Innovation is key to drive margin expansion
- Product innovation, built on deep consumer insight in the specific consumer audiences for our three main brands, has resulted in products with enhanced consumer benefits. These products command a higher price and drive margin expansion – known as ‘mix improvement’.
- Mix improvements have significantly contributed to operating income in recent years, demonstrating that Electrolux product innovations are in demand.
- In recent years, mix improvements have contributed an average of SEK 1bn to operating income.
- Our most resource-efficient products also drive profitability – enjoying higher margins than other products on average since the 1990s.
- Streamlining of the product portfolio has resulted in fewer product variants – which has reduced cost and increased sales.
- Consistent push for innovation has resulted in leading positions both within segments and in the market.
- Europe – strong 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.
Three clear innovation areas – Taste, Care & Wellbeing
- Targeted R&D gives us a competitive advantage – optimizing our offering and shortening the time to market.
- Electrolux focuses its R&D on features that allow a price premium i.e. products that provides great consumer experiences such as:
- great tasting food with the right taste and texture, healthy, fresh and nutritious. Inspired by new culinary techniques, while also reducing food waste.
- care for clothes so they remain like new for longer, and ready to wear by holding their size and shape, while using minimal water and energy.
- healthy wellbeing in the home by using appliances with a visual appeal, while creating a healthy environment.
- On average, 3% of sales have been invested in focused R&D efforts over the last five years.
- Resource-efficient products drive consumer demand in a market increasingly interested in sustainability.
- At least one-third of product development is in general related to sustainability, including energy and water efficiency.
Deep consumer insight – a competitive advantage in an age of greater consumer awareness
- Deep consumer insight increases our success rate and return on investment. The average consumer star rating for the Group was 4.65 in 2021.
- Consumer needs are our starting point to define business opportunities.
- A consumer-centric innovation process is critical.
- Electrolux product R&D is based on a long history of consumer insight built on surveys, consumer data, home visits, user experience labs combined with daily monitoring of consumer reviews of both Electrolux and competitor’s products.
- In recent years, new digital tools for testing products have accelerated the development process and reduced costs.
Increasing return through consumer experience design
The development of the intuitive user interface of the Quick Select dishwasher is based on consumer insights. Instead of the user having to make difficult choices between programs, the environmental indicator effortlessly provides an optimal balance between a sustainable choice and washing time.
Increased consumer experience focus strengthens our offering
- Combining functions for R&D, marketing, design, digital consumer solutions and sustainability ensures a consumer experience focus throughout the entire product development phase:
- Accelerate product innovation and aftermarket services.
- Translate experience innovation into brand storytelling and product design.
- Strengthen consumer relationships through repeat purchases and aftermarket sales.
Digitalization creates opportunities and new routes to market
- Consumers are increasingly using digital tools to find and buy appliances. Through the use of data analytics and digital marketing, Electrolux is well positioned to tailor offers that meet consumers’ needs.
- Our strong focus on innovation for the consumer experience improves consumers’ star ratings of our products, which in turn makes our more innovative products more desirable.
- B2B e-commerce allow us to a larger extent interact directly with the consumers and tell our story.
- Targeted investment in marketing and brand building is driving sales.
- Provides strong, differentiated information with clear consumer benefits to help consumers to find the right product.
- D2C e-commerce targeting our most loyal consumers with a differentiated offering.
- A complement to existing B2B sales.
- Currently a small part of total sales.
- Differentiated value proposition to leverage bundling – which includes services as well as products.
- Active in nearly 40 countries by the end of 2021 and scaling up the business in many of those markets .
- Largest presence in Latin America and Europe, with ongoing roll out in Asia-Pacific, Middle East and Africa, and North America.
- 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.
Strong brands drive profitable growth
- Strong brands grow faster, are more profitable and more resilient during crisis.
- 75% of a brand’s value share performance can be explained by being one of the top 3 brands in the minds of the consumers¹).
- 1.3X higher growth rate of most relevant brands vs. S&P 500 average²).
- 9X faster recovery for strong brands vs. global average during the 2008-09 financial crisis³).
- Innovation has resulted in growth and higher profit for our premium brands Electrolux and AEG.
1) Value market share regressed against top 3 and Spontaneous Awareness (Brand Scorecard 2014 & GFK sell-out data 2014. Countries included Frigidaire (NA), AEG (BE, DE, ES, UK), Electrolux (FR, IT, PL, RU, SE).
