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Electrolux 2019: Electric Bugaloo

Electrolux reports first-quarter earnings well above market expectations as the Stockholm-based home appliance manufacturer reassessed their strategy to cut lower-margin products and increased efficiency following mounting costs for raw materials and tariffs during the US-China trade war last year.

Both Electrolux and their foreign rivals have been cutting expenses on both their lowest earners as well as their overall production. Coupled with hiking up the prices just enough to offset the cost increases in the North American market, the new strategy has managed to keep the home appliance industry afloat in uncertain socioeconomic terrain.

While adjusted operating earnings of Electrolux fell from $141.8m last year to $135.6m today, that still remained well above the industry expectation of $129.3m, largely attributed to the over-performance of the North America arm as a result of the cost-cutting measures and price increases.

Driven by the increased prices and strong performance in North and Latin America as well as consistent growth in Europe, sales for the company grew an overall 6 percent to $3.1bn, comparable performance to those of rivals Whirlpool and LG Electronics.

Electrolux, which also owns home appliance brands AEG, Zanussi, Frigidaire and Vintec, retains a market share of 15-16% worldwide, with the Australian marketshare exceeding 31% at its peak while South East Asia remains the lowest market share at 5%.

Founded in 1919, Electrolux was the product of a merger between Svenska Elektron AB, a junior company founded 9 years prior by a former vacuum salesman, Axel Wenner-Gren, and the long-established Lux AB. Initially widely known as a pioneering vacuum manufacturer of Stockholm, Sweden, still under the Lux brand, Electrolux today specializes in a wide variety of home appliances as well as industrial machinery, following a century-long process of expansion and acquisition.

In 1925, the company absorbed AB Arctic and added absorption refrigerators to its product line, soon becoming the leading manufacturer of home appliances in Sweden, soon becoming multinational with factories opening up in the UK, France and Germany through the 1920s. In 1931, vacuum factories opened in Connecticut, United States and Australia. Floor buffers and kitchen appliances entered the product line by the late 1930s and early 1940s.

Washing machines soon followed in 1951 and dishwashers in 1959, with the leading model remaining in production until 1973. In 1956 another company, soon-to-be world leader in electrical pump manufacturing AB Separator, bought majority control of the company and through it, the affluent Wallenberg family of Sweden assumed majority control of the company.

Through an ensuing merger with Elektro Helios in 1962, the company expanded substantially, adding several new factories and product lines of stoves, compression refrigerators and industrial kitchen equipment, and launched their final iconic logo that is still in use today.

The Electrolux aesthetic became a common element among the burgeoning product line of home appliances – off-tone light colors, rounded corners and mixed outer materials consisting of a combination of hard plastics and lightweight metals such as aluminum with rubber trims helped popularize the Electrolux kitchen as a concept, with world leading designers such as Carlo Vivarelli of Switzerland and Hugo Lindström and Carl Otto of Sweden designing the kitchen of the future. Following the advent of a multitude of kitchen appliances during the economic boom years following the Second World War, new home appliance companies were appearing everywhere, leading to a fractured market.

The key to the company’s initial success during this time was its decentralization – with a multitude of the separate brands and acquired companies continuing to exist in some form to retain their base consumers and brand recognition while the main company was made public in 1928, from which point it was run by a board of directors under a chairman, rather than a company president. The company was however de facto led by the CEO, Hans Werthén, from his hiring in 1967. Werthén oversaw significant restructuring of the company and the European home appliance market in general, with Electrolux pioneering the aggressive expansion and merger and acquisition with a multitude of other brands that all had their existing product lines and factories incorporated under Electrolux. The following decade saw the biggest expansion for the company through mergers and acquisitions, including Danish Atlas, Finnish Slev, Norwegian Elektra and Flymo until 1969.

Werthén was later appointed Chairman of the Board in 1975 as a reward for his efforts in attaining what was then a market leadership position in Europe, while Gösta Bystedt became the CEO. The expansion of the company hardly ceased however, Electrolux acquiring nearly 60 other companies worldwide through the 1970s, including sowing machines, refrigerators, freezers and even industrial machinery and chainsaws. This period of rapid expansion culminated in 1980 with the acquisition of the metal conglomerate Gränges at discount prices following the steelindustry crash of the 1970s. And with it, Electrolux gained control over metal production and refineries, aluminum and copper production and even seat belts, while selling off the elements of the company that were no longer profitable.

Over the next 10 years, Electrolux continued purchasing companies across Europe, expanding their grasp on the continent, through acquisitions of Paris Rhône of France, Progress of Germany, Zanussi of Italy and Thorn EMI of the UK.

Also US-based brands such as Frigidaire, Gibson Appliance, Kelvinator, Yardpro and renowned White-Westinghouse were acquired in the mid-1980s, together making Electrolux the second biggest home appliance company in the world, after Whirlpool of the United States.

Following Werthén’s resignation as Chairman in 1991 and a rapidly changing economy, Electrolux struggled somewhat to keep a competitive edge over newer competitors from Asia such as LG Electronics that were gaining prominence on the international market, alongside the strengthening of Whirlpool’s European sales. The company survived nevertheless through strategic restructuring and paring down of older businessmodels and product lines in favor of more profitable designs. In 1995 Electrolux opened the first retail chain of their own, Electrolux Home, and pioneered several modern appliances that received widespread use today such as the first commercially available robot vacuum.

After a century of consistent success in the face of adversity, it’s not difficult to imagine the US-China trade war was ever thought of as much more than a blip on Electrolux radar. Nevertheless, the company took all the necessary steps to prevent anything more than a hiccup in their profit margins and continue to not only persevere but thrive, even in the changing geopolitical climate of the 21st century.

 
 
 
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