An American brand is the largest-selling white goods marque in Europe. In the Middle East, the same brand had a seven per cent market share in 2007, compared to eight per cent worldwide. This is what Marc Bitzer, the Executive Vice-President of Whirlpool Corporation, USA, wants to leverage into further success this year.
The big plan is to double Whirlpool’s share in the region’s market, using the company’s global network of resources, which is unmatched in the industry, and its portfolio of brands, which includes Whirlpool, Maytag and KitchenAid – spanning the spectrum from the affordable to high-end.
The strategy includes the opening of a representative office this year probably in Dubai – and the strengthening of its relationship with distributors, such as the Al Ghandi Group in the UAE.
Taking to Emirates Business Bitzer said Whirlpool Corporation was also unmatched at the innovation game and is proud to proclaim that the New York-listed company’s Global Consumer Design centre is based just outside Milan, Italy’s capital of style:
What has Whirlpool Corporation’s sales experience been so far in the Middle East and the UAE?
We had for many years established distributor relationships which we have built and nurtured, such as the one with the Al Ghandi Group here. The second phase, which I think we have just entered, is to establish a physical presence ourselves by opening a representative office. We want to bring in more high-end products – like KitchenAid, which we will launch this year.
As a portion of our total business, Middle East sales are still small, about $200 million (Dh734bn). That is about one per cent of our global revenues [of $19.408 billion in 2007]. However, globally there are only a very few markets that offer a similar high growth opportunity. Everybody talks about China; but the growth we are experiencing is coming in a big way from Russia, the Middle East, and to some extent from India. So the Middle East, although it represents a small proportion of our revenues, has a disproportionate share of our attention.
What are the growth figures you have experienced in the region?
Last year, the Middle East white goods market grew by about 20 per cent overall. Our business in the Middle East grew by about 40 per cent. I agree that the growth has been on a very small base. But that gives us the opportunity of rapid expansion. We have an internal strategic plan to double our business in the region this year.
The first step is enriching our brand portfolio. [Introducing] our high-end KitchenAid brand, which creates integrated kitchens, is part of that initiative. Second, we want to leverage our global product base to introduce new brands into the market.
The interesting thing about the Middle East market is that everybody talks about the growth; nobody talks about the kind of market it is. France, for example, is a very specific market; India has its own particular characteristics. In the Middle East, it is not as homogeneous. You have a wide range of experiences; it is a very diverse market. Now, we at Whirlpool have all the different products that we make for specific markets. What we are trying to do now is introduce them selectively into the Middle East and in that way leverage our global production.
It is a huge marketing challenge. Because you are trying to cater to the entire world in a single geographic. It presents complexities of keeping the brands separated, of marketing to different needs and wants.
On the other hand, it’s also a good learning opportunity for us, because if you can cater to such diversity in such a small geographic, you can cater to the world.
Which are the largest and the fastest-growing markets for the Whirlpool products in the region?
Historically, from the sheer size perspective, Saudi Arabia is the largest market in the region. On the other hand, the UAE is growing much faster.
If there is such rapidly growing demand for your products, why aren’t you setting up a manufacturing base in some of the Middle East countries?
We do not have immediate plans to set up a manufacturing base in the region. Do we exclude it in the long term? No, we do not exclude it. We don’t set up factories for specific markets. We set up factories that serve either regional or world markets.
Our factory in Brazil, for example, serves not only Brazil and South America but the entire world. Our factory in Germany produces for North America. We would not open a factory that serves a local market. If we believe that we can set up a factory here that produces a certain product line and serves a large geographic market, then I wouldn’t exclude it. We have to assess it in the long term.
However, there are certain structural characteristics that could make a Middle East factory attractive. For example, there are certain product types that use a large proportion of plastics. Plastic being an oil derivative, such a manufacturing line could be attractive because you are sitting close to the source. However, our first priority is to open a representative office.
Since October last year, you have become involved in the “built-in” market in the UAE where you supply project solutions to real estate developers. What is the status of this initiative?
It is a particular strength that we bring to the table. It is a trend that has grown in Europe over many years and we see it developing in this region – particularly the UAE.