2) Prophet Brand Relevance Index 2017 – 10 years CAGR of most relevant brands vs. S&P 500 average.
3) Kantar Research (2019)
Three well-established brands with strong and focused brand propositions
- High brand awareness is built on 100-year track record of innovation.
- The three main brands – Electrolux, AEG and Frigidaire – represent ~80% of total Group sales and receive the vast majority of investments in consumer experience through marketing, design and innovation.
- The main brands have clear target consumer positions where they can grow profitably and with potential to attract a larger audience.
- Distinctive target consumers:
- The typical Electrolux consumer is someone who actively drives change for the better and with a positive outlook on the future. They are open for new experiences and want progressive, sustainable premium brands that can help them evolve in their daily life.
- For the AEG consumer, it is all about innovation, performance and premiumness, while acting responsibly. This consumer strives to improve and has very high expectations on brands to support their lifestyle.
- The Frigidaire consumer represents middle American core families with family life and friends in focus. The consumer seeks practical solutions and wants to improve their local community.
- In 2021, the sharpening of brands has resulted in continued growth in brand preference (top 3) in a majority of Electrolux markets.
A sustainability leader – a competitive advantage for growth
- Consumers, retailers and authorities increasingly prioritize sustainability.
- ~2/3 of global consumers are willing to pay more for sustainable goods¹).
- ~3/4 of global consumers believe sustainability is more important than before the coronavirus pandemic²).
- We have first mover advantage, with a clear aim to continue to be the industry 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 Group has received several recognitions for its sustainability work and was also in 2021 included in the Dow Jones Sustainability World Index (DJSI World).
- Sustainability is a key brand attribute for the Electrolux brand.
- The framework For the Better 2030 includes key sustainability areas where Electrolux can make a difference. They cover all the stages in our value chain – from R&D and suppliers, through our own operations and consumer use, to the end of life of our products – where we have an impact. Read more about Electrolux key sustainability areas, goals and results at www.electroluxgroup.com/en/sustainability
1) Eco Ethical Report (2019).
2) Global WebIndex (GWI) (2020). Coronavirus research.
Sustainability is a key business driver
Our leading position in sustainability is growing sales, lowering costs and building trust. Strong stakeholder support can only be achieved with a strong sustainability reputation. A large proportion of corporate reputation is built on ESG dimensions3).
3) Source: www.reptrak.com
Sustainable products are in demand and more profitable
- Electrolux most energy and water efficient products accounted for 19% of total units sold and 31% of gross profit in 2021. The 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. Read about the ‘Make it Last’ campaign, highlighting the company’s sustainable laundry innovations at www.electroluxgroup.com/en/case-stories/
- Resource-efficient products are essential for sales growth in emerging markets, e.g. in water and energy scarce regions.
- Report on EU Taxonomy available in Annual Report 2021.
Our most resource-efficent products have a higher margin
*Percent from total volume in 2021 for Electrolux Group.
**Percent from gross profit in 2021 for Electrolux Group.
Note: Resource-efficient products that meet strictly defined technical specifications and conform to local standards for high efficiency. Since 1997, Electrolux has internally tracked the most resource-efficient products sold in the Group and each year the criteria have become more stringent.
Greater resource efficiency is a priority to further strengthen competitiveness
- In products – to strengthen our offering.
- 44% more recycled plastic used in products 2021 vs. 2015.
- In operations – to reduce operational and manufacturing costs and risk exposure.
- 43% less energy used per manufactured product 2021 vs. 2005.
- 56% of the total energy use in Group operations came from renewable sources in 2021.
- 43% improved water efficiency in operations 2021 vs. 2015.
Electrolux Climate Neutrality Roadmap 2050
- The overall target is a climate neutral value chain by 2050.
- Electrolux has set science-based climate targets (SBT) aligned with the 2015 Paris Climate Agreement to keep the global temperature rise below 1.5° C.
- Targets for CO2 impact from operations:
- -80% CO2 reduction by 2025 vs. 2015. In 2021 Electrolux achieved 78%.
- Climate neutral operations by 2030.
- Targets for CO2 impact from product use:
- -25% CO2 reduction by 2025 vs. 2015. In 2021 Electrolux almost reached 20%.
- Product usage accounts for ~85% of the CO2 climate impact of an appliance*. Therefore, product efficiency is where Electrolux can make the greatest contribution to tackling climate change.
- Majority of the re-engineering investments will contribute to achieving our science-based targets.
