Driving sustainable consumer experience innovation
A streamlined and innovative product portfolio with proven consumer benefits
Three defined areas of innovation - Taste, Care & Wellbeing
- Innovation and product development focus on great tasting food, care for clothes and healthy wellbeing in the home.
- Targeted R&D gives us a competitive advantage – optimizing our offering and shortening the time to market.
- Innovation in energy and resource efficient products provides competitive advantages in a market increasingly interested in sustainability.
- We provide differentiated, consumer-relevant and globally-applied technology platforms – with a unique emphasis on consumer benefit and experience.
Deep consumer insight – is a competitive advantage in an age of greater consumer awareness
- A human-centric design process is critical.
- Consumers are our starting point to define business opportunities, followed by extensive consumer testing.
- We co-create with consumers, rather than purely observing them.
- Our product R&D is based on a long history of consumer insight through surveys, consumer data, home visits and user experience labs.
- We have our own tools for gathering online consumer comments about Electrolux and competitor products – which are analyzed and fed into the design process.
- Testing in user experience labs and through Virtual Reality tools allows us to test early concepts and expand testing to more countries.
- Deep consumer insight increases our success rate and return on investment.
Consumer star ratings
A streamlined portfolio focusing on higher margin categories
- We have recently streamlined our product portfolio, resulting in fewer product variants to reduce cost and increase sales.
- In North America, the number of products (Stock Keeping Units) were reduced by more than 55% by the end of 2019 compared to the beginning of 2017.
- Successful execution of the strategy has strengthened our position in key categories by launching more innovative products with enhanced consumer benefits. These products command a higher price and drive margin expansion – we call this ‘mix improvement’.
- Mix improvements have significantly contributed to operating income in recent years, demonstrating that Electrolux product innovations are in demand.
- Our most resource-efficient products also drive profitability – enjoying higher margins than other products on average since the 1990s.
Driving margin expansion through innovation
Product portfolio management in the business area Europe has accounted for a large proportion of its operating margin increase in the last five years.
Our consistent push for innovation has resulted in leading segment and market positions
- Europe – leading position in premium segments for built-in kitchen and laundry.
- Southeast Asia – strong position in front-load washing machines.
- Latin America – leading position in innovation within core categories.
- A focus on innovative design to promote the most efficient and sustainable appliance settings, such as the QuickSelect dishwasher function.
New consumer experience (CX) organization strengthens our offering
- Established in 2019 – combining marketing, design, digital consumer solutions and ownership experience to ensure consumer experience focus throughout the entire product development and user phase.
- We can leverage our consumer experience expertise to:
- Accelerate product innovation and ownership solutions.
- Translate experience innovation into brand storytelling and product design.
- Drive connected ownership solutions for aftermarket growth.
Strong consumer experience understanding leads to higher revenue and value creation to shareholders
TRS = Total returns to sharehholders
Well-established brands with a strong innovation heritage
Strong brands drive profitable growth
- Brands enjoying better recognition in an age of greater consumer awareness and positive user experience have a competitive advantage.
- Strong brands drive profitable growth by selling more products at higher prices – 1.3 x higher sales growth for strong brands vs average brands.1)
1) Prophet Brand Relevance Index 2017 – 10 year CAGR of most relevant brands vs. S&P 500 Average.
High brand awareness is built on 100-year track record of innovation
- We celebrated 100 years as an innovation leader within the home appliance market.
- Innovations include the launch of the world’s first absorption refrigerator, the world’s first countertop dishwasher and the very first robot vacuum cleaner.
- We know how important brand awareness and experience are – both when consumers equip a newly built or refurbished property with appliances and when they need to replace appliances.
Three well-established brands with a sharp brand proposition
- Our three main brands – Electrolux, AEG and Frigidaire – represent ~80% of total Group gross profit and receive the vast majority of investments in marketing, design and R&D.
- To maximize the profitability of these brands, we target key products and categories appealing to distinct consumer groups for each of our brands.
- The AEG and Frigidaire brands have been successfully adapted in recent years to target specific consumer segments, focusing more on benefits and consumer experience.
- In 2019, the Electrolux brand was sharpened globally, building on its Swedish heritage and sustainability profile as a competitive advantage.
- Sharpening of the brands has resulted in an increased brand preference in more than 60% of Electrolux markets.
A portolio of well-established brands with a clear focus
Sharpened brand postition
Sustainability leadership differentiates Electrolux and drives profitable growth
Sustainability leadership in the appliance industry is a competitive advantage for growth
- Consumers, retailers and authorities increasingly prioritize sustainability, e.g. over 70% of Swedish consumers consider sustainability when purchasing appliances1).
- We have first mover advantage, with a clear aim to continue to be the sustainability pioneer.
- In the 1990s, we were the first appliance company to focus on sustainability – which has been at the heart of our strategy ever since.
