Electrolux 2010 Annual Report Download - page 24

Consumer Durables Europe, Middle East and Africa
annual report 2010 | part 1 | operations | business areas | consumer durables | europe, middle east and africa
During the year, Electrolux continued to strengthen its position in the segment for built-in
products through initiatives including the launch of an entirely new series of innovative,
energy-efficient products under the AEG brand. Profitability in the region improved through
new cost savings and a better mix.
The market
The European market for household appliances was worth approxi-
mately SEK 205 billion in 2010, of which Eastern Europe accounted
for about 18%. Demand increased somewhat during the year,
although from a low level. The increase was primarily due to stron-
ger growth in Eastern Europe, driven mainly by Russia, and to
greater demand in major Western European economies such as
Germany and France. Demand for vacuum cleaners increased mar-
ginally in most regions and segments.
The market for built-in appliances continued to show strong
growth. Interest continued to be strong in energy- and water-effi-
cient appliances.
The diversity of countries that comprise the European market has
contributed to a wide variation in consumer behavior and numerous
manufacturers, brands and retailers. The European market is a
highly complex market in which the low consolidation among manu-
facturers has led to overcapacity. This has resulted in downward
pressure on prices for a considerable time. In recent years, prices
have stabilized somewhat.
Retailers
The European market features many small, local and independent
retail chains that focus on electrical and electronic products as well as
kitchen interiors. Strong organic growth for retailers in recent years has
inhibited consolidation. Vacuum cleaners are sold through the same
channels as household appliances and through superstores.
Kitchen specialists currently account for approximately 25% of sales
of household appliances in Western Europe. The corresponding
figure for Germany and Italy is approximately 40%.
Since the proportion of consumers that use the Internet before
deciding to make a purchase is growing rapidly, manufacturers’
websites are becoming increasingly important as a tool for convinc-
ing consumers. The brand must be displayed correctly and con-
sumers provided with the answers they require.
The Group’s position
During the year, Electrolux strengthened its position in the built-in
segment, primarily in the German market. During the fourth quarter,
a completely new range of innovative built-in appliances in the pre-
mium segment was launched under the AEG brand in Germany and
Austria. The launch continues in other markets in 2011. At the end of
the year, a new range of energy-efficient premium vacuum cleaners,
manufactured using up to 70% recycled plastic, was launched.
A positive trend in terms of the mix and lower costs due to previ-
ous and new cost-cutting measures have contributed to improved
operating income.
Eastern Europe accounts for approximately 20% of Group sales
of appliances in Europe and about 15% of sales of vacuum cleaners.
Lower sales volumes in 2010 were primarily the result of the bank-
ruptcy of the German Quelle chain, one of the Group´s largest retail
partners, at the end of 2009. In this period, however, sales volumes
under the Electrolux brand showed a positive trend and the new
partnership with IKEA developed positively.
Share of operating income 2010
42%
Share of sales 2010
38% Operating income for appliances improved considerably, primarily due to a
positive mix development. Previous employee reductions and cost-saving
measures also positively impacted operating income. Operating income
improved substantially for the floor-care operations due to increased sales
of premium products.
Shipments of core appliances in Europe, excl. Turkey
Net sales
Operating margin
10
8
6
4
2
0
06 07 09 1008
%
50,000
40,000
30,000
20,000
10,000
0
SEKm
80
Million units
75
70
65
001 02 03 04 05 06 07 08 09 10
Total demand in the European
market stabilized in 2010 and
increased by 2%, after more
than two years of decline, pri-
marily due to growth in Eastern
Europe, where demand
increased by 6%.
Net sales and operating margin
20