By Nina Ying Sun, Plastics News staff
Akron, Ohio - Whirlpool Corp. stood out in the stock market slump on Super Tuesday. The world's biggest appliance maker reported higher-than-expected fourth quarter results and its shares soared as much as 11 percent.
All the positives, however, don't cover the fact that the North American market continues to shrink. Whirlpool managed to control the sales decline within 1 percent, while industry shipments of appliance units dropped about 6 percent. Although North America still represents about 60 percent of Whirlpool's global sales, other regions are playing an increasingly heavy role. The Benton Harbor, Michigan-based company reported brisk growth in other regions: 12 percent in Europe, 30 percent in Latin America and 26 percent in Asia.
Electrolux AB, which announced results a day after Whirlpool, also presented "best ever" results in Latin America and "good growth" in both sales and margin in Asia. North America, accounting for about one-third of Electrolux's sales, is dragging the company's performance with the housing crunch. The U.S. currency's 13 percent slide vs. the euro in 2007 also worked against the Swedish company's favor.
It appears, at a glimpse, that the geographic trends rule the appliances industry. You win in the growing continents and lose in the sluggish markets. But it doesn't work that way.
Despite the economic clouds in the US, Bosch Siemens Hausgeraete GmbH has seen double-digit growth in North America in 2007, a record rate since 2003. Franz Bosshard, president and chief executive officer with BSH Home Appliances Corp. North America, attributed the success particularly to the 37 new product launches in the past few years. The company said it offers "coordinated kitchen suites, depending on the individual consumer's lifestyle and cooking needs." The Munich-based company manufactures locally in New Bern, North Carolina, and La Follette, Tennessee.
Popular products such as front-load laundry and French door refrigerators earned white goods maker LG Electronics Inc. a 31 percent increase of home appliance sales in 2007.
A recent announcement of a General Electric plant closing also reinforced the message that you cannot emphasise too much the importance of the right products. The side-by-side refrigerators made at the facility in Bloomington, Indiana are simply losing popularity, the company explained in a statement.
It certainly is important to cut costs, streamline operations and level low-cost regions. But those alone won't save the market. Ultimately, the secret weapon is the products. Do they fit the latest home styles, save energy and give a kick to the bucks?
In such mature markets as the U.S., growth will primarily come from replacement demand. Consumers not only replace broken equipment but also trade up to newer models, research firm Freedonia Group Inc. said in its recent report World Major Household Appliance. Consumers look for new features, aesthetic and functional, that can justify their purchase decision, especially when the spending is in general tightened.
The Freedonia report also projected the world demand for major home appliances to grow 3.1 percent annually through 2011, exceeding 480 million units. It also predicted healthy gains in China, already the world's largest appliance market due to the large population. But the thriving market doesn't automatically guarantee success. In fact, Electrolux is making progress but still unprofitable in China, while the Japanese and Korean companies, in the higher price range, share almost half of the market with local Chinese producers that offer the best prices.
Again, it's not just the price tag; it's what the tag is attached to.
Nina Ying Sun is Plastics News' Akron, Ohio-based staff reporter and Asia specialist.
See more plastics news from China at www.plasticsnews.com/china/