- The Electrolux Better Living Program 2030 is an initiative to enable better and more sustainable living for consumers around the world.
Better Living Program
The Better Living Program 2030 targets are aligned with the United Nations Sustainable Development Goals and integrated into the Electrolux sustainability strategy.
1) Svensk Handels hållbarhetsundersökning (2018).
Sustainable products are more profitable
- The company's most energy and water efficient products accounted for 23% of total units sold and 32% of gross profit in 2019. Our most resource-efficient products have consistently had a higher margin in recent years.
- More sustainable products, with lower energy and water use, offer greater consumer benefit and consumers are willing to pay a higher price.
- Resource-efficient products are essential for sales growth in emerging markets, e.g. in water and energy scarce regions.
Our most resource-efficient products have a higher margin
Greater resource efficiency is a Group priority to further strengthen competitiveness
- In products – to strengthen our offering.
- 6% more recycled plastic used in products 2019 vs. 2015.
- In operations – to reduce operational and manufacturing costs and risk exposure.
- SEK 600m reduced annual energy costs vs. 2005.
- 75% less absolute CO2 emissions in operations vs. 2005.
- 44% less energy used per manufactured product vs. 2005.
- 34% improved water efficiency in operations vs. 2015
Greater resource efficiency reduces costs
Strengthen our position in the high-margin aftermarket business
Doubling aftermarket sales by 2025
- Our aim is to double Group sales in the high-margin aftermarket segment by 2025 from current ~5%.
- We are strengthening our service product offering through extended warranties, fixed price repair model and by establishing an in-house, digitally supported sales force.
- We are increasing direct consumer contact and promoting consumer loyalty – by establishing a digital consumer service interface, consumer relationship management systems and connected products.
Potential to capture largely untapped aftermarket business
- The aftermarket for consumer products is large and highly fragmented where manufacturers have limited direct access to consumers.
- Electrolux is launching services, such as fixed price repair in Europe, that aim to access the largely untapped aftermarket business
Aftermarket services
Large installed base and strong quality focus are key strengths
- ~400 million products, with ~12% of installed base served by Electrolux, provides huge aftermarket sales potential.
- Product reliability is important when buying appliances, with the Service Call Rate at a record low level – 2.9% in 2019 vs 5.1% in 2015.
Service Call Rate at record low level
Note: Service Call Rate for major appliances.
Digitalization creates opportunities and new routes to market
- The digital revolution is changing consumer behavior and Electrolux can find new routes to market and interact directly with consumers.
- We are complementing traditional product sales with new business models - i.e. selling a service/rental instead of a product.
- Digitalization also enables new opportunities for direct consumer engagement throughout a product's use/life cycle.
- We are continuing to expand our range of connected products to deliver great consumer experiences based on a scalable global IoT platform and with strong partnerships.
Clear roadmap to strengthen position in emerging markets
Emerging markets represent a potential universe of >6 billion consumers
- The growing global middle class has increasing purchasing power and is spending more on higher quality products for their homes.
- Consumers in emerging markets share similar needs to Western consumers as they become more affluent and move to more urban living spaces
- Potential to create new channels and urban distribution as well as increase online sales.
Emerging markets
Strengthening existing emerging markets and entering selected new markets
- Capturing further growth in emerging markets is key to positioning Electrolux for future success.
- We have differentiated approaches for entering various sub-regions in emerging markets.
Specific roadmaps for each region
Leveraging global scale, local knowledge and the Electrolux brand to capture the emerging mass-premium market
- We will increasingly leverage our global scale to support our local market knowledge.
- We have established global product architectures/platforms for refrigeration, laundry, and air and water care. This increases R&D pace and agility, lowers product cost and delivers economies of scale.
- The ‘Asia-Pacific, Middle East and Africa’ and ‘Latin America’ business areas are developing specific emerging market product offerings as well as innovation for taste, care and wellbeing experiences.
- Being both global and local ensures that our emerging market offering is better adapted to changing consumer demands.
- Centering manufacturing using our facility in Rayong, Thailand, as a manufacturing hub for emerging markets.
- Primarily building on the well-established Electrolux brand that is closely associated with sustainability and Swedish values.
- Resource-efficient products are essential for sales growth in emerging markets, e.g. in water and energy scarce regions.
Electrolux
Electrolux is a leading global appliance company that has shaped living for the better for more than 100 years. We reinvent taste, care and wellbeing experiences for millions of people around the world, always striving to be at the forefront of sustainability in society through our solutions and operations. Under our brands, including Electrolux, AEG and Frigidaire, we sell approximately 60 million household products in approximately 120 markets every year. In 2019 Electrolux had sales of SEK 119 billion and employed 49,000 people around the world.
S:t Göransgatan 143
SE-105 45 Stockholm, Sweden