issue: August 2005 APPLIANCE Magazine
Special Report - Candy Group
A Growing Tradition
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Jill Russell, Associate Editor
Family-owned Candy Group is taking a traditional approach to increase its market share and bump up its standing in the European appliance industry.
Keeping a traditional approach to manufacturing, Candy uses a mix of manual and automated systems that are flexible and can easily be tailored to the specific needs of its front-loading washing machine plant in Brugherio, Italy.
Italian appliance maker Candy Group has set its sights on increasing its market share and leadership position through product innovation and quality control as it reaches another milestone in the company extensive history its 60th anniversary.
First established as a mechanical workshop in 1919 by Eden Fumagalli, the company then made up of father Eden and brothers Niso, Enzo, and Peppino decided to manufacture a semi-automatic washing machine in 1945. The Candy Model 50, or the first all-Italian washing machine as the company coins it, featured an aluminum tub and a mangle press to wring out water.
In 1946, after World War II, the company decided to officially launch the washing machine after Enzo came back from the U.S. Niso, who was the technical mind in the family, developed the idea into a working prototype. Once the idea was proposed and approved by their father Eden, Peppino took hold of the administrative reigns and developed the initial management structure of Candy.
Three years later, Candy introduced its Model 45 washing machine. The unit featured a 3-kg capacity, a central beater, water heater, and a waste pump. In 1958, Candy released what it claims was the first fully automatic washing machine in Italy. The appliance featured 10 programmed cycles and a 550-rpm spinner. Then in 1961, the company relocated to its current headquarters in Brugherio, Italy, where it started production of its laundry appliances and still does today. Even then, as it does now, Candy invested in product design and technology, releasing several new washing machines. Although the company had enjoyed success with its washing machines up to that time, Candy decided it needed something more to carry it into the future.
In 1966, the company invested in its first of a series of new product segments with the introduction of the Stipomatic dishwasher. According to Candy, the dishwasher was the first automatic unit in Italy and featured three separate dishwashing compartments, different wash cycles, and an eight-place setting capacity, with room for pots and pans.
During the next three decades, a series of acquisitions would help Candy diversify its product offering. In 1970, the company added the cooking segment to its line-up with the acquisition of Italy-based companies Niven and La Sovrana, and also entered the refrigeration market with Italian-brand Kelvinator Italia. Wasting no time, Candy entered the international refrigeration segment in 1980 with the acquisition of the Kelvinator brand, which included factories located in the UK. Acquisitions soon followed with the addition of Italy-based Zerowatt, specializing in front-loading washing machines, and Gasfire, a leading cooking appliance producer. The year 1987 welcomed in Rosires, a France-based cooking appliance manufacturer. Candy added Mayc-Otsein of Spain, a maker of top-loading washing machines, in 1992, and Iberna, an Italian refrigeration company, in 1993.
Then, after a brief acquisition hiatus, Candy added Hoover European Appliances Group, marking the company entry into the floor care segment. Candy says this acquisition has been the most important to the companys success, as the Hoover brand currently holds the number one position in the European floor care market. Also a player in the refrigerator and laundry segments, the Hoover acquisition included the brand name in North Africa and part of the Middle East, in addition to Europe. In 2003, Candy expanded into Russia with a joint-venture with Zavod, which allowed Candy to produce and market floor care appliances in the region.
For 60 years, the company has been a successful producer of white good appliances, launching several product developments and claiming many technological firsts for the region. Originally producing only 30 washing machines a day with less than 100 employees in the first year of production, Candy has since grown and expanded both in size and strength.
The company says it currently holds between the sixth and fifth spots in the European appliance industry, up from the number 10 position only 12 years ago. In 2004, Candy Group produced 5.6 million appliances, which now includes laundry, cooking, refrigeration, and floor care products, with 5,041 employees that span factories in five countries. Despite the companys extensive growth, the company has remembered its roots and continues to invest in what started it allthe washing machine.
The companys laundry facility, located in Brugherio, Italy, alone produces 900,000 washing machines each year with a workforce of 450 people. And with a capacity to produce between 1.2 million to 1.3 million units a year, the company says it is continuously working to seize opportunities to help exceed its current capabilities. This philosophy is applied to all facets of the company, including its management philosophy, brand strategy, production facilities, and product portfolio.
In addition to its many acquisitions and product introductions, Candy says that its company structure and family tree have helped sustain the companys success. Originally established by Eden Fumagalli and his three sons Niso, Enzo, and Peppino, the company is now managed by Aldo and Beppe Fumagalli, sons of Peppino, and Silvano, Maurizo, and Eden Fumagalli, sons of Niso. Aldo, the companys chairman, says that the traditional, family style of management it follows from its corporate operations to its production facilities, is a trait that runs back to the Fumagalli heritage.