- The long-term incentive program for senior managers since 2020 includes a substantial climate impact reduction element.
- Read more about the progress of these targets at www.electroluxgroup.com/en/sustainability.
Product usage accounts for ~85% of the CO2 climate impact of an appliance*
*Calculated as the average of eleven different appliances.
Driving corporate climate action through Science Based Targets
The aim is to capture a largely untapped aftermarket business
- The aim is to increase the share of Group sales in the high-margin aftermarket segment to ~10% by 2025. In 2021, aftermarket accounted for ~7% of the Group’s sales, compared to ~5% in 2018.
- Currently Electrolux has less than 20% penetration of aftermarket products relative to consumer spending potential.
- We are increasing direct consumer contact and promoting consumer loyalty by establishing a digital interface for consumer services, consumer relationship management (CRM) systems and connected products.
- The aftermarket for consumer products is large and highly fragmented, and manufacturers have historically had limited direct access to consumers.
Targeting two areas
- Consumables and accessories
- Tailor-made offerings for specific needs, e.g., air and water filters based on targeted product innovation.
- Launch of subscription offers making it easier to order filters, dust bags, etc.
- In Business Area North America, the water filter business has grown strongly in recent years, mainly by targeting the consumers who are most interested in regular filter changes, while also raising awareness of the need to change filters regularly to ensure water quality. In 2020, sales increased by ~50% year-on-year, with an almost 60% improvement in gross profit. In 2021, the subscription model was introduced with double-digit sales growth.
- Service and repair
- A key area to further enhance the consumer experience and loyalty to drive repurchases. At the same time, it provides a better use of resources as the life of products is extended.
- Strengthening our offering through extended warranties, fixed-price repair models and by establishing an internal, digitally supported sales force.
- In 2017, Electrolux was the first among all appliance manufacturers to offer fixed-price repair services in Europe. The service has been very well received as it enables consumers to make an informed decision on whether to repair or replace an appliance.
- In 2021, the Repair and Care service product was launched in Europe, giving consumers additional options to protect themselves against future repair costs, along with monthly payment solutions to ensure consumers always have a relevant offer whenever needed.
- A flexible business model for service and repairs ensures high quality deliveries.
- In strategic markets with high population density, in-house service personnel are used predominantly.
- To ensure coverage in the more than 120 markets where Electrolux sells its products, a network of dedicated independent service providers and multi-brand independent service providers is used.
Key strengths to leverage the aftermarket
- An installed base of ~400 million major appliances offers a large potential for aftermarket sales.
- Deep consumer insights and strong expertise in appliances to develop tailored offerings for Consumables and accessories as well as for Service and repairs.
- Well-established brands with high brand recognition.
- Solid financials.
- Driving organic growth through required investments in CRM, connectivity and aftermarket sales capabilities.
- Strengthen aftermarket presence through selected acquisitions.
- Recent acquisitions in service and repair in key European markets and Australia.
- Product reliability and user experience are key.
- Service Call Rates improved significantly, amounting to 2.4% in 2021 compared to 5.1% in 2015.
- Consumer star rating of 4.65 in 2021.
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 have similar needs as 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.
Strengthening existing emerging markets and entering selected new markets
- Capturing further growth in emerging markets is key to positioning Electrolux for future success.
- Differentiated approaches for entering various sub-regions in emerging markets.
- Prioritizing common development resources and investments to enable emerging market growth.
Leveraging global scale, local knowledge and the Electrolux brand to capture the emerging mass-premium market
- We are increasingly leveraging our global scale to complement our local market knowledge and drive growth.
- We have established global product architectures/platforms for refrigeration, laundry, dish care and cooking. This increases the pace and agility of R&D, 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.
- We are strengthening our direct to consumers offering in Latin America and Southeast Asia.
- Being both global and local ensures that our emerging market offering is better adapted to changing consumer demands, and also product development programs that primarily aim at Western markets take emerging market needs into account.
- Driving scale at the Electrolux facility in Rayong, Thailand, as a manufacturing hub for emerging markets, which can be complemented with additional hubs as we execute on the roadmap.
- Primarily building on the well-established Electrolux brand that is closely associated with sustainability and Swedish values.
- Resource-efficient products are key for sales growth in emerging markets, e.g. in water and energy scarce regions.
- Targeted approach in China with the AEG brand resulted in strong growth in 2021.
Capturing the emerging mass-premium market