Haier Gains Ground in Japan and Southeast Asia Through Sanyo Acquisition

Panasonic Corp recently announced its intention to sell its recently acquired Sanyo refrigeration and washing machine business units to Haier Group in Japan and Southeast Asia as part of its efforts to restructure its operations. By acquiring Sanyo, Haier will become one of the top five major appliance players in Japan, a market traditionally driven by domestic players. 

Why Japan?

For Haier, the Sanyo acquisition will mean better access to the Japanese major appliances market, worth ¥1,040 billion (US$11.5 billion), accounting for 20% of overall Asia Pacific major appliance value sales and one where local manufacturers dominate the competitive environment. The top five major appliance companies, which account for a 68% volume share, are all Japanese. Haier partnered Sanyo in 2002 to enter the Japanese refrigeration market and by 2010 the company had managed a close to 20% volume share in freezers, which translates into a 0.2% share in major appliances. The acquisition will result in Sanyo Haier Co Ltd returning to Haier following its sale by Panasonic.

According to industry sources, Haier could gain a good competitive advantage against local manufacturers if it manages to introduce a portfolio of low-cost and energy-efficient appliances to the Japanese market, something that Sanyo’s technological edge in energy efficiency could provide.

Top 5 Major Appliances Manufacturers in Japan: How the Competitive Landscape Will Change

Volume sales (000 units)

Haier 1

Euromonitor International Competitive landscape based on 2010 company volume shares

What the deal means for Haier

Through the acquisition of Sanyo, Haier enters the home laundry market by gaining a 15% volume share to give it a ranking of fourth, ahead of Sharp. For Panasonic, on the other hand, losing the Sanyo share in the category implies yielding its leading position to Toshiba Corp and a drop in volume share from a commanding 35% to 20%.

Additionally, in refrigeration appliances, the deal grants Haier an additional 7% volume share to reach nearly 8% in the category, a one position jump in the rankings to sixth place, ahead of Miele. With a 21% leading share of the category, Panasonic remains unfazed by the spin-off. In freezers, which Haier already leads, adding Sanyo’s share will result in Haier commanding 31% of the Japanese market, significantly widening the gap between itself and second-ranked player Hitachi, which holds a 9% volume share. Haier also gains an automatic 7% volume share in fridge freezers and 9% in fridges.

What the deal means for Panasonic

2011 has been a complicated year for Panasonic Corp which has undergone significant restructuring and cost-reduction measures which will end up costing the company ¥100 billion (US$ 1.2 billion) amidst a tough economic and competitive environment. The main objective is to fully integrate Sanyo into its operations, which it acquired in 2009, and end up with a streamlined organisation that is capable of facing fierce competition, particularly from other regional rivals.

Having launched its first range of major appliances outside the Japanese market in March 2009, the sell-off does not seem to be in line with Panasonic’s strategy of focusing on consumer appliances, and particularly major appliances as a long-term source of profit. However, the company’s finances have been affected, partly because of the Japanese earthquake in March 2011, and it reported a 59% decline in profit for the fiscal year ending March 2012. The spin-off, therefore, might have more to do with that as well as Panasonic’s stated intention to become more globally-oriented, with a strong focus on the emerging markets. In the BRICs+V (Brazil, Russia, India, China and Vietnam) and the so-called MINTs+B (Mexico, Indonesia, Nigeria, Turkey and the Balkan States), Panasonic plans to increase its sales to ¥330 billion in fiscal 2013 and strengthen local manufacturing and product design.