Electrolux Sweeps into America
Electrolux is unquestionably a big player in household appliances. The company's own definition stretches the category to include lawn mowers and chainsaws, making it the biggest appliance maker in the world, with $13.1 billion in sales. Yet in the U.S., the Swedish outfit is best known for a line of vacuum cleaners it doesn't even sell anymore. Electrolux gave up the North American rights to its trademark name in 1969, when it sold off its U.S. floor-care business. Now, it sells vacuum cleaners under the Eureka brand.
Soon, though, U.S. consumers will again be seeing the Electrolux name on honest-to-goodness Electrolux products. In late 2000, it repurchased rights to its name, and in October, it will begin adding its moniker to some two dozen top-end Frigidaire appliances. In early 2003, Electrolux plans to start shipping other upscale white goods, such as built-in ovens, that will carry only the Electrolux label. And yes, within a few years, Electrolux-branded vacuums will again by sold in the U.S. by their namesake.
Why subordinate Frigidaire? That brand dates to the first electric home refrigerator ever made, in 1918. Hans Straberg, Electrolux's new president and CEO, figures the Stockholm-based company will get more bang for its buck by marketing globally under a single brand rather than its current grab-bag, which includes Tappan, Kelvinator, McCulloch, and WeedEater. Also, he suggests that Electrolux might carry more cachet with American consumers smitten with Euro styling.
Electrolux (ELUX) could definitely use some buzz in the U.S. Straberg's predecessor, Michael Treschow, spent his five-year tenure wielding the ax. The restructuring raised Electrolux' aftertax profit margin to 5%, from 3% or less. But with management focused so squarely on cost-cutting, Straberg concedes Electrolux had little money for advertising.
The 45-year-old Straberg, who started with Electrolux in 1983 and ran its floor-care division, recently chatted with BusinessWeek Senior Chigago Correspondent Michael Arndt about his new marketing push, the state of the economy, and his favorite new product. Edited excerpts of their conversation follow:
Q: The big news coming in the U.S. is your rebranding effort. Why do you think the Electrolux name will score in America?
A: Frigidaire is a strong brand name for us in North America. And Electrolux, of course, is less familiar than some other brands, like GE (GE) and Whirlpool (WHR) in appliances. But our research shows that it has high trust and that it can be transformed to white goods as well.
We did extensive research before we acquired the brand name in 2000. We interviewed 40,000 consumers about brand preferences. This company hasn't spent very much on its brands. We will be spending more now. We are now leaving the turnaround phase and going forward.
Q: One trend that's striking, particularly in these tougher times, is that the high end in appliances seems to be doing better than the midrange or low end. Why is the high end gaining market share?
A: The mid-segment, where we are predominantly, is performing quite well, too. But what we see is that people want to spend more on their homes. They want to have the best equipment. They want to be proud of what they have at home. The tragic September 11 events may have accelerated this trend further [of] people staying home more.
Q: Do you think that trend can continue or might you see some pullback as the stock market's decline eats away at the wealth of some of these households?
A: I think it will continue. We think it's a lifestyle issue, and people are more and more interested in spending on their homes.
Q: How is the European consumer different from the American consumer?
A: What we can see is that the consumers and their interests are coming together more and more. One example is the front-loading washer. Ten years ago, Europeans used front-loading washing machines, and Americans used top-loading machines. Then, we started to sell the front-loading washers under the Frigidaire and Kenmore brands [Electrolux makes Kenmore appliances for Sears (S)] in the U.S. That has taken off, and now some other competitors, Maytag (MYG) and very recently Whirlpool, have joined us.
Another example is the stainless-steel product in the upper end. About 15% of our side-by-side refrigerator/freezers in the U.S. now have stainless-steel fronts. That is double the percentage in 2001. When Americans spend more on their homes, they seem to prefer a combination of something that's American and European in style. That puts us in a very good position, to provide that European flavor to these products.
Q: How is the European market holding up these days?
A: In the first six months of this year, Europe overall was about flat. And that's what we believe the European market will be going forward.
Q: How about the North American market? Are you expecting consumer confidence and spending to hold up for the remainder of this year and next?
A: That's a question I was going to ask you. I see these trends pointing in different directions. Consumer confidence is declining. At the same time, consumers keep buying. But we believe the third and fourth quarters will be about flat compared to last year. We're very much aware that there is the risk for a downside in North America. It's very difficult to understand the economy today.
Q: Let me back up and ask you to review the restructuring that went on at Electrolux under your predecessor. One of the things that we in the media focused on was the magnitude of job cutting. How can you get rid of 40,000 people? Was the company that fat?
A: We have grown through acquisitions over the last 30 years or so and bought 450 companies. You could say we did not achieve synergies through these acquisitions. We had duplicate facilities and redundant personnel. We also had become quite diversified. We have divested companies that did not fit into our core business, which is household appliances for indoor and outdoor use.
Q: But is there a risk that when you go through this, you can cut too deeply?
A: We don't see it as a risk. At the same time, we've improved our profit margin and our operations and our positions with the leading retailers around the world.
Q: Can you give me a new product that you've rolled out recently that will be a big hit?
