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Philips’ Muller Readies For Holiday Battle

New York — Philips is looking to grow positioning in the TV market this year with its expanded flat-panel TV lines, according to Philips North American President Stewart Muller. TWICE spoke with Muller for his insights into the upcoming holiday season:

TWICE:How are you preparing for Black Friday this year?

Muller: We are going to go after Black Friday with things like our DVD, our audio systems, MP3 and possibly plasma if we do anything in TV. Quite honestly, we and a lot of our retail partners hope to possibly not see the Black Friday this year that we saw last year. The consumer won, and that’s always good, but I think it got a little too irrational where we hit price points that weren’t necessary. The longevity and sustainability of the industry gets called into question when things get that crazy. There are going to be places where we pursue Black Friday opportunities, but I wouldn’t think at this point they would be in our core LCD line. We need to make a mark with our TVs this year and we are doing it with picture quality and design.

TWICE:How big a factor are MAP policies going to be this holiday season?

Muller: I can’t speak for the rest of the industry, but I hope there is going to be some semblance of order. Ultimately, it doesn’t even do the consumer any good if things are given away below cost, because pretty soon you are not going to have a sales channel and people won’t be able to get what they want. My philosophy on it is we have to have a set of products that has a MAP program associated with it for 40 percent of the TV line, and then 60 percent of the TV line is just open retail. The beauty of it is you have a MAP policy that doesn’t change, or changes rarely as new ways of going to market evolve — that’s like a constitution with some amendments — but your MAP listing can change every month based on price moves and new introductions. The policy stays the same, but what you put on the list can change much more regularly. If the industry stabilizes, you put more on it. If it doesn’t, we have some flexibility.

TWICE:A lot of your distribution emphasis seems to be on the larger national accounts, what message do you have for the smaller A/V specialists?

Muller: I want them because of the way we go to market to focus on the 40 percent range [covered by MAP policies] in our line. In the future our entire Ambilight range should be on the MAP listing.

TWICE:Your emphasis is on the Philips brand here, but how is the role of Magnavox changing?

Muller: Wal-Mart is still our biggest Magnavox player. We are also offering it to the office superstore channel and Home Depot, which has done well with Magnavox, and that will continue for the foreseeable future.

TWICE:What will be Philips’ breakout product this Christmas?

Muller: We have a pretty big product portfolio from audio to peripherals and accessories, but let’s face it, as TV goes we go. And that’s really the voice of your brand. So the products I’m most excited about are our 42- 47- and 52-inch 1080p LCD TVs. They are easily the best TVs we’ve ever made. As far as picture quality and design they will compete with anything on the market. These are the only models we’ve seen so far that are able to display content at all levels from all HD sources.

TWICE:Will Philips have an ad campaign to promote its Perfect Pixel HD TV lines?

Muller: We are planning a very big and unique brand campaign. I don’t want to confuse that with an ad campaign. It’s not just advertising, but I don’t want to give away too much at this time because it is going to be a competitive advantage for us. Suffice it to say, we want to influence where consumer decisions are made, and 60 percent of that is in the store.

TWICE:You have just introduced a new fashion line of portable electronics products, what led to that decision?

Muller: We started a partnership with Swarovski about a year ago to merge IT technology with consumer electronics technology, but there is also a convergence of lifestyle home décor with fashion. There are stylish ear buds out there, but we think we’ve taken it to the next level by partnering with a world renowned high-quality jewelry and crystal manufacturer. We see it as the perfect marriage of fashion and technology. Women we’ve talked to and shown it to seem to love it.

TWICE:Where do you see the future of plasma TV in the Philips TV line?

Muller: We are going to look at LCD as a strategic direction and plasma as an opportunistic purchase. We’ve relied on an asset-light infrastructure. We have an LCD fab investment, but other than that we source in our supply chain, so we have no capital expenditures or investments in plasma. If an opportunity opens up in a certain screen size in plasma and a retailer wants to do that screen size with us, we’ll do it as a tactical measure.

TWICE:How important is shelf share in your strategy this year?

Muller: You never want to give up any shelf share, but I think it’s more important to take any shelf share you have and drive more velocity — go narrow and deep. Our shelf share, though is pretty good, it’s more in some places than others. But more important on my mind than getting SKUs placed is getting more velocity per SKU. We are having great trouble keeping stock of the line we just introduced. We have the lowest levels of inventory now, but you’d rather run tight in this business than heavy.

TWICE:Why aren’t you doing more TV business with Circuit City?

Muller: Circuit City is still an important partner for us and we do a lot of business with them, but last fall as they were putting together their TV assortment, they struggled with where they saw how Philips and Magnavox fit. They had their ideas and we had ours. They are revising their strategy as we speak, and they blamed a lot of their problems on the TV business last Q4. Well, we weren’t in the TV business with them then. So, I think they are continuing to look at their partners. We may or may not be a part of that this year, but we maintain an open dialog, and I make no bones about it, I hope to be back in with them.

TWICE:What’s your plan for Blu-ray Disc this year?

Muller: We are staying committed to the Blu-ray camp. We are a founder. As far as hardware, we are waiting for our next generation player to start pushing it. The reality right now, with the cost of the components, where going from analog TV to HDTV is an order of magnitude in difference, going from regular DVD to Blu-ray is not in equality with the difference in price you are going to pay. As this gets down into the price points that are more in line with the incremental benefits, we will be going after it aggressively. We remain firmly committed to Blu-ray Disc.