Whirlpool Corp – Consumer Demand For Household
Appliances – 15 July 2021
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Specialist:
Title:
Moderator: Nyree Hinton (NH), Third Bridge Sector Analyst
Joshua (Josh) Gitlin (JG)
Former General Manager, North American Region at Whirlpool Corp
Agenda:
1. Consumer trends within kitchen and laundry appliances and impact on Whirlpool Corp (NYSE: WHR)
2. Component shortages
3. Global sales strategy and restructuring
4. Inflationary pressures and demand outlook
Contents
Q: Could you give an overview of the kitchen and laundry appliances industry? How has it evolved over your
years there?
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Q: Could you discuss industry dynamics from May to June 2021?
Q: Is there a risk of oversupply, given capacity issues are currently being resolved?
Q: How has Whirlpool transformed over the years to add new brands and re-innovate its products?
Q: What have players done to benefit from the growth you’ve described over the last year or to take market
share? You said they weren’t really using pricing to take share. How are players staying competitive and
taking advantage of growth vs benefiting from overall category growth?
Q: Why do you think Whirlpool lacks a stronger presence or is not
Q: How would you assess the distribution landscape, perhaps through some of the retailers? Where is the
focus?
Q: Could you assess Whirlpool’s ability to keep or raise prices and capture some of the industry margin
expansion?
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Q: How would you say the retailer-manufacturer relationship has progressed? How much control does
Whirlpool have over price points at the retailer level?
Q: Could you elaborate on brand loyalty and how consumer shopping patterns are trending, on quality and
when considering brand repositioning or rolling out new products?
Q: Could you discuss consolidation and what you’ve noticed around businesses being aggressive and
acquiring more brands? What’s your outlook for acquisitions or deal activity to pick up? Would you say
consolidation is a factor to come on board during H2 2021 to 2022? Do you think premiums are too high at
the moment?
Q: Could you expand on e-commerce’s impact on the appliance industry?
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Q: How do you think newer, smaller international companies have been able to quickly make a strong
presence with US consumers and win over brand affinity? I believe you mentioned one of them merged
recently and built out new distribution with Lowe’s. How are newer manufacturer entrants gaining market
share?
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Q: What do you think investors should monitor around Whirlpool and its most pressing challenges – not
necessarily category or overall industry challenges but ones specific to the company in a newer environment
where demand meets supply and promotional activity heats up?
10
Whirlpool Corp – Consumer Demand For Household
Appliances
Transcription begins at 00:00:04 of the recorded material
NH: Welcome to Third Bridge Forum’s Interview entitled Whirlpool Corp – Consumer Demand For
Household Appliances. I am Nyree Hinton and I will be facilitating today’s Interview with Mr Josh Gitlin,
former General Manager, North American Region at Whirlpool Corp.
Josh, before we get started with today’s Interview, please state I agree or I disagree to the following statement:
You understand the definition of material non-public information and agree not to disclose any such
information, or any other information which is confidential, during this Interview.
JG: Yes, I agree.
NH: Thank you, Josh. Could you start with an introduction to your background and various roles you’ve held
in the industry?
JG: I worked at Whirlpool for over 25 years. I had a unique opportunity over the years to work with the last
three CEOs on a number of projects, the last several North American business presidents, VPs of sales,
marketing, supply chain. My role as General Manager that I was in for about seven years was responsibility for
regional projects as well as leading one of the brand’s business units. The kinds of projects, the subject matter,
with topics like industry forecasting, competitive analysis, enablement for areas like e-commerce, product
development, addressing tariff mitigation, developing trade customer strategy and parts and service strategy
as well. Some past areas I had worked, a lot of depth in sales, sales leadership, capabilities, enablement,
process work, as well as North American strategy, insights, innovation, M&A over the last 20 years. I left
Whirlpool a little over a year ago and I started Decision Advisors, helping different businesses make better
decisions, whether it’s investment, due diligence, working with trade customers, enabling e-commerce. That’s
a quick update. One last thing, I’ve also been on some various boards of directors for research institutes within
the industry, like the Home Improvement Research Institute, and started up a number of the research
initiatives, looking at the industry from Whirlpool’s perspective.
[00:02:53]
Q: Could you give an overview of the kitchen and laundry appliances industry? How has it evolved over your
years there?
