It's A Dream Year For AC Sales - Twice

It's A Dream Year For AC Sales

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It was the kind of room air conditioner season manufacturers and retailers dream about: That's the consensus as AC suppliers total up the numbers from the summer of '99.

Manufacturers scrambled to increase production and/or shift units to the parts of the country that needed them most. Chains and independents alike were selling room units by the truckload -- and frequently begging for more truckloads to meet demand.

Some suppliers could provide them, some couldn't, as companies with conservative production schedules for the '99 season found themselves sold out by the Fourth of July. Units in the most popular smaller sizes were in short supply off and on throughout the summer, but retailers told TWICE that in many cases customers desperate for relief from the heat simply traded themselves up to larger units rather than wait for broader availability.

A whopping 69.7% increase in suppliers' shipments of room units in July put the category more than 45% ahead of 1998 year-to-date, according to the Association of Home Appliance Manufacturers. And air conditioner suppliers, who peg sell-through levels at more than 90%, said both the distribution pipelines and most retailers' warehouses are clean, making the outlook good for preseason 2000 AC programs.

"This has been the best year for room air conditioners in 10 years," declared Tom Purcell, Fedders' sales and marketing senior VP. "It was one of those perfect years when we had sustained heat throughout the country, and a big plus was that the heat hit three different times, Memorial Day, July 4 weekend, and then again late in July. So retailers had the capability to sell through and reload, and then here came another wave of heat. We couldn't have asked for more."

Fedders extended its room air production into early August to keep up with demand, Purcell said. With the company's Accurate Response program, "we met every customer's forecasts and easily exceeded them. And we didn't have to sacrifice one person's business to keep another person happy."

Purcell estimates retail sell-through for this season in the 90% to 95% range nationwide. Only the Northwest had what he characterized as "a normal year," rather than the extraordinary year for AC sales the rest of the country enjoyed. And looking ahead to next year, "the smart retailers will merchandise early and get product on display early in 2000 to get the preseason business, because consumers whose air conditioners broke down in late August or September were not going to buy a new one then -- they'll wait until early next year and then buy at the first sale they see."

At GE, marketing manager for global products Jerry Wolff put the sell-through level at about 95% and noted that GE "not only benefited from the heat, but we will also see a significant market share increase this year."

Wolff described the season as "incredible" and said the industry originally had been predicting sales of about 5 million units. "An average year is 4 million units," he explained, "but now it looks like it's going to come in at 6 million."

Sales were strong in all areas of the country, he said. "The South got heat late, but it's a moot point because it caught up with the North, which got heat early."

"GE was able to fulfill all of our preseason orders, plus some," said Wolff. "We were able to fill some incremental demands." As for carryover, "most of the barns are going to pretty empty" going into the 2000 season, and he's taking a wait-and-see stance on preseason pricing and merchandising plans. "How do you make predictions for next year?" he queried. "We have never had a year like this one."

Friedrich's senior marketing manager Ron Koehler anticipates that the clean pipelines will produce strong preseason retail buying. His company did have tight availability on some 115v models this year, and "we're reminding our dealers in the Northeast that this is the third year in a row the sell-through has been strong, so they need to plan their ordering carefully."

Because the heat hit in different parts of the country at different times during the summer, virtually every retailer shared in the strong season, said Koehler. "Our dealers in the Northeast got it first, and their early-season sales were fantastic. Retailers in the South, particularly in Texas, were nervous in July because it was a cool, rainy summer, but then in August, Texas had two straight weeks with temperatures over 100, so their business picked up."

"This year was stupendous," declared Chris Fitzgerald, director of North American window room air conditioner operations for Carrier. "The total air conditioner market will probably be over 6 million units for 1999, which represents significant growth. Retail sell-through was running at around 90% as of late August, so all their warehouses should be very clean at the end of this year."

Like other suppliers, Carrier was out of stock in several under-10,000 Btu models in July. But its cleaned-out inventory position will provide a plus for the preseason, Fitzgerald said. "We can be a lot more flexible, because we have no significant stock left over. We're going to have several special promotions, still in the planning stages, available in the preseason."

Mike Ambos, marketing and merchandising manager of environmental products for Whirlpool Appliances, said his company "cleaned out all our inventory, and the retailers cleaned out all their inventory, so we see fairly empty pipelines going into the 2000 season."

Looking at the country region by region, Ambos said, "The South got the heat a little late, but it won't be a repeat of last year for them. Luckily, the Northeast was also not a repeat of last year, and they did really well. In Texas retailers had stocked up heavily but then the heat came late, so they may have some room units left over. California had a decent AC season, but nothing to get excited about, and Washington and Oregon had a lot of rain and a very slow summer -- that's the one area that I expect carryover."

As a result of the strong room air season in most of the nation, "we expect more up-front shipments for 2000 because the pipelines are completely empty," continued Ambos. However, "after three cold years in a row before this one, I don't expect retailers to go overboard with ordering for next year."

Said Rick Essex, Frigidaire Home Products' general manager, marketing, for home comfort products, "We're seeing very, very, very little carryover at retail, so we're in a position to produce and sell a lot more air conditioners for next year" through a preseason program that kicks off in September and October.

Frigidaire had no significant availability problems this summer, Essex added, "although like everyone, we could have used a few more units."

And although it is gratifying to look back on room air sales for this summer, Essex is already planning ahead. "We're ready for another season just like this one next year," he said. "That's not a prediction, just a request."

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