issue: March 2006 APPLIANCE Magazine
Liebherr: The Cooling Specialist
Email this Article
by Adite Chatterjee, Contributing Editor
When it comes to engineering, it’s German engineering that emerges with a reputation as the international leader. And it is German engineering that gives Liebherr, a family-owned corporate group, its technological and creative edge.
With a diversified product portfolio that includes construction machinery, appliances and aerospace and transport technologies, the 4.5-billion euro (approx. U.S. $5.5 billion) Liebherr Group has established its presence in more than 21 countries. Its appliance division contributes nearly 13 percent of the group’s total sales revenue and is the second largest business division for Liebherr.
It was in 1954 that Hans Liebherr, the group’s founder, set up the appliance division. The post-World War II environment and the reconstruction of Germany offered a business opportunity that Liebherr was quick to grasp. As Germans set about rebuilding their homes and lives, the demand for refrigerators grew exponentially.
Throughout the years, the group has steadfastly focused on refrigeration products, enhancing its product quality and designing innovative products that deliver value to global customers who are looking for top-of-the-line refrigeration appliances. It is this niche-within-a-diversified-business-portfolio strategy that is perhaps one of the most distinctive features of the group’s business model. Says Joachim Platten, managing director of Liebherr: “As a diversified group, the appliances division gives our business portfolio balance.” And in the process, Liebherr has emerged as the “cooling specialist.”
Liebherr’s SBS 2410 is a built-in refrigeration system with three separate compartments—the refrigerator, freezer and the BioFresh compartment. Each section has its own dedicated compressor and cooling circuit, creating different temperature and humidity zones.
Doing Things Differently
Since the beginning, Liebherr has striven to do things differently. As Platten explains, “We don’t get into business unless we are confident of making a profit, unless we know that we can earn money in order to make further investments.” It was this mentality that drove the decision to invest in the company’s Ochsenhausen, Germany plant. Hans Liebherr set up the first appliance plant very close to his hometown, base of the automobile giant Mercedes-Benz and a region which some consider to be “home to German invention.”
Although Liebherr now has plants in Austria and Bulgaria, the Ochsenhausen plant continues to be the main source of new designs. “The people here are innovative, and they have a special feel for design,” Platten says.
So while the global trend is moving manufacturing plants to lower-cost destinations, Liebherr has chosen to stay in Ochsenhausen and benefit from its key strengths: its human capital, attention to innovation and product quality, and a focus on aesthetics and design.
Today, the Ochsenhausen plant is spread throughout 200,000 sq m, has staff strength of 1,697, and has an output of 828,000 appliances per year. The facility is an example of German excellence—not just in product manufacturing, but also in innovative processes.
In its quest to achieve quality, it adopted a concept of teamwork on its assembly line. Each staff member no longer completes a single type of assembly work for hours. Liebherr management created “assembly islands” at two stages in the production process: the pre-foaming stage and at the final assembly stage. At these assembly islands, two- or four-member teams work much more efficiently as the functions are rotated among them. This helps reduce job monotony and keeps the staff motivated.
Platten believes that Liebherr’s core strength is its employees. The company employs nearly 11,000 people from the Ochsenhausen region alone. “We share a common history,” Platten says. “A guarantee of the quality of our products is the people who work here. They identify with the company, and we gain from their experience.”
European Styling for the American Market
There are many “European features” that Liebherr feels will appeal to its newest consumer—the American. Some of the products that have been introduced by Liebherr in this market have several unique design features.
The Fully Integrated Refrigerator/Freezer Concept is one such aspect. European Integrated Refrigeration is completely hidden inside a pantry cabinet. Liebherr engineering allows the unit to be integrated into a sliding hinge system attached to cabinet doors. The only evidence of an appliance is a thin air vent in the toe kick.
The Dual Refrigeration System facilitates optimal conditions in both the refrigerator and freezer whereby separate silent compressors ensure accurate temperature and humidity control. Ice-cold dry air circulates in the freezer section, while the refrigerator maintains cool, moist air, thus sealing in nutrients and safeguarding food. This technology also reportedly preserves the flavor and texture of foods since there is no transfer of unwanted air, moisture or food aroma between the two compartments.
The 48-inch SBS 2410 is a built-in system with three separate compartments—the refrigerator, freezer and the BioFresh compartment—each with a dedicated compressor and cooling circuit. This creates different temperature and humidity zones and is said to guarantee the constant maintenance of the set temperature in each compartment.
For long, Germany has been the key market for Liebherr’s appliances. Catering to this quality-conscious market has helped the company design specialized cooling products that meet consumer needs as well as create a core group of dealers. “Being German, we are technology-driven, quality-obsessed,” Platten says. “There is a lot of premium on reliability and continuity.” It seems these factors have helped Liebherr establish its credentials in the European market.
The focus on innovation has resulted in many “firsts” for the appliance division of Liebherr. Beginning with the frost-safe system rollout way back in 1966 to the changeover to CFC-free appliances in 1993, patenting of the BioFresh technology in 1991, and creation of the automatic ice cube maker in CFC-free appliances in 2003, innovations are vital to Liebherr’s success in Europe. While in 1996 new products were launched an average of once every 7.5 years, by 2004 the company sped up its product launch cycle to every 3.1 years.