JG: I’d say before the last 12-18 months, if you could imagine an industry that historically had been relatively
flat, usually not more than a couple of points up and down, and impacted typically by recessions and interest
rates. The competitors, typically, were full-line-type competitors like GE, Samsung, LG, Electrolux, Bosch, and
then also competing against the super-premium brands like Wolf, Sub-Zero, Miele, Gaggenau, Thermador,
Monogram and others. Then COVID hits in March of last year and the shipment roller-coaster by
manufacturers kicks in. When I refer to these numbers, I’m talking about what the industry refers to as the T6,
which is the core, the washers, dryers, refrigerators, dishwashers, ovens. April last year, in 2020, industry was
down, and these are YoY-type numbers, industry dropped 40%, and when I say dropped, these are industry
shipments. May dropped 10%, YoY, June started to flatten, and then Q3 last year, the roller-coaster started
going up. Q3 was up 8%, Q4 was up 20%, which amounted to a full year up about 5.5%. Then we get to 2021
and Q1 was up about 27%. Then, if we go all the way through, through week 22, the industry is up close to
29%.
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At first, this increase is refrigerators and freezers, then people are spending time at home, realising their other
appliances aren’t working, discretionary purchasing is kicking in, in addition to all the regular normal duress
purchases. Then later in the year, when people start becoming a bit more comfortable with people entering
their home, remodelling starts kicking in and then some new home construction starts as well. By the end of
last year, the NAHB, the National Association of Home Builders was projecting about 1.3-1.41 [sic] single-
family housing starts, which would be the highest pace since September 2006. What was also happening in the
industry was this build-out in single family and multifamily went well beyond the East Coast, West Coast. It
was actually highest, it was double digit in the Midwest. It was higher in the south than the west and the
northeast. When you look at the growth in the builder market, the primary beneficiaries of that are Whirlpool,
GE and those super-premium brands. The builder market is not one where the Asian competitors, the Korean
companies, have really gotten beyond single-digit-type market share.
To wrap up this question, so at the end of May, demand was still outstripping supply and for the first time in
the industry, whether it was kitchen or laundry, the manufacturers are not chasing market share. They’re
selling everything they can. They’re steering production to either higher average sales value models or models
that could be made more productively. That takes you through May and I think through that week, I
mentioned the industry was up 29% and refrigeration was up 28% YoY, laundry, up 32%, ranges, 22%, dish,
24%. Even a product that’s not core, countertop microwaves, was up over 37%. All these categories seeing the
benefit of COVID, of what happened with changing consumer behaviour due to COVID.
[00:08:06]
Q: Could you discuss industry dynamics from May to June 2021?
JG: I think this gets to what’s been happening in Q2, and I’d really confine Q2 to what I’m starting to see
happening in late May to June. I alerted you or I mentioned that demand was way up through week 22 and
there were many factors for that. People are just spending on things, are spending on appliances because they
weren’t spending on other discretionary-type items, but in the last 4-5 weeks, I think what we’re starting to see
is people are spending money on other things like vacations and their stimulus spending is either done or they
may have saved it. Many states are cutting their unemployment benefits, but on the plus side, probably in the
future months we’ll probably also see some anticipated benefit from the uptick of the child tax credits from the
Biden administration, with many of those people getting those being homeowners.
Back to what we’re seeing after week 22, as I mentioned earlier, last May and June, May was down 10%, June
was flat. What’s happening since week 22 is the industry, year to date, has now dropped. It went from being up
29% to being up 26%, so in the last month, we’ve started to see slowness. Week 22 was only up 2%. Week 26
was showing growth of 3%. Earlier, I was talking about growth numbers of 20-30% and we’ve consistently
seen some of these single-digit-type growth numbers over this last month. The growth has slowed. We are
seeing refrigerators and ranges still double digit, as those tend to be more remodelling-oriented products, but
laundry is flat and dish is down. When I noticed this dip in week 22, it wasn’t a trend, but now that we have 4-
5 weeks of a trend developing, it’s probably, I’d probably say, healthy and expected that this industry isn’t
going to be up 30% all year. I think we’re probably starting to see the reality and the normalisation at the
starting point of it. To remind you, last year, I mentioned Q3 was up 8% YoY and Q4 was up 20% YoY. It’s
quite possible that there are going to be some challenging comps in H2 of the year because I wouldn’t envision
industry being up 20% in Q3 or Q4.
