2021 has been a good year for the electronics & electrical market globally as most of the global brands posted growth compared to 2020. The main driver of the growth was mainly due to the mass vaccination effort put on by the governments around the world which made it possible to return to the normal business at the pre-pandemic level. Global brands like Haier, LG, Whirlpool, Arcelik, etc. showed positive growth in 2021 as the demand for the electronics and electrical market increased significantly.
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However, if we compare in terms of just growth numbers Walton surpasses the global giants. In 2021, Walton reported a growth of 79.8%. Revenue in 2021 was Tk 74,830.0 Mn which was Tk 41,618.8 Mn in the same period last year.
As it can be seen from the above graph, the revenue growth of Walton has been the highest with 79.8% in 2021 among the 6 peer companies. Arcelik which also has a stake in Singer Bangladesh grew by 66.8% in 2021. Other than that LG Electronics and Midea Group grew by more than 20.0%. In this article, we will explore the reasons behind the substantial growth of Walton growth compared to its global peers in 2021.
Drivers for Walton’s Growth
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Strong Local Demand
Strong Local demand was the main driver for the staggering revenue growth of Walton in 2021. Although, the country faced two waves of coronavirus infection rise mass vaccination allowed the country to resume normal business activities. Compared to most developed countries, the infection rate in Bangladesh was very low. Hence after the panic in 2020, consumer demand rose from January 2022. The first 6 months of 2021 were the main difference-maker as total sales grew by 189.2% YoY from Tk 14,973.7 Mn in Jan’20-Jun’20 to Tk 43,304.8 Mn in Jan’21-Jun’21. The company was hit hard from Jan’20-Jun’20 as Bangladesh was on countrywide lockdown from the end of March 2020 to the start of June 2020.
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The rebound in Export Revenue
As the world was hit hard by the pandemic export of electronics and electrical products declined drastically during 2020. However, from the start of 2021, the export started to rebound. Export revenue grew by 754.4% YoY from Tk 139.9 Mn in FY 2019-2020 to Tk 1,195.5 Mn in FY 2021-22. The export revenue kept the spectacular growth in the second half of 2021 by growing 324.7% YoY from Tk 290.1 Mn in Jul’20-Dec’20 to Tk 1,230.5 Mn in Jul’21-Dec’21. After excelling in the domestic market, the company has set its sight on the export market.
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The decision seems to be paying off as export revenue as a percentage of the total revenue of Walton has grown in 2021. Compared to FY 2019-20, export revenue as a percentage of total sales has grown to 1.7% in FY 2020-21 from only 0.3%. The percentage is growing even more as export as a percentage of revenue in the Jul’21-Dec’21 period was 3.9% compared to 1.1% in Jul’20-Dec’20. Walton has already established the milestone of being the highest exporting entity in the E&E industry with a global presence in many countries. The company which only started exporting in 2011 now exports to countries like – India, Nepal, Bhutan, Myanmar, Maldives, Qatar, USA, South Africa, etc. The company is also in process of penetrating the markets of Australia, Europe, Poland, Singapore, etc. For global operations, the company has representative offices in Qatar, China, Thailand, Nepal, India, and the USA.
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Maintaining Competitive Prices
The coronavirus pandemic led to a huge supply chain backlog which ultimately was partly responsible for the rise of most of the commodity prices. Just like other industries, Walton was also affected by the rising raw materials price in its industry. However, the company had a conscious decision not to pass on the higher cost to the customers which resulted in a gross profit decline. But the business strategy of maintaining the competitive prices despite the price hike of raw materials was one of the main drivers which resulted in the staggering growth in 2021.
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Consumer durable items are one of the most expensive purchase decisions for most of the consumer class. Hence the decision of maintaining the same competitive prices surely helped the company to win over customers. In H1’21-22 gross profit declined by 11.0% YoY despite 17.3% YoY growth in sales. This was mainly due to the decline in gross margin from 40.5% in H1’20-21 to 30.5% in H1’21-22. Evidently by the numbers the company didn’t pass on the higher raw materials costs to the customers which are responsible for the sales growth in 2021.
Conclusion
According to Research and Markets, the global electronic products market was worth $ 1,055.3 Bn in 2021 and it is expected to grow at a CAGR of 5% to $ 1,2911 Bn in 2025. Walton has a long way to go as the potential for revenue growth is immense. As stated by Golam Murshed (Managing Director & CEO of Walton) in the latest annual report, Walton wants to be one of the influential global brands by 2024. The competitive pricing strategy along with the superior quality has worked so far and is expected to work in the future as well.
Recently, the company set up a research and innovation center in South Korea. This deal clearly shows the company’s ambition to succeed in the global market by producing superior quality products. Walton also acquired three European brands which will allow the company to have a stronger foothold in Europe. All these moves surely show the ambition of the company to become a global brand by 2030.
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