issue: February 2006 APPLIANCE Magazine
The Koreans in Europe
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by Paul Roggema, Europe Correspondent
A major change is brewing in Western European white goods retail stores: the rise of the Koreans.
The white goods market is known to be difficult for new brands to enter, but LG, Samsung and Daewoo are now found in the majority of stores in some areas of Europe. What is their strategy, and what can we expect in coming years?
"My company only started selling white goods in Europe about 5 years ago. Before that, we only sold microwaves," Rex Wijngaard, sales director, LG Electronics Benelux, tells APPLIANCE. "But now, with our brand getting broad recognition through products such as LCD TVs and cell phones, the company wants a worldwide market presence in white goods. The strategy for Europe is to focus on a few segments of the market; we do not want to follow the market with mainstream products."
Currently, LG's appliance product leaders are side-by-side refrigerators, which are relatively new for Europe, and direct-drive, front-loading washers. "Side-by-side [refrigerators] are the current hit product for Europeans, and growth is about 30 percent yearly," Wijngaard says. "We adapted to the smaller European kitchens by offering different depths. Fastest acceptance is in the United Kingdom, France and Benelux. As kitchens are used more and more as part of the living room, people are looking for upgrades in furniture and appliances. A side-by-side attracts attention as a premium appliance, with the icemaker and water cooler as sexy features.
"Market share of SbS models in Europe [all brands] now is estimated at about 5 percent in units [shipped], but much more in value," Wijngaard explains. "Most of LG white goods products still come from Korea, but we are planning a new factory [for different products] in Poland. Our European design center in Milan, together with a research and development center in Paris, studied local taste in each European country and adapted design as far as possible.
"Many consumers in Northern Europe prefer clear, geometric shapes, where the southern countries want more emotion in their design: sweeping curves and 'fun' details. In side-by-sides, size does matter: in the beginning, when U.S. models were imported, the models with 90 cm depth would not fit through doors and delivery was plagued by problems. Now cabinets are 60 or 70 cm, and doors are removed before delivery."
LG washers are unique because of their 7 kg capacity within a standard footprint and because of their direct-drive motor. Both features, and their benefits, are easy to communicate to customers. Direct-drive does not come cheap, but clearly distinguishes the LG brand. The washers target the upper-half of the middle segment, where Bosch/Siemens and Electrolux's AEG brand are LG's competitors.
In the spring, LG will add another innovation: the steam washer. Already available in Korea, it should further enhance the market image.
Competitor Samsung has offered side-by-side refrigerators in Europe since 2000. The company also studies kitchen trends, of course, and the company calls its approach "cold technology and warm, user-friendly design." Samsung sells refrigerators, washers, air-conditioning, vacuum cleaners, and microwaves in Europe, with most products made in Korea. Samsung was the first to offer 7.5 kg washers with standard cabinet depth, an under-100-minute washing time, A-class performance, and a unique detergent liquidation system. Its current Silver Nano technology should help it build a premium brand image. The top model washer is a large-footprint washer-dryer combination laundry appliance—it washes and dries in a single drum. The unit has a 10 kg wash-capacity and 6 kg dry capacity.
In refrigerators, Samsung's Twin Cooling system has fully separate evaporators in both compartments, and the CoolSelect meat/vegetable drawer has a separate temperature control (-11 degrees celcius to 2 degrees celcius).
Samsung's strategy is to expand in high-end segments while maintaining presence in the middle segment.
To Be Continued: Legal Battles Over Beer Taps
Home beer taps, engineered with built-in cooling, are a huge success in Europe. First came BeerTender, introduced by Krups (a Groupe SEB brand) and Dutch brewer Heineken. Soon after, Belgian brewer InBev joined forces with Philips to develop a competing product. (Philips worked with Heineken early on, but the two firms parted ways in 2002.)
The competing home beer tap marketers met in the courtroom in 2005, and in December, a court in The Hague (Netherlands) decided to reject a complaint from Heineken. Heineken asked the court to stop Philips from selling its PerfectDraft product.
The battle is not over, as the court only decided that the type of court was unfit to settle a legal problem as complicated as the beer tap battle and that another court should resolve it.
Similar troubles have embroiled manufacturers of coffee pods and coffee pod machines using the Philips Senseo system. An Antwerp, Belgium court recently overruled previous Belgium, German and Dutch court rulings and declared that the Senseo patent claims were valid. The patent addresses the specific dimensions of the 62-mm pod and the so-called by-pass problem: how to prevent the water from bypassing the coffee pod inside the machine. Competing coffee makers are offered under brands as Petra, Severin and Bosch. German coffee specialist Melitta escaped legal troubles by designing a separate pod format with matching hardware.
The court in Antwerp may, or may not, have ended the legal maneuvers surrounding pod-using coffee makers. The home beer tap issue will likely continue winding through the courts for some time. In both cases, significant revenues are at stake: 10 million Senseo coffee makers and several hundred thousand beer taps have been sold already.