On the counterforce side, trade inventories are very low. There’s going to be a significant amount of restocking
of trade to healthy levels, likely through Q3, and I’d anticipate that Black Friday, Q4 tends to be a strong
appliance-buying period and we might start to see some promotional activity start to kick in later in the year. I
think in the next few months, we’ll see a lot of catching up on both inventory levels, as well as many consumers
and retailers have back orders where the customers have been waiting months for their products to come in
and many of those orders will start to get fulfilled.
1 Specialist was referring to 1.3-1.4 million housing starts.
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[00:12:26]
Q: Is there a risk of oversupply, given capacity issues are currently being resolved?
JG: I think the industry tends to have, most of the bigger players have fairly robust inventory-playing
processes with their retailers. I think the demand signals are pretty good and collaborative between the top
retailers and manufacturers. I’d probably assume that because of the longer supply chain, LG and Samsung
might be at more risk from that, in that they can’t react to changes in supply chain signals as well as some of
the domestic manufacturers.
[00:13:23]
Q: How has Whirlpool transformed over the years to add new brands and re-innovate its products?
JG: I think as you look at the business and break it down by there’s geographic expansion, and I think you’ve
seen expansion into China, for example, and I think in the last few months there has been communication
about Galanz, the appliance maker, officially becoming the controlling shareholder of the Whirlpool China. I
think they’re going to have over 51% share. Whirlpool will still be a shareholder with about 20%. It will give
Whirlpool a capability to have a made-in-China capability, but it also would allow them to have some of the
advantages of having an experienced Chinese manufacturer. I think as Whirlpool has expanded globally,
they’re learning along the way. I think the Galanz signal, move is probably one to improve performance and
margins in that region. Similar, I think there was communication a few weeks about Arçelik signing an
agreement to acquire Whirlpool’s enterprise in Turkey. That probably is similar. It’s probably a more efficient
asset utilisation, margin improvement opportunity. I think they’re trying to minimise risk in those regions and
trying to optimise the margin opportunities.
The other part of it, I think, is leadership has a strong focus on the core businesses, the laundry and the
kitchen businesses, and they’ve also been getting rid of the non-core, so businesses like the compressor
business, things that might have been distractions. It’ll allow them to focus on their core business. I think one
of the major differences between Whirlpool and competition is its brand portfolio. While some brands like an
LG has LG and is trying to launch a bit more premium Signature, and Samsung is positioned somewhere
between a mass, mass premium brand, and they acquired Dacor for the super premium, companies like GE
tend to have GE and then they have sub-brands like Monogram or Profile, or Café, for example, Whirlpool is
really the only one that has as robust and as strong of a brand portfolio that stretches from value all the way up
to super premium. From an ease-of-doing-business standpoint, whether it’s for a builder customer or a retail
customer, it’s not just easier for the trade to do business with one company with multiple brands, but it also
just creates a lot of efficiency in distribution, sales force management, cost to serve that they get to benefit
from.
[00:17:44]
Q: What have players done to benefit from the growth you’ve described over the last year or to take market
share? You said they weren’t really using pricing to take share. How are players staying competitive and taking
advantage of growth vs benefiting from overall category growth?
JG: I think most of the retailers and the buy-group people would say that those who’ve grown have grown
primarily because they’ve had product available to sell. Vs other issues in the past where drivers might have
been around pricing or margin or programming, now it’s been quite a bit about do you have it available? Now,
when you look at winners and losers in this past year, I think people in the industry tend to look at Traqline,
which is a national survey of consumers that made a purchase over the last six months, and they produce
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quarterly data. The newest report comes out about three weeks at the end of each quarter. I think by next
week, they’ll produce their Q2 report and that’s really what the retailers and manufacturers look at to see who
the winners and losers are and confirm or challenge trends.
I’d say some of these observations I’d make would be based on public information, so some of the investor
calls, news reports. Frigidaire or Electrolux, for example, there’s been a lot of industry talk about them
performing well in the past year, but product availability seems to be an issue with the trade, and availability
and some of the cold and freezing weather in Texas and Mexico impacted their production probably worse
than others. Their foaming operations, the foaming supplier that made refrigeration, they appear to have
significant fulfilment issues across different categories. In the product category of laundry, semiconductors
have been an issue for many of the suppliers. Whirlpool had announced some parts issues to the trade on
front-load laundry and had very low production for an extended number of weeks in Q2. They also were
impacted by the supplier foaming issues in Texas and Mexico and had reported that to the trade.
