Weak macroeconomic conditions in Brazil led to a significant fall in market demand for appliances. However, Electrolux continued to implement an extensive action program to adapt costs to the prevailing market situation.
Ricardo Cons, Head of Major Appliances Latin America
The Electrolux brand occupies a strong position in Latin America through its innovative products and close collaboration with market-leading retail chains. Brazil is the Group’s largest market in the region and accounted for about 60% of Electrolux sales. In major Latin American countries such as Brazil, Chile and Argentina, Electrolux is the market leader in a large number of product categories in appliances.
The Latin American market offers excellent opportunities for long-term growth in pace with an expanding middle class. The market is dominated by a few large manufacturers and the degree of consolidation is also high among retailers. These factors contribute to strengthening the potential of established manufacturers in the region. Brazil accounts for about 50% of the total market.
The market in Latin America continued to trend weakly in 2016 and has gradually declined over the past two years. Weak macroeconomic conditions in Brazil led
to a significant year-on-year fall in market demand for appliances. Demand also declined in Argentina.
The weak market impacted Electrolux sales volumes and sales decreased by 10.8%. Extensive savings measures were taken to adapt cost levels to the weak market. Prices were also raised to mitigate negative currency effects. During the first six months of 2016, the USD strengthen against many Latin American currencies, resulting in increased costs for imports of input materials and finished products.
In 2016, Major Appliances Latin America focused strongly on sustaining the market position while reducing the product costs. The Brazilian operations have been a standard bearer in the Group in terms of testing and adapting products to meet consumers’ preferences. New products are tested before being launched in the market to clearly identify consumer preference for the Electrolux product compared with similar market alternatives. Some
innovative products were launched during the year, including a new range of no frost refrigerators in Chile and Argentina and washing machines in Brazil. An intensive portfolio management focus has been initiated to stabilize operations and restore profitability.
An extensive cost-reduction program was implemented across all units in Latin America to adjust costs to the prevailing market situation. This included actions such as capacity reductions at the region’s seven production units. The Electrolux Manufacturing System (EMS) with a strong focus on increased automation was implemented to counter the reduced capacity utilization and increase manufacturing efficiency in Brazil. The program also focuses on reduced use of resources, improved product quality, costs, inventory optimization, occupational health and environmental impact.
Major Appliances in Latin America continued to be impacted by weakening market conditions and organic sales declined by 10.8% in 2016.
Operating income deteriorated. Cost measures to adapt to lower demand, structurally reduce costs and mitigate under-absorption of fixed costs in production were being undertaken.
The new and first Electrolux stove to offer connectivity, making it more practical and interactive for consumers to use. It has a Food Sensor technology, the only one in the market, which automatically turns off the gas when meat has been cooked, and includes the I-kitchen App that allows consumers to adjust and control the stove remotely.
Electrolux new washing machine is designed to consumers who need a high capacity machine, aimed at the Andean market to reinforce Electrolux presence in this category. Electrolux has adapted its technologies in order to meet consumers’ needs. The washing machine is equipped with a “Fast Cycle” which allows washing, rinsing and spinning in only 17 minutes. It is equipped with the Eco Motor, a direct drive engine which saves energy when compared to a traditional machine. It is silent and has a plush filter which removes bacteria during the cycle.