Industry Growth Hits Spin Cycle - major home appliances industry market overview - Brief Article - Statistical Data Included

Brandweek, June 4, 2001 by Karl Greenberg

After a strong start last year, major appliance marketers took a direct hit in the third and fourth quarters of 2000, as the economy stumbled and consumer demand became slack. The waning activity, combined with a weak European market and stiff price competition, left white-goods makers scrambling to streamline development and production costs and restructure under-performing operations. Now they are in the dubious position of laying off workers even as they accelerate product launches.

Despite Maytag's sales being down 6.7% in the fourth quarter, with a net loss of $10.2 million, and a continuing weak market, CEO Len Hadley said the company is concentrating on growing its core businesses, increasing investments and gaining productivity and operating improvements. At the 2001 Kitchen/Bath Industry Show in Orlando, Fla., Maytag debuted five additions to its Gemini double-oven range.

While its rivals spent next to nothing on Internet marketing, Maytag spent $1.3 million, or 4% of its total budget in the sector last year, per CMR. The company has gussied up its consumer site to enable visitors to peruse product reviews and information, select a product and then choose a dealer for delivery and payment. The program, called "cart-to-cart," now comprises 3,000 dealers with more expected this year. And the payoff so far is promising: About 70% of sales on Maytag.com are for items that cost $600 or more, per company estimates.

Whirlpool, after showing strong profits in 1999, hit a snag last year. Home Depot cut the manufacturer as one of its two appliance suppliers and Circuit City said it would abandon the major appliance category altogether. Although Whirlpool posted net earnings of $121 million in the second quarter, up 22%, sales were down 1.2% from the same period in 1999. Whirlpool subsequently warned that its third- and fourth-quarter earnings in 2000 would fall short of Wall Street forecasts.

The Benton Harbor, Mich.-based company plans to reduce operational expenses by $100 million over the next two years, which began with a January restructuring plan that called for the elimination of up to 6,000 positions worldwide. Despite the apparent pullback, Whirlpool, has no immediate plans to cut its media and marketing budget. In fact, last year's "Just Imagine" spots, via Publicis, Chicago, which touted the Catalyst top-loading clothes washer and Conquest side-by-side refrigerators, were so successful that Whirlpool had to launch another production line to keep up with demand, per a company rep.

The firm's most recent "Just Imagine" TV spots were produced in May for a summer run to tout its new entry, the Calypso washing machine.

GE Appliances, second in sales among the top five last year, had a shakeup at the top in April when James Campbell was named president and CEO after supermarket chain Albertson's hired away the division's president, Lawrence Johnston, as its chairman and CEO. "This does not effect the commitment that GE has to appliances," Campbell said. "It does not affect the commitment to investment in new products." The company launched both its Arctica refrigerator and SXS model in April; the top freezers will be out this September.

The company also has thrown its weight behind Web-based marketing as the appliance maker reported that about 50% of last year's $5.9 billion in revenues was transacted via CustomerNet, its B2B site.

As part of its two-year $100 million restructuring program, Amana, a unit of Houston-based Goodman Holding, launched a new line of refrigerators with a hip marketing spin aimed at young women (the $26 million "Funny Women" campaign).

Last year, Frigidaire's Swedish parent Electrolux formed Electrolux Home Products as its new global appliance brand, supplanting Frigidaire Home Products in the U.S. and Canada. In May Electrolux said a restructuring and cost-cutting program announced in February, intended to eliminate 2,000 jobs and save the company about $42 million in 2001, was proceeding according to plan.

Though the company formally re-affirmed a target to post a gain in operating income in 2001, Electrolux blamed low U.S. demand on an economic slowdown, high retail price pressure and materials costs. Concurrently, the EHP unit still plans to launch its Next Generation line of 25 side-by-side and 36 top-mount fridges, partly the result of a $200 million investment at its refrigerator factories in Anderson, S.C., and Greenville, Mich.

                               APPLIANCES
Brand             Company Name, Location
1. Whirlpool      Whirlpool, Benton Harbor, ME
2. GE Appliances  General Electric, Louisville, KY
3. Maytag         Maytag, Newton, IA
4. Frigidaire     Electrolux Group, Stockholm
5. Amana          Goodman Holding, Houston
Brand             Lead Agency, Location      Totals Sales
                                              (millions)
1. Whirlpool      Publicis, Chicago, London     $10.3
2. GE Appliances  BBDO, NY                       5.89
3. Maytag         Leo Bumett, Chicago            4.35
4. Frigidaire     N/A                            N/A
5. Amana          In-house                       N/A
Brand             Media Spending  Quality  Salience  Equity
                    (millions)
1. Whirlpool          $42.4        7.27       85      61.8
2. GE Appliances       25.1        6.86       92      63.1
3. Maytag              25.5        7.68       84      64.5
4. Frigidaire          N/A         6.81       78      53.1
5. Amana               2.2         6.80       60      40.8
Sources: Company reports (sales);
Competitive Media Reporting (media);
Total Research; QxS=E (see key, page S23)