When you look at what’s happening on the retail floors, I think the most significant thing is that two Chinese
manufacturers have gained a foothold on the floor at Lowe’s. Two very large appliance manufacturers, Midea
and Hisense, both brands are showing up with at least 10 SKUs displayed and available for purchase. I’d note
that while I’m not sure how familiar the American consumer is with those brands, or how familiar the analyst
community, US analysts are familiar with those brands, given that I was at Whirlpool and in the industry at a
time when LG and Samsung were launching 15-plus years ago, I think Midea and Hisense probably might be
even more formidable competitors, given their expertise in the appliance industry and how mature they are in
the appliance industry in other countries. I would say they’re not the technology powerhouses or have the
same kind of consumer reputation as LG and Samsung, but Lowe’s decision seems to be one of, “They’re a
company that can provide us something to sell, so we’re going to give them some space on the floor.” I don’t
have any information if that’s going to continue, but I would think that most appliance retailers are watching
that to see if it’s at all successful and that might give them some expansion opportunity in the US market.
The other thing, I think, that’s notable is that there are certain categories, particularly in refrigeration, where
the Korean companies do really well. Samsung and LG, for example, if you look at Lowe’s website, Samsung is
showing 73 SKUs, LG is showing 38, and Whirlpool, KitchenAid, Maytag combined, are only showing 15 for
sale. I think that points a little bit to Whirlpool really focusing in on the key selling SKUs, driving production
in a way that’s going to yield the greatest product and also support the trade customer with high levels of
availability, but with a smaller assortment of product being available to the customer. Then I think in
categories like top load, Whirlpool and Maytag are pretty similar to Samsung and GE, for example. I think in
front load, some of the issues that I mentioned earlier with Whirlpool’s front-load business, when you look at
the Home Depot website, they’re only showing mostly, or I should say they’re showing predominantly
Samsung and LG and one each of GE and Frigidaire. I think they may have to start earning their way back into
front load at Home Depot. I would also keep in perspective that in laundry, the top-load category is the one
that’s been growing and around 75% of all the sales are in top load, so having a small presence in front load is
not as dire as that might sound.
[00:25:17]
Q: Why do you think Whirlpool lacks a stronger presence or is not more competitive in some of the categories
you mentioned? Would you say the company’s global footprint is spread a little too thin?
JG: I’d say, as you look at the different categories, I guess for confidentiality reasons I really suggest you look
at Traqline to get a feeling for which brand and categories Whirlpool is strongest in. I’d say, from publicly
available information, I think back in December there was some communication around the French door
bottom mount refrigerator in Iowa, and a few moments ago I talked about that French door business and the
limited number of SKUs. Their communication in December was around a sale of that facility and then leasing
back production at that facility. I think they realise that that’s probably a category that market share had
declined and that had also been a category where the Korean competitors had strength. I think this is an
opportunity for them to probably evaluate how to be much more competitive in that space. This leaseback
opportunity gives them all the opportunity to determine how they’re going to create a world-class-type best-
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cost facility like they have in many of their other categories like laundry or dishwashers, for example.
[00:27:28]
Q: How would you assess the distribution landscape, perhaps through some of the retailers? Where is the
focus?
JG: Due to the size of the major big box accounts, you’ve got Home Depot, or, I guess, in order of outlet share,
you have Lowe’s, Home Depot, Best Buy, and then it drops down to Menards, but those four make up about
65% of all the retail sales, so it’s really critical for the top manufacturers to aspire to be in a leading position in
those channels. I guess when you look at Menards, Menards floor appears to be all Whirlpool. Having a 100%
balance of sale is a great position to be in. I think you can walk the floors at Depot or Lowe’s, at Best Buy, and
get a feel for who’s gaining space or losing space. The major evolution factor in the industry in the last 10 years
really has been Sears, the decline of Sears and Kenmore and the growth of Lowe’s and Home Depot. A
significant amount of share shifted from Sears to Lowe’s and Depot, as well as the independent channel. The
home improvement channel has become the largest channel for home appliances.
