Forging green habits

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The 2009 business results of the BSH Group show that the company not only weathered the recession well but also demonstrated its leadership in the market of energy-efficient products. Anna Ryland reports.

In 2009, overall sales revenue of BSH Group was €8.405 billion, 4% lower than in 2008, although when adjusted for the effects of the exchange rates, the shortfall was only 1.4%. However, the company’s pre-tax profit of €517 million was 1.4% higher than in 2008 due to the substantial reduction of production costs and ability to secure value for money sources of materials, energy and logistics.

Dr Kurt-Ludwig Gutberlett, chief executive officer of BSH Group, commenting on these results said that the company has benefited from “focusing on innovative products offering features with a strong consumer appeal, and from the fact that we were quick to recognise the importance, worldwide, of having a portfolio featuring particularly energy-efficient appliances. This trend towards energy efficiency developed into a mega-trend in 2009. Our range of super-efficient home appliances allowed us to benefit tremendously from the increasing consumer demand for such products and re-asserted our leadership role in this growth market.”

Performance on the international scene

This approach helped BSH outperform the market in many regions.

In the German market where the demand for ‘green’ appliances is particularly strong, BSH’s sales grew by 4.4% in 2009, while the overall market increased by only 3%. Among the contributory factors to this result were the growing sales of dryers using heat-pump technology, as well as good performance of small appliances, such as floorcare and coffee markers.

Meanwhile, the Group’s West European market experienced a sales decline of 6% (while the market overall suffered a 7% fall), after an already significant drop in business in 2008. The company has attributed this to the collapse of the housing market which affected its built-in business. In the UK where BSH is a number two domestic appliance brand, with a 14% market share and a market leader in built-in (with 26.8% market share), the company’s overall sales declined by 4.8% on 2008. However, BHS performed well in France, Belgium, Austria, Switzerland and Sweden.

The Eastern European market, which for many years has been a dynamic growth area for BSH, declined by 12% on 2008, while the overall sales in this market tumbled by 28%. Only in Poland the sales of BSH products showed minimal decline.

The 11% sales drop in North America was a reflection of the slump in the premium built-in market and a waning demand for luxury goods.

In the meantime, however, the Asian economies were booming, and BSH’s Asian markets delivered a 17% growth in 2009, against the overall market growth of 10%. The company was particularly pleased with the performance of the Chinese market where it has six factories and where, due to the state-funded incentive scheme, the demand for energy efficient appliances is growing fast. In 2009, BSH gained over 10% of its total revenue from the Asian markets, which made it the most successful foreign manufacturer of domestic appliances in China, ranking it second in the market as a whole.

Despite the difficult economic climate, BSH is committed to continue with the same level of R&D investment as in the past. In fact, in 2009, the company increased R&D spend by 1.5% to €267mln, which equates to 3.2% of the company’s revenue.

Leveraging the green card

Having achieved a 10% year-on-year increase in sales revenue in the first quarter of 2010, the BSH Group management feels positive about the future. Its main European markets, such as Britain and Turkey, are on the road to recovery, while the Chinese market already grew by a two-digit rate in the first quarter of the year.

It is clear that the company’s focus on highly efficient products is paying dividends. The share of super-efficient appliances sold in Europe reached almost 15% in 2009, and they constituted almost 18% of the company’s turnover. Dr Kurt-Ludwig Guberlett stressed that energy efficiency has became the USP of BSH’s products, giving the company a competitive advantage on many of the world’s markets.

The state’s recognition has followed, and in early 2010, BSH received the Innovation Prize for Climate and Environment from The Federal Ministry of the Environment and the German Confederation of Industry for the innovative Zeolith drying system featured on the company’s dishwashers.

In Germany, the high demand for highly efficient appliances is stimulated by both social and economic factors. The Germans tend to make long-term investments in their homes – when they buy domestic appliances they treat them as investments for 10-15 years. Moreover energy consumption in Germany is taxed with full VAT, on top of which eco tax is added.

Meanwhile in the UK, these social and economic trends work in reverse. For a considerable proportion of British consumers price is still a dominant factor in purchasing decisions, therefore they expect their appliances to last between four and five years. Also many people don’t know the exact cost of their energy consumption. That’s why it’s more difficult for them to calculate the potential longer-term savings they would be able to make if they purchased energy efficient appliances, although their initial cost is higher.

Yet, “in the future the UK consumer will have no choice but to adopt more environmentally responsible behaviour,” pointed out Jean Dufour, chief sales and marketing officer at BSH. “Firstly, manufacturers no longer invest in products which are less energy efficient than an A rating. By 2013 this will become EU law. Furthermore the rising costs of energy will force people to change their purchasing behaviour and domestic habits. Domestic appliances already account for 40% of household energy consumption and this is likely to become an even greater burden on domestic budgets. Therefore energy conservation will be vitally important.”

In this context, educating retail staff about energy efficiency issues becomes a key priority for manufacturers. Mr Dufour explained: “We are making a big investment in training retail staff so in turn they can educate their customers about potential energy savings. If no one will tell consumers that an A++ fridge is consuming 45% less energy than an A model they won’t be able to make informed purchasing decisions.” The BSH Group is working closely with retailers developing a PoS programme which will help them better present the ‘green’ products and their benefits.

“BSH’s message to retailers is: adoption of resource efficient appliances is definitely going to happen, although in some countries this may take longer than in others, so you may as well be the leaders of this trend,” concluded Mr Dufour.

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