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As one of the highest priced products within consumer appliances, manufacturers’ investment in refrigeration appliances is inevitable, in a bid to grow margins. Unfortunately, what greets them is a global market that is mature and heavily penetrated. Refrigeration appliances is projected to post a 3% volume CAGR over 2014-2019, which is lower than average for total major appliances. This relatively low growth, however, will not halt manufacturers from developing new products and technology to make gains.
If we investigate further into refrigeration appliances, consumer preferences have stayed or grown within just two formats – fridge freezers and electric wine coolers/chillers. Though still widely considered to be a luxury household item, electric wine coolers/chillers is expected to see significant growth, especially within Asia Pacific and Latin America, accompanying the rise of wine appreciation and home consumption.
The most popular refrigeration appliance is fridge freezers, accounting for more than 70% of total refrigeration appliances’ volume sales in 2014. Besides energy saving features, sales are being driven by product design, as consumers continue to grow in sophistication in terms of kitchen interior design and layout. For instance, instead of traditional white colours, stainless steel is now preferred.
Within refrigeration appliances, manufacturers’ commitment towards expanding and growing the premium end is clearly evident. The high product unit price offers high margins and revenue within the consumer appliances industry. Moreover, with the average replacement cycle of a fridge freezer being over 12 years, consumers have shown to be willing to spend more and thoroughly consider competing brands before making a purchase decision.
European manufacturers like Electrolux and BSH Bosch & Siemens Hausgeräte carry premium range within refrigerators, offering products built with higher-end materials and that offers new designs and features. This includes Electrolux’s French door with its wave-touch control and BSH’s glass door refrigerator. The direction of BSH’s new refrigerator range is also a move in this direction, with the smaller capacity (10 cu ft) targeting young professionals living in smaller houses with a premium product. With a price tag of close to US$2,500, BSH’s movement comes across as bold.
Asian manufacturers are also doing their bit to heat up the premium end. While the battle between Samsung and LG continues to see which offers the biggest refrigeration capacity, these two Korean conglomerates have also strengthened their presence in the premium end of fridge freezers in 2014 and 2015. Samsung launched its Chef Collection in 2014, which is a total kitchen appliances package recommended by prominent chefs globally. Its Chef Collection’s refrigerator has a “chef secret zone”, which is claimed to keep ingredients at their most appropriate temperature to maintain freshness. In addition, while ice and water door dispensers are not new features, Samsung now offers a built in sparkling water dispenser powered by SodaStream.
Not to be outdone, LG revealed during the CES 2015 show its door-in-door refrigerators, which have now been extended to a mega capacity (34 cu ft) refrigerator that has shelves built into the first set of mirrored glass doors, which then open to a second set of doors and the main fridge compartment. Both companies are looking to gain traction in the premium segment with price range of US$4,000-US$6,000 in both domestic and overseas markets, including North America.
Meanwhile, Japanese giant Panasonic is also exploring introducing its high-end refrigerators in China and other Southeast Asia countries. In early 2015, the company launched its premium refrigeration with steel doors in China, offering customised functions such as maximum temperature settings to cater to Chinese consumers across different provinces.
The acquisition of Fisher & Paykel in in 2012 automatically propelled Haier Group into the high-end market where the brand already existed. That said, it remains a challenge for Haier and other Chinese companies like Hisense Group to build their presence in the premium segment of refrigeration appliances with their current brand image. These Chinese companies are gaining market share gradually in Europe and North America with price advantages rather than appealing to consumers with functional features.
While the traditional European, Korean and Japanese manufacturers have been at the forefront of premium product innovation, they need to be mindful of the potential threat that Chinese manufacturers may pose as the popularity and awareness of Chinese branded refrigerators gains ground. It is no industry secret that the likes of Haier and Midea are committed to improving their brand image and product quality in a bid to move up the price ladder to improve margins, and a combination of competitive pricing and investment into research and development will accelerate these Chinese companies’ aggressive expansion abroad. This will most certainly heat up competition at the premium end, with a greater focus on features of controlling by smart devices, new designs and colour schemes, and bigger capacities for all household types in coming years.