In distribution, I mentioned that you have those big four accounts that make up a majority of retail. There’s
also a builder business and the builder business is about 15-20% of the industry. What’s unique there is that
GE and Whirlpool have the leadership position there, and Frigidaire is a trailing competitor in that space, but
mostly at the more value-conscious SKUs. The Korean brands haven’t really been able to penetrate beyond
single-digit-type share. When you look at the top publicly traded builders, the largest ones, Lennar Homes,
Taylor Morrison, Pulte, Centex, they typically make a choice, it’s either GE or Whirlpool. There’ll tend to be
long-term contracts that have significant logistics and service capabilities built into those that some of the
other competitors just don’t have, or they may not have the brand portfolio that can be stretched enough to the
wide range of consumers and price points of homes that all those builders have.
There’s also the independent channel that makes up that retail business and most independent dealers have
aligned themselves with a buy group to make them more competitive. There are tens of thousands of the small
accounts that are part of those and then you have the larger accounts, regional players like PC Richard and
BrandsMart, and others, that also participate in that segment. For this independent segment, COVID was one
of the best gifts they could have had. Best Buy was shutting down stores for much of last year. Lowe’s and
Depot had shut down for different periods of time and COVID allowed them to gain several points of outlet
share in 2020 and also likely gaining a little share this year. While the independent channel is often
considered declining, I think it’s had a several-point uptick and it’s probably also allowed that channel to
reintroduce themselves to consumers. It’s also a channel that does a little bit better with remodellers and
consumers seeking to remodel because they tend to carry a higher mix of product than a Lowe’s or Home
Depot. They also have access to those more super-premium brands than Lowe’s or Depot would carry.
[00:32:36]
Q: Could you assess Whirlpool’s ability to keep or raise prices and capture some of the industry margin
expansion?
JG: Whirlpool leadership I think has stated in the past that they’re very good at managing go-to-market
strategy, extracting margin, taking cost out. When COVID started to hit in Asia, I think Whirlpool had the
benefit of understanding what shutdowns mean and when they started hitting North America, I think they
were ready with all their contingency plans that they announced, the public plans they announced around
liquidity and reducing SG&A and spending. COVID allowed them to switch production to a more narrow focus
of SKUs. SKU rationalisations tend to be difficult decisions in the industry, but COVID allowed them to focus
on fewer SKUs and I think that created a lot of improved margin.
From a cost perspective, I was mentioning that some of those publicly announced moves, they attacked the
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structural cost side of Whirlpool, the people side. Promotion allowances also got eliminated, to a great degree,
over this past year. When supply is so much greater than demand, excuse me, when demand is so much
greater than supply, there really was no need for the manufacturers to try to promote to increase demand.
What was interesting that happened was the retailers realised that they’re getting a higher shopping cart, all
their metrics around margin, margin percentage are improving, the manufacturers’ net sales and margins are
improving, and you also had price increases taking place that were related to tariffs. There were benefits of
liquidity measures taken. Last year, in an industry where the sales organisation typically had a lot of travel and
trade show expense, those were all eliminated. When you start taking all those actions, you also inevitably slow
different investments and projects. I think all those things have been reported and critiqued by analysts, but I
think it’s creating an even more competitive Whirlpool.
I think the challenge is that, at the promotion level, eventually we’re going to get to a point where the supply of
products and the demand start levelling. Then it starts to become a market share fight, which this industry is
known for. It had been pretty typical to be having anywhere from 10%- to 25%-, 30%-off promotions in this
industry. My sense from the industry is that the retailers don’t necessarily want to move back to that big-
discounting environment. I think they all tend to like making money. They prefer not to be in an environment
with 20%-, 30%-off sales. I think what we’re probably going to see is promotion activities start to heat up
again. Before this slowdown in shipments in the month of June, many in the industry were talking about
probably next Memorial Day or July 4th being the next big promotional period, but I think we’re starting to
see a signal that it might be a little bit earlier. I think plans are baked, pretty much, for Black Friday at many
retailers, but I think by early next year we might start seeing a bit of market share fighting starting to intensify,
but probably not at the levels that we’ve seen in the past, which I think should improve margins in the industry
historically, but I think it’ll be very tough for retailers as well as these manufacturers to comp the same high
levels of margins because they had such great tailwinds helping them over this past year.
