Co-branding Electrolux

For many, the reentry of Electrolux in the Philippine market three years ago was a surprise. At that time, Sweden-based AB Electrolux already owned three popular brands in the refrigerator segment alone–White Westinghouse, Kelvinator, and Frigidaire–which were manufactured and/or distributed by local partners.

Even more surprising was the company’s decision to put up a wholly-owned subsidiary, the only European/American consumer durables company to do so.

"Electrolux is still perceived as a door-to-door business in the Philippines even though direct selling now accounts for only 1% of total global sales," said Electrolux Phils. Inc. president Vichai Lorattawoult. "When we reentered the market in October 2001, we decided to concentrate on two of our brands–Electrolux and White Westinghouse– which were then idle. In the case of Electrolux, this was because we closed down our direct selling business. In the case of White Westinghouse, our local partner, Philippine Appliance Corp., had shut down, in part because of higher costs brought about by importing the bulk of the parts needed to produce refrigerators."

To date, 80% of local sales have come from refrigerators, which are sourced from the Electrolux Group’s production facilities in Brazil and China, and from washing machines, most of which are made in Thailand. Cooking appliances and vacuum cleaners account for the balance 20%. (The introduction later this year of dishwashing machines is not expected to dramatically change the product mix in the short term).

Double Branding

In an effort to capitalize on the White Westinghouse name, an American brand popular with Filipinos, the company has double-branded all its refrigerators as well as its top-load washing machines to White Westinghouse-Electrolux. The Electrolux brand name is used for the fun-load washing machine, which is smaller and more technology-friendly than the top-load version.

Double-branding is a marketing strategy practiced worldwide by Electrolux. In its 2003 annual report, the company stated that it wants "to build Electrolux as our leading global brand. In countries where we have strong local brands, we double-brand these with Electrolux. This makes the local brand a platform for building the Electrolux brand."

The annual report also profiled its consumer base as "those willing to spend more for products that better meet their real needs and preferences."

In the Philippine market, the attraction of technologically-advanced appliances comes from consumers who have had global experience, either because they have the wealth or the working experience.

"The Philippine market is an interesting one. On the one hand, you have consumers who have lived abroad. This market covers not just the A-B markets with obvious purchasing power but also overseas Filipino workers. On the other hand, you have consumers who are attracted to the good quality of our products but need some sort of financing to buy our products. This is the market we would like to develop," said Lorattawoult.

The local market for refrigerators is estimated at 500,000 units per year, the same market size as washing machines. Based on industry data, first semester 2004 sales have gone up, year-on-year, by about 50%, auguring well for the traditionally strong sales generated by consumer durables in the second semester leading to Christmas. As in previous years, Metro Manila accounted for half of total sales.

Consumer-Friendly

"The decision to buy an appliance is made by the family, rather than by an individual. The decision to buy an appliance is also a rational rather than an emotional decision. For these reasons, building brand awareness through product availability and right pricing is important. Equally important is building consumer confidence through after sales service," said Lorattawoult.

Electrolux maintains a spare parts and training center in Sucat, Parañaque. It also has tie-ups with local partners in 60 locations nationwide to service the 300 dealer-outlets where its products are distributed.

"Eighty percent of after-sales repairs are completed within 36 hours; 90% within 48 hours. Most of the problems arise from consumers not knowing how to use the appliances that they purchase," said Lorattawoult.

The twin strategy seems to be working. An informal tracking of appliance sales from the 17 malls operated nationwide by the SM Group showed Electrolux currently among the top three appliance brands in the country tod