Hamilton Beach 2013 Annual Report Download - page 17

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HBB continues to monitor both currency effects and
commodity costs closely and intends to adjust product
prices and product placements, as appropriate, if
these costs increase more than anticipated. HBB
expects cash flow before financing activities in 2014
to be substantial but down significantly from 2013’s
very strong results.
Longer-Term Perspective
HBB’s vision is to be the leading designer,
marketer and distributor of small electric household
and commercial appliances sold worldwide under
strong brand names and to achieve profitable growth
from innovative solutions that improve everyday living.
As part of this vision, HBB is focused on delivering
growth above historic rates to reach sales of approxi-
mately $750 million. As the company moves toward
this target sales level, HBB expects to take advantage
of increasing economies of scale to improve return on
sales by focusing on its five key strategic initiatives.
First, HBB is focused on enhancing placements
in the North American consumer business through
consumer-driven innovative products and strong
sales and marketing support. The company’s product
and placement track record is strong due to innovation
processes centered on understanding and meeting
end-user needs and focusing on quality and best-
in-class customer service. In the North American
consumer market, HBB believes it has a stronger and
deeper portfolio of new products than its competitors.
HBB expects its product pipeline in 2014 and beyond
to be at or above 2013 levels, with strong brands and
best-in-class products.
A second area of growth opportunity is through
the enhancement of online sales. In the past few
years, online sales of small kitchen appliances have
grown significantly. During 2013, 15 percent of small
kitchen appliances were purchased online. Retailers
are looking for partners that can provide not only
products, but also the capabilities and support for
promotion, marketing and distribution programs
appropriate for that channel. As consumers’ shopping
habits evolve to rely more on the Internet, HBB is
focused on providing best-in-class retailer support,
increasing engagement with end users, including
maintaining a website that is appropriate for mobile
devices, and enhancing its programs designed to make
HBB the preferred source for small appliances.
Third, the “only-the-best” high-end small kitchen
appliance market segment is a strong growth area
in which HBB has not previously participated. This
segment accounts for approximately 38 percent of
the small kitchen appliance market, and its target
consumer is financially strong. HBB is concentrating its
efforts on participating in the “only-the-best” market
with strong brands and a broad product line. HBB is
planning to enter the “only-the-best” high-end small
kitchen appliance market selectively. The company is
currently working with the Jamba Juice Company to
create a product line focused on blending and juicing.
HBB is also working with other partners to create
additional lines that can be distributed in high-end
specialty stores and on the Internet.
Fourth, HBB is focused on expanding its retail
presence internationally in the emerging growth
markets of Asia and Latin America by increasing
product offerings designed specifically for those
market needs and by expanding distribution channels
and sales and marketing capabilities. HBB’s historical
strength has been in the domestic consumer goods
market, with only 22 percent of total sales occurring
outside the United States in 2013. The company’s
objective is to increase international sales to 35 to 45
percent of total sales by concentrating on key markets.
HBB’s efforts will focus on continuing to expand in
Mexico, Canada, Central America and South America,
as well as entering the emerging markets of China,
India and Brazil. To achieve this growth, the company
is working to understand local consumers’ needs,
increasing resources allocated to these markets and
developing products to meet those needs, especially
in the mid- to high-end segments of these markets.
In addition, HBB expects to work with local partners
in certain targeted countries. HBB began selling
retail product in China in early 2013 and in Brazil
in late 2013. The company expects to increase sales
in these areas in 2014 and enter the Indian market
during mid-2014.
Fifth, while HBB has a solid position in the
Commercial market, it continues to focus on achieving
further penetration of the global Commercial market
through a commitment to an enhanced global product