[00:38:32]
Q: How would you say the retailer-manufacturer relationship has progressed? How much control does
Whirlpool have over price points at the retailer level?
JG: I’d probably say they have no, I would not use the word control because the manufacturer really has no
control as the retailer could sell the product at any price, but the manufacturers have, many of the
manufacturers have minimum advertised price policies and they also have cooperative advertising policies.
There are dollars at risk. These kinds of policies are not exclusive to any company, these are typical types of
programmes between manufacturers at retail, but to earn the promotional incentives and allowances, there
are minimum advertised prices to achieve those. Many of the retailers understand the incentive that’s out
there and want to earn that incentive. The major factor is just competition, that Whirlpool and the other
companies are striving to maintain competitiveness and if they’re not competitive in innovation and features
at the right price point, they know they have the potential to lose market share, really, no matter how strong
the brand is. It’s a highly competitive industry.
[00:40:42]
Q: Could you elaborate on brand loyalty and how consumer shopping patterns are trending, on quality and
when considering brand repositioning or rolling out new products?
JG: On this question of brand loyalty, I think you need to probably look at it through the lens of the consumer
and the retailer. The retailers are very aware that there are a significant number of consumers that have
installed in their homes many of these, what I’d almost call legacy brands like the GEs and Maytags and
Whirlpools and Kenmores out there. Some of these other brands like LG and Samsung, consumers aren’t
necessarily replacing those because that may be the first time it’s actually going in the home, since they haven’t
been in the United States more than one replacement cycle. From a retailer lens, many of these, a primary
determinant, from the consumer’s perspective, in brand loyalty is having that brand to even start with. That’s
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where a lot of the equity, that the retailers are well aware that they have to have these brands because they’re
highly considered by the consumer.
From the consumer lens, when you look at the Whirlpool portfolio, not just across the US, but they have five
brands that are over USD 1bn each. Looking at the US, Whirlpool, KitchenAid, Maytag have unique
positionings and are targeted to different consumer profiles. While they have a similar infrastructure, they all
have unique marketing and go-to-market strategies that are executed efficiently by a sales and marketing
commercial supply chain organisation. I think when you look at these brands, I think the more recent
phenomena, besides the typical marketing mix of activities to maintain your awareness and preference and
trust, it’s also star ratings, and the presence that the manufacturer has to maintain with the e-commerce part
of the retail organisations. If you look at how marketing was done several years ago, it tended to be more
traditional and the tools that are being used now in e-commerce are much different and the co-marketing
funds that the manufacturers spend, for the most part, have transferred over to supporting more of an online-
type approach to support all research that consumers are doing when they purchase the appliances.
[00:44:58]
Q: Could you discuss consolidation and what you’ve noticed around businesses being aggressive and acquiring
more brands? What’s your outlook for acquisitions or deal activity to pick up? Would you say consolidation is
a factor to come on board during H2 2021 to 2022? Do you think premiums are too high at the moment?
JG: I thin within the US appliance industry, much of the consolidation seems to have happened with brands. I
think over the last 10 years, many of the value-type brands have gone away. Some of those brands are not
participating in major appliances and have been retired as the manufacturers realise that the investment
required to maintain the awareness and preference, consideration for those brands, really focus in on their
core brands. I think the challenge that I mentioned earlier with some of these Chinese brands emerging, I
think those are concerns that are going to affect everybody, all the manufacturers in the industry, because I
think while they are showing up at Lowe’s, as they start showing up in other channels, that they have the
potential to start picking up a few points of market share over the next few years. I probably can’t speak too
well to the higher end, the super-premium brands. There’s been some private equity in that space, but I’m not
too knowledgeable about what activity may be taking place in that area.
[00:47:52]
Q: Could you expand on e-commerce’s impact on the appliance industry?