We come from a very particular region of Italy named Brianza,? Aldo Fumagalli explains. People that come from this area are very well known in Europe for two basic things: being very pragmatic and attention to costs. So this is very good for managing a company, he quips.
Silvano Fumagalli, CEO of Candy, agrees: One important factor in our group is the presence of family, he tells APPLIANCE. It is important to have direct contact with the people on top of the organization when you need to discuss a specific project.
The Fumagallis describe the structure of the Candy Group as a flat organization. This, according to Aldo Fumagalli, creates trust within the company because there arent several levels of management. We [the Fumagallis] have a certain weight in the management, but the organization has 18 first-level managers, Aldo Fumagalli explains. We, the five members of the family, are deeply involved in both strategic and day-to-day operations of the company, but we do not cover everything.
According to the Fumagalli family, the benefits of owning the company allows them the fortune of consistency. Aldo Fumagalli explains: In this type of business, it is more important to not make an error than to go faster than others. I think this is the rule when you have to put your face in front of the same customers for 20 years, not just 3 or 4 years, and this is a strength.
Carrying on the tradition of a family-owned business, the third generation of the Fumagallis is dedicated to bringing Candy to a new level and increasing its market share ranking by one spot within the next year. The company prides itself on its traditional values and believes that those values, coupled with strong branding and product innovation, will allow the company to reach the ultimate goal of doubling the company in the next 5 years.
Front-loading washing machines just off the assembly line are placed in a quality testing lab, where they are closely monitored during operation and are later disassembled and inspected part-by-part to ensure reliability.
Give and Take
One of the many keys to achieving the companys goal of increasing its size, according to Aldo Fumagalli, is maintaining a strong brand portfolio. But strong, at least in this case, One of the many keys to achieving the companys goal of increasing its size, according to Aldo Fumagalli, is maintaining a strong brand portfolio. But strong, at least in this case, does not always mean large. Only 10 years ago, Candy maintained a large brand portfolio made up of 11 brands. Today, the company has implemented a brand management plan that narrowed those 11 brands down to only two international brands the Candy and Hoover brands. The two brands cover all key markets, while the companys national Rosires, Iberna, Otsein, and Zerowatt brands are supported in selected countries. The dual branding exercise, as Candy calls it, was utilized to join national brands with the Hoover brand in order to increase the awareness of the Hoover brand.
Implemented in 1999, Candy Groups new brand strategy will eventually allow the company to represent the entire European market, with the Candy brand placed at an average positioning and medium price point and the Hoover brand placed at a medium to high position. Using this type of approach, the company said that it has experienced both positive and negative results, but is now benefiting after dappling with a little give and take in terms of market share.
The implementation of the dual branding result has been, in some cases, a little painful, Aldo Fumagalli admits. In some countries, our national brand had strength as a brand that took over higher positions in the market. By changing our strategy], we had to give up some shares throughout Europe, but weve more than gained the small loss by now with a very strong Hoover brand throughout all of Europe.
The companys two-brand strategy has set the foundation for its share of the European market. According to Aldo Fumagalli, the Hoover brand now represents approximately 40 percent of Candy total product portfolio. Managing the brand portfolio in Europe is challenging, the tells APPLIANCE. Europe is not like the U.S., where you have single markets or a single division of the market. Here, you have some 26 countries, and you have to find the correct market strategy. To always keep the brand on the same magic level is very, very difficult. The key, he says, is remaining flexible in both production and management.
The Candy Group has stayed at its headquarters in Brugherio, Italy since moving there from Monza, Italy in 1961. The 130,000-sq-m plant produces up to 900,000 washing machines annually and has a capacity to produce up to 1.3 million units a year.
A Flexible System
Candy says that one of the many ways it has attained its increased market share is through its flexible production capabilities. At its Brugherio plant, the company prides itself on the ability to continuously produce a variety of 33-, 40-, and 60-cm washing machines with 4- to 6-kg capacities. The manufacturing operation is made up of six main parts the cabinet production line, painting line, drum assembly line, final assembly line, quality control stations, and the packaging line. All machinery is controlled by a computer that takes into account just-in-time (JIT) forecasts and scheduled production for various-sized products. This allows the needed number of different-sized units to be produced automatically without having to stop production or make major changes to machine or tooling operations.