A: One of them is a robo-vac called the Trilobite that we have launched in Europe. It's an automated vacuum cleaner -- the first for residential use. We have been working on this for the last 10 years. It's a very complicated appliance. We're using electronics and patented algorithms for the product to navigate and not get stuck. In Europe, it retails for about $1,400. It launched about six months ago in Sweden. It will come to a store near you in the not-too-distant future
Soon, though, U.S. consumers will again be seeing the Electrolux name on honest-to-goodness Electrolux products. In late 2000, it repurchased rights to its name, and in October, it will begin adding its moniker to some two dozen top-end Frigidaire appliances. In early 2003, Electrolux plans to start shipping other upscale white goods, such as built-in ovens, that will carry only the Electrolux label. And yes, within a few years, Electrolux-branded vacuums will again by sold in the U.S. by their namesake.
Why subordinate Frigidaire? That brand dates to the first electric home refrigerator ever made, in 1918. Hans Straberg, Electrolux's new president and CEO, figures the Stockholm-based company will get more bang for its buck by marketing globally under a single brand rather than its current grab-bag, which includes Tappan, Kelvinator, McCulloch, and WeedEater. Also, he suggests that Electrolux might carry more cachet with American consumers smitten with Euro styling.
Electrolux (ELUX) could definitely use some buzz in the U.S. Straberg's predecessor, Michael Treschow, spent his five-year tenure wielding the ax. The restructuring raised Electrolux' aftertax profit margin to 5%, from 3% or less. But with management focused so squarely on cost-cutting, Straberg concedes Electrolux had little money for advertising.
The 45-year-old Straberg, who started with Electrolux in 1983 and ran its floor-care division, recently chatted with BusinessWeek Senior Chigago Correspondent Michael Arndt about his new marketing push, the state of the economy, and his favorite new product. Edited excerpts of their conversation follow:
Q: The big news coming in the U.S. is your rebranding effort. Why do you think the Electrolux name will score in America?
A: Frigidaire is a strong brand name for us in North America. And Electrolux, of course, is less familiar than some other brands, like GE (GE) and Whirlpool (WHR) in appliances. But our research shows that it has high trust and that it can be transformed to white goods as well.
We did extensive research before we acquired the brand name in 2000. We interviewed 40,000 consumers about brand preferences. This company hasn't spent very much on its brands. We will be spending more now. We are now leaving the turnaround phase and going forward.
Q: One trend that's striking, particularly in these tougher times, is that the high end in appliances seems to be doing better than the midrange or low end. Why is the high end gaining market share?
A: The mid-segment, where we are predominantly, is performing quite well, too. But what we see is that people want to spend more on their homes. They want to have the best equipment. They want to be proud of what they have at home. The tragic September 11 events may have accelerated this trend further [of] people staying home more.
Q: Do you think that trend can continue or might you see some pullback as the stock market's decline eats away at the wealth of some of these households?
A: I think it will continue. We think it's a lifestyle issue, and people are more and more interested in spending on their homes.
Q: How is the European consumer different from the American consumer?
A: What we can see is that the consumers and their interests are coming together more and more. One example is the front-loading washer. Ten years ago, Europeans used front-loading washing machines, and Americans used top-loading machines. Then, we started to sell the front-loading washers under the Frigidaire and Kenmore brands [Electrolux makes Kenmore appliances for Sears (S)] in the U.S. That has taken off, and now some other competitors, Maytag (MYG) and very recently Whirlpool, have joined us.
Another example is the stainless-steel product in the upper end. About 15% of our side-by-side refrigerator/freezers in the U.S. now have stainless-steel fronts. That is double the percentage in 2001. When Americans spend more on their homes, they seem to prefer a combination of something that's American and European in style. That puts us in a very good position, to provide that European flavor to these products.
Q: How is the European market holding up these days?
A: In the first six months of this year, Europe overall was about flat. And that's what we believe the European market will be going forward.
Q: How about the North American market? Are you expecting consumer confidence and spending to hold up for the remainder of this year and next?
A: That's a question I was going to ask you. I see these trends pointing in different directions. Consumer confidence is declining. At the same time, consumers keep buying. But we believe the third and fourth quarters will be about flat compared to last year. We're very much aware that there is the risk for a downside in North America. It's very difficult to understand the economy today.
Q: Let me back up and ask you to review the restructuring that went on at Electrolux under your predecessor. One of the things that we in the media focused on was the magnitude of job cutting. How can you get rid of 40,000 people? Was the company that fat?
A: We have grown through acquisitions over the last 30 years or so and bought 450 companies. You could say we did not achieve synergies through these acquisitions. We had duplicate facilities and redundant personnel. We also had become quite diversified. We have divested companies that did not fit into our core business, which is household appliances for indoor and outdoor use.
Q: But is there a risk that when you go through this, you can cut too deeply?
A: We don't see it as a risk. At the same time, we've improved our profit margin and our operations and our positions with the leading retailers around the world.
Q: Can you give me a new product that you've rolled out recently that will be a big hit?
A: One of them is a robo-vac called the Trilobite that we have launched in Europe. It's an automated vacuum cleaner -- the first for residential use. We have been working on this for the last 10 years. It's a very complicated appliance. We're using electronics and patented algorithms for the product to navigate and not get stuck. In Europe, it retails for about $1,400. It launched about six months ago in Sweden. It will come to a store near you in the not-too-distant future