For Liebherr, innovation is not just tinkering with features or models, but a value addition that helps enhance consumer lifestyles. Says Michael Brielmann, managing director, Overseas, “We are specialists in cooling, and we focus on that. Our aim is not to copy competitors, but to offer new solutions to the consumer.”
Take the BioFresh technology the company patented in 1991. This unique technology has allowed Liebherr to offer refrigerators that feature a combination of temperatures and humidity to keep different types of food fresh for longer periods. In fact, the company says studies have shown that technology enables food to retain their nutrients for a longer period. “As a result, our products are not just setting new trends, but also ensuring that they meet our consumers’ desire for a healthier lifestyle,” notes Platten.
Today, Liebherr is a market leader in the very competitive German market in the mid- and high-price segment of the bottom-freezer combination refrigerator segment. In fact, it seems competing in the tough German appliance market has turned out to be a blessing in disguise for this appliance maker. For instance, the German requirement for environmentally friendly products drove Liebherr to design products that are not only energy-efficient, but also create production processes that are geared to meet international quality standards.
“Eighty percent of our products are rated A++, a certification provided by the European Standard for Refrigerators, signifying the energy efficiency level of the appliance,” notes Platten. “According to the standard, appliances are rated from A to G with the most-energy-efficient rating being awarded the A++ and the least G. Similarly, in North America, all of our products have qualified for the tough Energy Star® rating, which means that they consume 15 percent less energy than other appliances in the same category.”
Although its roots are in Western Europe, Liebherr entered the East European marketplace in 2000 with the opening of its state-of-the-art plant in Marica, Bulgaria.
A Logical Progression
With the European market expanding, the Liebherr focus on quality and innovation has ensured that the appliance maker’s success in other markets as well. Says Platten: “Our strategy has been to enter markets wherever we see a potential for a high-end product. But ours is a step-by-step approach to growth.”
Keeping with the “logical progression” of entering new markets, Liebherr has now established itself as a key brand in Austria, Belgium, Spain, France, Italy, and the Netherlands. Its foray into East European markets in 2000 was marked with the opening of its state-of-the-art plant in Marica, Bulgaria. Says Brielmann: “In these markets too, Liebherr has emerged as the premium brand.”
Adds Platten: “Even in Bulgaria, we built a greenfield project with German equipment, management and machinery, and created a state-of-the-art facility. In the beginning, all the components that were used were supplied from Ochsenhausen. Only after we were sure that the plant would be able to manufacture them did we stop supplying them.”
As in the German and Austrian facilities, the emphasis was on recruiting highly educated staff. However, the Marica location is unique in that product designs and production leads are geared toward the mass market. In fact, production at the Bulgaria facility is so high, products are being marketed in high-end markets such as Germany.
As competitive pressures begin to grow in the European market, the company has started to expand its global operations. “A couple of years ago,” says Brielmann, “we opened offices in Singapore for the Asia-Pacific market and in Russia. North America too is an important target market for us, as there is large potential for a high-end brand like ours.”
The challenges, of course, will be different for Liebherr in markets like the U.S., where it has to concentrate on building brand awareness. However, Marc Perez, vice president, North America, is not worried: “Our products have features that are different from the American brands, and these features offer specific solutions to the needs of American consumers.”
With a range of nearly 300 basic models and 800 different executions—including finish, styling and aesthetics—the Liebherr portfolio offers a huge selection of products that meet American needs. Says Perez: “Our approach for the North American market is to establish Liebherr as a top-of-the-line brand. We have selected the higher-end models of our extensive European range for North America, and we have developed exclusive features for that market.” (See sidebar, “European Styling for the American Market”.)
Apart from its design-and-quality advantage, the other key element in Liebherr’s global expansion is its distribution network. Liebherr selects just one importer for each of its overseas markets, which then looks after the retail market. Brielmann explains: “It is a unique distribution system which is very cost-effective and is based on a relationship of trust.”
Platten notes that the distribution system is lean and that the products are directly imported by the distributor. “As a result, we are not adding cost layers, and the Liebherr sales office in the country just provides whatever support is needed,” he says.
This distribution strategy, adds Perez, will be a major advantage for the company in the American market. “It sends out the message to distributors that we are long-term players, and we are interested in partnering with our distributors and growing with them instead of just using them,” Perez says.
The Liebherr Mantra
For Liebherr, the future clearly lies in the overseas markets, particularly North America. As Brielmann says: “Diversification and global presence are stabilizing factors for the company. With an above-average shareholder equity of 52 percent, Liebherr is in a very good financial position to invest in new products and technologies to meet consumers’ changing needs. Our product philosophy of launching high-tech products and our marketing strategy of going step-by-step will together help us to succeed in the competitive U.S. market.”
So even as its competitors struggle to cut costs and move production lines to low-cost countries, Liebherr has mastered the strategy of making profits by producing high-quality products with the best materials, equipment, managerial input, and processes. As Platten says: “What is needed are good cost structures, lean management and volumes. We believe that cost-cutting should never be at the cost of quality.” And that, perhaps, is the mantra to Liebherr’s global success.
|Suppliers mentioned in this article: