Responding to changing market
Major Appliances North America
Position and Strengths
- Strong market position about 16% share in core appliances in 2018, predominantly under the Frigidaire brand. The brand has a 100-year heritage and targets consumers with limited time and money, and who value affordable solutions. The business area also has seen strong growth in its Electrolux branded laundry products, which have grown 31% in volume year-over-year.
- Economies of scale in core categories, including cost and production efficiencies. The economies of scale are being further strengthened by the Group’s investment to modernize and automate its North American manufacturing.
- Long-standing relationships with retailers, particularly with national and dealer stores. Retailers value the business area’s nimbleness to meet changing consumer demand and to provide consumer buying analysis and insight that helps shape retail strategy.
- Strong aftermarket sales capability through experienced call-centres.
1 Stability & Focus
- Adapting to market changes and to shifting consumer buying and delivery preferences. As the business area has planned for changes in the retail landscape, it has been efficiently targeting new product launches to drive demand and increase online reviews. Electrolux has also addressed the changing landscape by growing other channels, particularly its contract sales to the construction industry.
- Radically simplify organization, operations and product offering. Strategically, this effort drives a clear focus of individual product profitability while also significantly reducing the total product offering and cost base. It also allows the business area to drive growth of its Frigidaire products, which accounts for about 75% of North America sales.
- Investing in manufacturing re-engineering and new product architectures. The Group is investing in automation, modernization and in new lines of innovative Frigidaire kitchen products to drive profitable growth in North America.
- Create outstanding consumer experience through aftermarket sales. This is accomplished with the consumer after the purchase, and simplifies and improves product use.
Net sales and operating margin
share of net sales
1) Excl. non-recurring items
- Organic sales declined by 6.2% due to lower sales volumes under private label and from room air conditioning. In addition, increased costs for raw material, logistics and trade tariffs impacted earnings that declined. To mitigate the headwinds, Electrolux implemented cost-based price increases and actively worked with suppliers. Operating income included restructuring cost of SEK 596m for the consolidation of freezer production in North America, classified as non-recurring item (see Note 7 in the Annual Report).
- In 2018, the business area successfully executed new product launches by driving a commercial discipline from the start of a new product’s production through retail flooring. A strong example was the launch of the Frigidaire wall oven. Overall industry demand for wall ovens in 2018 grew 4%, and branded growth for the business area grew 10%. Not only did the launch begin production ahead of schedule, the commercialization was well-planned and executed. Product demand has steadily grown since its July launch and the cooker had a five-star consumer rating at year-end.
- The number of products (Stock Keeping Units) were reduced during the year by more than 50% compared to mid-2017, eliminating unprofitable and costly products. This resulted in a narrow focus on the business area's most profitable products and a portfolio with an average consumer rating of 4.4 stars and the highest quality level on record.
- During the year, there was significant progress in its North American manufacturing investments.
- The new refrigeration and freezer plant in Anderson, South Carolina, is near completion and will begin production during 2019.
- In the Springfield, Tennessee cooking plant, four new presses were installed and began running in December. These presses are improving reliability and productivity, and produce 3,000 tons of force to bend, cut and form sheet metal for the cookers.
- Market demand for French Door Bottom Mount (FDBM) refrigerators grew 3% in 2018. Electrolux launched improvements on the refrigerator’s icemaker and noise level. This investment led to 19% FDBM branded growth during the year for the business area.
- Aftermarket sales saw a 4% year over year growth as the business area launched new online how-to videos, adjacent products and expanded its service network.
- Building a home delivery network resulted in final mile delivery capability that can now reach 95% of U.S. with weekly service. Home delivery capability is key to further expansion to retailers as well as direct to consumer and contract sales.