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issue: February 2004 APPLIANCE Magazine

European Report
Merloni Expanding in Central and Eastern Europe

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by Paul Roggema, European correspondent, APPLIANCE magazine

Globally, many manufacturers have been shifting production East to areas such as China and Eastern Europe.

And since the fall of the Berlin Wall, the European white goods industry has followed suit. Whirlpool and Electrolux acquired brands and factories, and BSH is expanding its plant in Poland. Low wages (as low as 150 euros per month) are one of the benefits of moving East, but manufacturers are also seeing the need to produce locally to successfully build a brand position.

In December, Italian appliance maker Merloni Elettrodomestici formally opened its new Central European head office in Budapest, Hungary. The Hungarian Secretary of Finance and the Italian Ambassador were present as Merloni announced a new office, a logistics center, and a call center for the Central Europe region. Other initiatives, announced earlier, include a new washer factory added to the Russian Stinol facilities and expansion in Poland. The company's existing cooker capacity in Lodz, Poland will double in size and a new refrigerator plant will be added. The total investment exceeds 100 million euros throughout a 3-year period.

"This shift in production capacity meets the need for a more even balance between output levels in Eastern and Western Europe," says Aldo Taddeo, Merloni's managing director, Central Europe. "About 86 percent of the company's total production is provided by its plants in Western Europe, a region that only delivers 67 percent of the company's sales. Further, while Western European markets are showing growth of slightly over 2 percent, Eastern European markets are enjoying double-digit growth rates.

"Our Budapest office will house the country management for Hungary, Czech Republic, Slovakia, and Romania," Mr. Taddeo adds. "The call center for these countries is already operating. A new warehouse of 30,000 m2 [that will hold] 500,000 units per year will be opened in cooperation with a logistics partner. The office and call center now employs a staff of about 80, but fast growth is foreseen."

As for production, both Russian and Polish factories will reach the 1 million-mark after expansion, making them some of Merloni's larger facilities.

According to Mr. Taddeo of Merloni, each Central European country requires a different approach. "Hungary and Poland are very price-sensitive, but Czech customers got acquainted with German quality and have somewhat higher demands. Romanians want to upgrade from old-style products," he explains.

"Communism favored high-rise buildings with small apartments, so space-saving products are typical for these markets. Here, the smaller front-load washers are popular. Also, French-style top-loaders are popular," Mr. Taddeo says. "In cooking, we try to maximize oven capacity, while keeping a small footprint. Smaller (45-cm in width) dishwashers do well; however, total dishwasher market penetration is low."

Currently, Merloni's market share is about 15 percent in Central Europe, and in Russia, the Stinol brand is number one.


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