Just as the Fumagallis carefully plan the companys branding, this notion is also applied to the manufacturing side of the company. Although the manufacturer is currently updating its automated steel welding line for the cabinet manufacturing, the company doesnt look at the most advanced automation as a winning solution for its production line. We are not investing heavily in robots and laser We would rather select technologies and processes that can be easily transformed and reconfigured to new products in a small amount of time Our priority is on set-up time rather than overall productivity. Instead of investing in robotic equipment, the company invests to improve its logistics, its network of JIT suppliers, and its working environments and conditions.
We have no plans to make huge investments at the risk of having to make another investment to change a problem, says Silvano Fumagalli. This pragmatic and practical mode of thinking is evident throughout the entire plant. Instead of using automation as a way to reduce the amount of employees needed, Candy uses its automated processes as an asset to help its employees. According to Silvano Fumagalli, the most automated part of the plant includes the metal preparation and painting of the cabinets and the conveyor system, while much of final assembly is performed manually. The automation in the assembly line is to make the physical activity easier and to save time in the work cycle. It is there to improve the working environment in general, he says.
Innovation and improvement have always been deeply rooted in the family, and the company is making continuous changes to improve its operations. To be efficient in our industry, it is not a matter of making a tremendous revolution in changes in the process, Silvano Fumagalli tells APPLIANCE. It is more a process of continuous improvement.
The first process at the Brugherio plant is cabinet production. Steel panels in pre-cut sizes are moved via a conveyor through a bender that forms the backside of the unit. Next, the front panel is stamped, and the two pieces are welded together by a series of automated machines. The cabinets are then moved down the conveyor system and placed on hangars, where they are transported to the painting line.
During the painting process, the cabinets are first cleaned and rinsed off. Then, they are pretreated in a 60-m long bath using a clear, anti-corrosion coating with a layer of zinc phosphate. Here, the cabinets are moved through a set of paint bins, where they are submerged and coated by an electrophoresis process in the 60,000-L paint run. In the vats of paint, copper bar lines produce an electrical current between the paint and the cabinet. This, Candy says, ensures that paint covers every inch of each cabinet during the final painting stages.
After the cabinets have been pre-coated by electrophoresis and heated by the first of two ovens at 175C for 20 min, they are ready for painting. First, a low-solvent white coat of paint is sprayed on. A magnetic disc in the middle of the painting booth creates a 100,000-V charge that allows paint particles to attract and adhere to the steel cabinet. The cabinets are then sprayed with a second coat of white paint and treated at 209C for an additional 20 min.
After painting and drying is complete, a conveyor moves the cabinets to a quality check. Each cabinet is hand-checked for paint mars, imperfections, and scratches and are pulled off the line if they do not meet quality standards.
While the cabinet is being constructed and painted, the washing machine drums are being assembled. First, a pre-cut piece of stainless steel is sent to a bending station to ensure a completely circular form. The bottom of the drum is then pressed and crimped together. The company says it avoids the use of spot welding to avoid future corrosion in the drum.
After the drum is constructed, the plastic tub is installed. Candy uses a polypropylene tub with glass fibers, available in different colors. Since 1963, Candy has used an elliptical tub that is said to help save water and energy. Because of the tubs shape, it fits perfectly around the circular drum and Candy says that less water is needed to operate its units because the volume of water needed is reduced. In addition, Candy says its design helps reduce energy by as much as 30 percent because there is less water to heat due to the reduced volume.
Before the drum is inserted into the tub, a temperature control with two bearings on each side is attached. The bearings help balance the load of the machine while in use and prevent the drum from rotating off axis. The drum is then inserted into the tub and screwed together at the bottom.
Once the cabinets have been painted and the tub and drum have been assembled, the two meet for final assembly through nine assembly lines. The final stages of production are completed manually throughout the last stretch of conveyors. Here, the motor is attached to the tub. Candy produces its own electromechanical motor, but uses a supplied electronic-controlled motor, depending on the model.
Simultaneously, cabinets are equipped with a rubber fitting to help reduce vibration during operation. Next, a water discharge pump is installed, and wiring for the motor is added. The drum is then dropped down into the cabinet, and the wiring and drum are secured. Other electronic components installed at this time include thermostats and heating elements. At the last step of assembly, the control panel is attached to the front of the cabinet, and the unit is then moved on conveyor to a series of quality control and test stations.
Checks and Inspections
As an internal control, the company performs hand-inspection of the unit at the end of each major assembly or production station. Every station checks the previous stations mechanical assembly before installing the new parts. Once final assembly is complete, units are connected to a computer, which checks the position of the tub and the electrical system and prints a report. If any errors are detected, it is reported to the plants quality manager, who accesses the problem and, if necessary, stops final assembly production by batch number to correct the problem.
