government is charging for importing SKDs totals 35 percent, which is keeping the prices up. However, localisation has picked up in the segment; if you look three to four years ago, we and many other companies were importing CBUs. Now we are importing SKDs. And eventually, I foresee that we will be moving further towards localisation in the next 6-7 years.
BRR: How do you compare Dawlance with some of the imported white goods like Samsung, LG etc.?
SA: We at Arçelik follow Samsung, LG and some of the European top refrigerator manufacturers very closely for technological and quality benchmarking purposes. Also, we follow their R&D patterns at Arçelik. However, let me tell you that while you get these brands here, they are not customised for the electrical configuration in the country; they are manufactured on the global standards and cater to the global demand and needs. Pakistan, and by Pakistan I mean the masses, is not ready for their products.
We, on the other hand, keep customisation to the extent of country’s specifications as our top priority; why Dawlance is so successful is because we look for Pakistani needs and brings products accordingly. Market for appliances is very different; the customer is looking for a good 5 to 7 year usage, which might call for service requirement or spare part requirement. In such situations, Dawlance is exceeding.
BRR: What about the dishwasher market?
SA: The dishwasher market as you know is non-existent in Pakistan. The situation was similar in Turkey 7-8 years back; but today, the market has really picked up. Actually, before bringing in the dishwasher concept, we need to address two issues. One, you need to create awareness about the product and its many uses, and for that companies like Dawlance will have to come forward. Second there is a misconception that dishwashers use more water than normal/ conventional dish washing. You would be surprised to hear that the dishwasher uses around 7 litres of water for 18 sets of tableware, whereas the same quantity of dishes when washed the conventional way use around 18 litres! We will definitely bring dishwashers to the market if the market is ready – we will decide that based on our consumer insights and market research.
BRR: You talked about focus on end users? How is Dawlance looking to revamp the after sale service culture in Pakistan?
SA: End user inspection and after sale service in Pakistan is a disaster. It has rather become profit centre for companies. All the customer to dealer/manufacturer relation is finished at the point when the sales receipt is generated. We need to change this because the consumer uses the white good for a good amount of time. And Dawlance will take the lead here.
Also, I will be starting a white good manufacturer association, where I have talked to the relevant government officials to invite all white good manufacturers on behalf of the trade minister to join hands in making this committee.