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News What Drives the

News What Drives the Home Appliance ZVEI Household Appliances Division Chairman Dr Reinhard Zinkann What direction is the global household appliances market taking? What are the trends, and what is the outlook for the coming year? Dr. Reinhard Zinkann, Chairman ZVEI Household Appliances Division gives his overview on the dawn of the world’s premier consumer lifestyle event, IFA Berlin. Dr Reinhard Zinkann Chairman ZVEI Household Appliances Division After two years of growth, the 2012 global market for major appliances stagnated in value - more or less, depending on the currency you take as basis for the calculation. If you take the US-Dollar as basis, the global turnover with large appliances dropped by one percent compared to 2011, according to GfK figures, but if you take the EURO as basis, the outcome is some positive growth. So the “sales of units” is probably a more meaningful figure. And here GfK reports a slight increase of two percent. There is no reliable figure available for the global market value for small appliances. There was growth in many markets, like in China, Russia, UK, Australia, Germany or France. But there were also declines in other countries. I think it is not wrong to assume that in total, the global business with small appliances was a bit more successful than the one with major white goods. This divergent evolution of small and major appliance sales is not particularly unusual. While the purchase of a washing machine or refrigerator is usually a well-considered step, small appliances are sometimes subject to impulse buying. Or they are bought as a present. For many product groups of small appliances the penetration rates in private households are comparatively minor so there is a good potential for further business. And some new products have only recently left the starting point like vacuum cleaner robots. But no matter whether we talk about small or major appliances: in simple terms we can divide the appliances world into mature markets, which are dominated by replacement business, and emerging markets, where absolute sales volumes are rising constantly. GROWTH MARKETS Naturally, manufacturers try to exploit business opportunities in the emerging markets. These regions have truly amazing growth. In 2002, the gross domestic product of the so-called BRICS countries, Brazil, Russia, India, China and South Africa, was less than 9 percent compared to the global GDP. In 2013 it will likely reach a share of 22 percent. In those countries we see a fast paced urbanization. The standard of living is rising and – consequently – the demand for consumer products is growing. The penetration rates of core appliances like washing machines and refrigerators are very high in saturated markets, close to 100 percent. In China by comparison the penetration is around 65 percent - considering all regions, not only urban areas. And in India the penetration rate is even less. So the growth of markets is very different. Only six years ago, Western Europe, which is still the largest market for major appliances in terms of value, had a share of 31 percent in the global market. In 2012 this share had declined to 24 percent. In order to successfully exploit these opportunities, we have to understand and adjust to different cultures and markets, their customers and their needs. Because people's habits of cooking or storing food, washing or doing the dishes vary considerably from continent to continent, even from country to country. “IFA is our leading trade show for home appliances. We will play our full part in continuing the IFA success story.” Consequently, home appliances have to match very different expectations of consumers. They are subject to different local trends and habits. KEY TRENDS As one might expect, energy efficiency is still a strong trend. One reason for the boom of high efficient appliances is the rise of energy costs in many regions. In Germany, electricity costs almost doubled in the period from year 2000 to 2012. Consequently, consumers tend towards efficient appliances to cut down their energy and water costs. 12

News Market? gives his outlook for the sector Rising energy costs translate into growing market shares of high efficient appliances. For example: In Germany in 2011, the combined sales share of A-double-plus and A- triple-plus dishwashers was close to 38 percent. One year later, in 2012, it was almost 50 percent. Such or similar developments in terms of consumer’s demand for high efficient appliances can be seen in many regions worldwide. The other reason for the market transformation towards efficiency is political regulation. Examples are the energy label and various ecodesign measures. Both have been successfully implemented in many countries. These regulations are subject to a regular revision to follow technical progress and they are extended to even more product groups. The 2013 working plan of the European Commission lists not less than 34 different measures of labelling and ecodesign. Lots of household appliances are listed in this plan, like vacuum cleaners, coffee machines, hoods, ovens or cookers. The focus is more and more shifting towards “resource efficiency” and governments are looking into every environmental related aspect, from the cradle to the grave. The debate is about recyclability and the use of materials, about the re-use of old appliances and about durability. A start has already been made by the European Commission, as the upcoming ecodesign regulation for vacuum cleaner will call for a minimum lifetime of 500 hours for the motor. PROSPECTS FOR COMING MONTHS Naturally, any attempt at a forecast is subject to quite a number of risks and uncertainties, whether political or economic. There are many “ifs” and “buts”. Nevertheless, I think there is a good chance that the global market will pick up in the last part of 2013. In the United States, consumer confidence is slowly coming back. There are some positive signs of expanding employment and a gradual recovery of the housing market, which could further support an upward trend. And there is no reason why Latin America should not perform quite well again. Furthermore, it seems that the Asian appliances market is returning to growth. Especially the increasing purchasing power of a growing consumer-oriented middle class is a strong impetus for further growth. On the other hand, I am afraid Europe will remain a matter of some concern. The market will continue to be weak, or at best flat. This trend is mainly characterised by the weak demand in the Southern parts of Europe, which can hardly be balanced by expanding sales in other countries. Considering all these developments: I am quite optimistic that in 2013 the global appliance market will achieve a positive result. Certainly we hope that the IFA show in Berlin will foster our worldwide business and give further impetus to the global home appliance market. IFA is our leading trade show for home appliances. We will play our full part in continuing the IFA success story. IFA International • Monday 2 nd September 2013 13

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