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White-Goods Biz In Flux As Players, Products, Market Evolves

The once-staid major appliance business has been anything but in recent seasons.

Thanks to enormous shifts in channel preference; an overheated housing market; successful penetration by alternative offshore brands; and strong demand for high-priced, fully-featured, fashion-forward white goods, the majap trade is almost a different industry than it was even five years ago. And there’s no telling what the playing field will look like five years hence.

The most profound structural change to rock the business, and whose repercussions will surely be felt for years, was this past April’s $2.6 billion acquisition of Maytag by Whirlpool, following a round of offers and counter-offers by private investors and Haier, and a relatively quick approval process by the Department of Justice. The combined entity now has a greater than 70 percent share of the domestic laundry market and about half of the dishwasher business.

The impact is most immediate for the 4,500 workers losing their jobs as Whirlpool shuts plants in the United States, Canada and Mexico in an effort to return the Maytag business to profitability. The consolidation will likely be felt hardest in Newton, Iowa, Maytag’s former headquarters town, which is losing its largest employer. Nevertheless, argued Whirlpool chairman/CEO Jeff Fettig, “The combined companies will create substantial benefits for consumers, trade customers and shareholders through continued development of innovative products, improved quality and service, and cost efficiencies.”

“We have an opportunity to reinvigorate Maytag in a positive way,” David Swift, the recently named president of Whirlpool North America, told TWICE. “We love Maytag’s brands. They have a lot of equity with consumers, but they’ve been underserved. We think we can use our innovation pipeline to get to the marketplace faster and bring differentiation to the portfolio.”

One of the pro-merger arguments that Whirlpool presented to Justice Department lawyers who were weighing the deal’s anti-competitive consequences was the influx of new and well-financed vendors from offshore. Indeed, Asian appliance powers LG and Samsung, after establishing beach heads at Best Buy, quickly became major white goods players in the United States after they were embraced, respectively, by The Home Depot and Lowe’s.

As Soon Kwon, president of digital appliances for LG Electronics USA, told TWICE, “2006 will be another big year for us. We’re growing like crazy in the U.S., and thanks to our vertical integration as a CE and appliance company, we will work to bring consumers and our retail partners more new products and more innovation than any of our competitors.”

Haier too continues to expand its assortment and market presence by entering new white-goods categories.

At the same time, robust consumer demand for premium appliances provided fresh opportunities for high-end majap makers from Europe and the United States. “Appliances have become a style statement,” observed Tina Settecase, Sears’ home appliance business VP and general manager. “It went from a ‘need’ business to a ‘want’ business, which is a relatively new phenomenon for appliances. They’re now like cars, with consumers changing them every few years.”

Also changing is the way consumers buy their white goods. While Sears remains the 800-pound gorilla in majaps, with some $8.9 billion in sales last year, shoppers have been eschewing enclosed shopping malls — Sears’ traditional stomping ground — for strip malls and freestanding formats. That fact hasn’t been lost on Lowe’s, the No. 2-ranked majap retailer with $4 billion in sales, and third-place Home Depot, which garnered $3.6 billion in white-goods sales last year. Both have been building out their store base at a breakneck pace, chipping away at Sears’ market share lead in the process.

Looking ahead, industry observers have noted a slowdown in sales, and are projecting more of the same next year (see stories, this page and next). But despite the double headwinds of higher interest rates and declining home sales, manufacturers rolled out a bevy of high-tech beauties at this spring’s Kitchen/Bath Industry Show, where induction cooktops, high-efficiency washers and sleek styling were offered as the tools of the trade.