In Europe, consumers like to blend all their kitchen appliances. You almost never see a free-standing refrigerator or dishwasher. They are fully integrated into the kitchen. That is a little more technically sophisticated than in the United States. Consumers especially in Dubai are demanding higher kitchen integration. The total market in the Emirates for appliances is growing at about 20 per cent. The “built-in” market, or project market, is growing at a rate that is way above that – it’s a very healthy growth that we want to tap into. We are already involved in 15 development projects. We have done Motor City and Rolex Towers.
How have the difficult economic conditions of 2007 affected sales last year?
We see a lot of volatility in the global markets – not only from the consumer side but even more from the raw material side. We are very exposed to things such as steel and oil. But a lot of the emerging markets have very strong growth rates. Post the sub-prime issue, the North American market saw a significant slowdown, as did Europe more recently. As a producer, that affects us, certainly. But in Europe, the farther east you go, the more growth you have. So what we are seeing is a global polarisation of growth patterns rather than a global slowdown.
But if you judge from the numbers, you will see that Whirlpool has learnt how to deal with volatility. In 2007, we posted the highest-ever earnings per share of slightly above $8.00 and our guidance is to increase that to $9.00 this year. We are not planning for a stable environment. We have found ways to deal with volatility. We have made our supply chains shorter and shorter.
Whirlpool has always stressed on its innovation capability. How much of your revenues are spent on research?
You need to differentiate – we have capital investments and we have engineering investments. Capital investment in innovation research is close to three per cent of our total sales. Engineering investments are between two and three per cent of sales. Globally, we have 3,000 engineers working on innovation – no other white goods producer has that many engineers involved in innovation.
The interesting thing is that a decade ago, you would have different product innovation in North America from what you had in Europe, for example. With the rise of Asia, some of these lines are blurring, which gives us much better leverage with our innovation.
What are the returns from the more than half a billion dollars you spend on innovation research?
Internally, we have a very strict definition of accounting how much innovation contributes to our revenue. Roughly a fourth of our revenues come from innovation. It also contributes disproportionately to our margins. Let me put it this way: without innovation, our job would be infinitely more difficult. And consumers have repeatedly showed us that they are willing to pay for innovation.
Does Whirlpool’s innovation extend to protection of the environment and reducing resource usage?
Whirlpool was the first to bring out a water-efficient dishwasher. Up until we brought that to the market, dishwashers used to consume about 40 litres per cycle. We brought that down to 11 litres.
We were one of the first to bring out A-plus [energy rating] appliances.
Companies have been focusing on making the individual appliance more efficient. But if you look at the kitchen system, you will see that there is a lot of opposing temperatures. For example, a cooling product has a lot of heat generated outside it from the compressor, while a dishwasher would need water that is heated. We are working on a way to use the heat given off by the refrigerator to heat the water in the passive tank of the dishwasher. You could call it combining different energy streams to save and re-use resources.
Again, the dishwasher usually stands next to the kitchen sink. In an average household, 90 per cent of the water running through the sink is clean water. In the dishwasher, we already have electronic sensors that can differentiate between clean and dirty water. So we thought: why not use the sensors to divert clean water flowing through the sink into the dishwasher’s passive water tank? There is no other corporation working on such initiatives. We have developed a full-blown concept and we are now looking at how to bring such a kitchen to the market.
Finally, why should I buy a Whirlpool appliance?
Simply because you get high a level of innovation and quality at a price that is not cheap but not very high-end either. Consumers love that.
President, Whirpool Europe and Executive Vice-President Whirpool Corp, United States
Marc Bitzer was named executive vice-president of Whirlpool Corporation and President of Whirlpool Europe in January 2006 after being with the white goods manufacturer in various capacities since September 1999.
Prior to joining Whirlpool, Bitzer spent eight years with the Boston Consulting Group in Munich and Toronto, where he held a number of positions of increasing responsibility, rising to vice-president and partner.
A German native, Bitzer holds a degree in Marketing and General Management and a Doctorate, both from the University of St Gallen, Switzerland.
Whirlpool operates in 170 markets. It has 43 factories and 74,000 employees in 14 countries
47,000,000 Whirlpool appliances were shipped last year
246 product launches are planned this year
Whirlpool plans to double business in Middle East