STOCKHOLM Nov 21The U.S. head of Electrolux,
the world's second-largest maker of home appliances,
talks a lot about food - the food revolution, celebrity chefs
and a fad for cooking classes.
Keith McLoughlin, chief executive of the Swedish company
since 2011, wants to shake off the fusty image of cookers,
fridges, vacuum cleaners and washing machines to draw in
consumers and increase profits.
Offering space-age cooking tops and developing an oven that
can smoke food or monitor it with cameras, the push is part of
Electrolux's strategy to change focus after years of cost
cutting and factory closures.
The group wants launches of new products to let it raise
prices in weakening key European markets to maintain
profitability and fend off competition from U.S. rival Whirlpool
and South Korean manufacturers Samsung and LG.
"There is a huge food revolution going on around the
world...More and more people focus on food, better quality
ingredients, taking cooking classes, TV shows with chefs, chefs
are the new celebrities.," McLoughlin told Reuters.
"For us, ultimately, what we are going to get paid for is to
bring more consumer relevant stuff to the market."
McLoughlin's push is focussed on kitchens as cookers are
Electrolux's strongest global market position.
This year it launched a high-end kitchen range retailing for
80,000 euros, which McLoughlin said shows Electrolux's dominance
in professional cooking equipment.
The company has also sponsored a travelling restaurant
called The Cube, which sits atop famous landmarks in European
cities including London and Brussels.
It says it innovates outside the kitchen too, citing
handheld vacuum cleaners for small areas of grime.
The stress on product launches is in sharp contrast to an
earlier focus on getting its manufacturing base right.
That involved cutting its workforce in western Europe, which
stood at more than 45,000 people in 1999, to just over 13,000 by
the end of 2011. Staff numbers have risen in countries such as
Mexico and Brazil where wages are lower.
The company is still cutting costs, closing factories in
western Europe and opening new ones in Asia. But McLoughlin said
more money was now spent on marketing, research and development.
Products also had to be preferred to similar items on the
market by at least 70 percent of a test group before launch.
Investors have this year given the thumbs up to Electrolux
and Whirlpool due to expectations they have seen the worst of
raw materials costs rises, are benefiting from cost cuts and
have managed to get through price rises in mature markets.
That has shown in a 50 percent share price rise for
Electrolux this year, one of the top three performers in
Stockholm, and in Whirlpool's 80 percent rise.
That is due to expectations of growth, with Thomson Reuters
StarMine data showing analysts expect Electrolux operating
earnings to reach 6.5 billion crowns by end-2013 from about 3
billion last year. Whirlpool's earnings are seen rising to $1.3
billion from $792 million in 2011.
Whether those expectations are borne out is linked also to
the consumer push in mature markets, as well as efforts to grow
sales in faster-growing emerging markets.
"Basically the only way you can raise prices in the European
appliances industry is to come up with new products, with new
features and new designs," said DNB analyst Christer Mangergard.
He said the share rise showed investors were already pricing
in earnings growth and he was now neutral on the stock.
"Next year there are tail winds and headwinds, some pluses
and minuses which sum up to not such a big upside potential in
consensus earnings estimates as I would like to have," he added.
MAKING A FRIDGE SEXY
To back up his drive, McLoughlin for the first time
appointed to the management board a chief technology officer,
who is a German, a chief marketing officer, from the United
States and, most recently, a chief design officer - an Italian.
The three are on the management board and are supposed to
work together to drive out consumer-focussed products faster.
The chief design officer is Stephano Marzano, who was on his
way to retirement from Dutch consumer electronics group Philips
when McLoughlin got him to join Electrolux this year.
Marzano does the big thinking about home appliances,
lifestyles, the kind of space people have to live in, whether
they are environmentally aware and about changing eating habits.
That means getting away from the standard image of a
household appliance as simply a metal box.
"Perhaps we will not only talk about the refrigerator as it
is now, but as a food quality preservation centre," he told
Reuters at the company's headquarters in the Swedish capital.
"If you are someone who likes cooking and likes eating,
suddenly the refrigerator and how the fridge can maintain the
cheese and the meat can be sexy."