Control tests are also conducted to evaluate the units operation during washing and spin cycles. If everything is correct, the final cabinet is ready for packaging. Of the total number of units ready for packaging during a given day of production, 3 percent are taken off the line and sent to a quality control lab, while another 15 percent are routed to an extra quality test line, where the long washing cycle is set into action and evaluated.
The company says that it performs such extensive testing to maintain a high level of reliability and loyalty with its current and potential customers. It is better to invest in quality at the production level more than at customer service facilities. That is why we have three different quality control systems, Guglielmo Pasquali, group marketing director for Candy, explains.
At the quality control lab, washing machines are run for full cycles and are observed and tested for vibration and noise. After the appliances are approved under operation, each unit is then disassembled to ensure that every nut, bolt, and screw are tightened and fitted properly. Candy says if operators find anything wrong with a unit at any time during the final assembly and quality control, the entire batch is pulled off production until the origin of the problem is found and corrected.
Once machines have passed the point inspection at the quality control lab, those units are also moved to packaging. During packaging, styrofoam edges are placed on the unit, and it is shrink wrapped. Candy says it uses shrink-wrap packaging because it allows the product to be seen, which helps operators remember to handle the units more carefully when moving them from inventory for shipping. Next, an international bar code is printed and placed on the packaging. The label contains brand, commercial name, model number, date of production, and a code associated with the manager on duty at that time for easy reference and inventory purposes. Units are then immediately placed on trucks for shipping to warehouses, distributors, and retailers. Candy says it stores a maximum of 1 week of production, or 17,000 units, in inventory at one time.
Ensuring Long-Term Success
Maintaining its long-earned brand image, Candy works hard to ensure its products provide a high level of quality not only inside the factory, but also during the lifespan of its products.
With a life expectancy of approximately 8 to 10 years, Candy currently stocks 600,000 codes of spare parts if something should go wrong with one of their washing machines. In a large warehouse, the Gias Company, the customer service subsidiary of Candy, stocks parts from up to 10 years ago, with the quantity of each part determined by the amount of sales for each model.
As a further investment in quality, Candy says it will build a service center prior to entering a new market to ensure its services will be available once production starts. The company currently has more than 2,000 service stations in Europe, with an average of three technicians at each station.
In addition to the companys attention to product quality, Candy says it has to pay close attention to product innovation because the European market is heavily saturated. Close to 99 percent of the households in the region have a washing machine, and it is about the same for refrigerators and cookers, Mr. Pasquali, explains. The market is large, but its replacement only in the West, where it is slowing down. In the Eastern countries, it is still growing stronger, yet the trend is toward a quick saturation. Only Russia showed substantial growth rates in the past years: its still the most promising market.
According to Mr. Pasquali, Candy will concentrate on its laundry and refrigeration product categories, in addition to continuously improving its cooking and floor care products, to remain a leader in the highly competitive European market. From a strategic point of view, this year and next year, we are investing a lot in cooling products with innovation and field testing to grow in the European market, he says. We are also putting a lot of pressure in laundry, both front- and top-loading models.
Candy has not wasted any time getting started and recently introduced several new products. In the refrigeration segment, the companys new Biocold Future Activa range is said to consistently control the temperature in a bacteria-free environment through the use of electronic controls, a high-placed generator that allows the air to fall and circulate evenly, and an anti-microbial material. In the second quarter of 2005, Candy also launched a new series of vertical, frost-free freezers featuring an improved design and a storage section for frozen pizzas.
For its laundry division, Candy introduced a new range of top-loading washing machines with 5.5 kg capacity and the 5+5 combination washer/dryers, which also handle a load capacity as large as 5 kg and eliminates users from unloading part of the wash before drying. In addition, the company recently introduced a new model of the Hoover Vision washing machine with 6-kg load capacity and inverter-motor. The Internet-ready unit features a large inclined door and drum for easier loading and an AA or AAA energy consumption and washing and spinning efficiency rating, depending on the model.
A New Era
In response to how the company expects to stay ahead of the competition during the next several years, Aldo Fumagalli says Candy will follow the same path the company started on 60 years ago investing in product quality and performance and adding the value of good design. Call it innovation, call it very strong marketing, call it whatever you want. We devote the entire strategy so that the product produced in the shop is something different from what our competitors are doing, Mr. Fumagalli notes.
Looking to the future, the Fumagallis believe the next few years will be an interesting time for the European appliance market. The company says it believes that there will be a reduction in the number of overall appliance brands, despite some Eastern umbrella brands entering the European market.
Now, the discussion is open again between civilities of war, says Aldo Fumagalli. Today, it is between specialized brands and large, umbrella brands like before. Who will win the attention of the customer? History says that the latter will have to make up their minds and cannot invest everywhere. Of course, we stay very convinced that specialized brands are better than umbrella brands.