JG: I think in this space of e-commerce, the retailer-manufacturer relationships have been changing because
of direct-to-consumer. I think it’s not necessarily something to look at as manufacturers going it alone. It’s
really manufacturers today are better supporting retailers with, what I’d call this A-plus content. We
mentioned manufacturers are moving marketing funding from traditional media to more digital. I think it
often comes up that are the manufacturers going to go direct-to-consumer and bypass the retailer? I think the
main question is what are the manufacturers going to do? They’ll make it a better buying experience than what
the retailer does. That’s a real challenge because, in most cases, that key independent can deliver in one or two
days. Lowe’s, Depot, Best Buy, many of them have take-with inventory or they may not deliver in 1-2 days, but
what’s in stock at the store, you can take, or maybe it’s several days out, but they’re often offering free delivery,
haul away.
When you look at what the manufacturers offer, they really can’t come close to that kind of service level when
a customer has a duress purchase and they want a product in the next couple of days. Across the
manufacturers, Whirlpool and GE, because they have the most robust builder networks, they probably have
the greatest logistics capability to be able to execute that though. It’s interesting, though, that LG has the
highest online purchase rate of any of the brands. That’s according to Traqline. Traqline would say more
people are buying LG online than these other brands, which might make sense just because maybe they’re
targeted consumer is younger and more apt to make purchases online. I would say, whether it’s the retailer or
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the manufacturer, if you go on LinkedIn, you’ll see everybody is hiring direct-to-consumer talent. Whirlpool
has commented that they’re doing close to USD 1bn direct-to-consumer globally. I think across the domestic
industry, you’re probably still seeing maybe 2-3 points of direct-to-consumer business. It’s still a relatively
small percentage. I think the one interesting statistic is that Traqline would say that about 75% of consumers
do online research before they’re buying. I think there’s just a set of consumers who, if price is about the same,
they would just as soon buy from the manufacturer if they don’t have any strong affinity or loyalty to any
retailer. I think the manufacturers are preparing for that, but I think the bigger ones anyway all perceive that
the risk of alienating any of the top three or four retailers and builders just may not be worth the reward at the
current time.
[00:52:09]
Q: How do you think newer, smaller international companies have been able to quickly make a strong
presence with US consumers and win over brand affinity? I believe you mentioned one of them merged
recently and built out new distribution with Lowe’s. How are newer manufacturer entrants gaining
market share?
JG: I think the Koreans, like the LGs and the Samsungs, again, like I mentioned earlier, when you look at the
brand and you use the lens of how does the retailer perceive it and how does the consumer perceive those
brands, I think they’re both saying that both brands bring technology and a pace of product launch that is
faster than what the traditional appliance industry is used to. It’s not to say that the appliance industry,
domestically, hasn’t caught up because some of the most innovative new products in the last year in laundry or
dishwashers have come from Whirlpool, but the pace of change, like, for example, LG, their technology in
smart appliances and trying to link it back to appliance service hasn’t really been successfully done in the
industry. Samsung, some of it’s technology, but some of it’s also the design, the modular design, the Bespoke
product line and the different colour configurations you could do on refrigeration. These tend to be more
premium-type price points as well, and then also what I’d call the purple cow, that when you put them on the
retail floor, they demand the end cap because they’re so unique and different. The retailers tend to want to
show them off because they draw traffic and those innovative products, while you may not sell that product,
you’re going to sell the other Samsung or LG products because of that.
[00:55:21]
Q: What do you think investors should monitor around Whirlpool and its most pressing challenges – not
necessarily category or overall industry challenges but ones specific to the company in a newer environment
where demand meets supply and promotional activity heats up?
JG: I’d probably say that once that demand hits supply, the growth of the Korean competitors in some of the
categories like French door bottom mounts would be concerning, or that the duties that are expiring on
washers in a couple of years then creates pricing pressure. I think their focus really has to be on innovation at
the best possible cost. There are examples where they have four-door refrigeration product that they’re
importing now from China and that’s allowed them to address some of those gaps, but I think some of the
record margin that they’ve been able to achieve, they’re exceptionally well at reducing cost. I think the
challenge will be on managing how aggressive they are on matching competition on promotions, because that
potentially would be a threat to margin expansion. I think the other piece is just managing all the channels. In
many cases, they have a leadership position in many of those four channels that I highlighted, make up the
most of retail, as well as (? 57.52) position. They’re challenging and competing directly with GE in the builder
channel. They’ve changed so much, some for the good but they’ve also changed out a lot of talent in their sales
organisation. I think just being able to manage the distribution strategies and have strategic relationships with
Lowe’s, Depot, Best Buy, Menards, those are going to be key to maintaining their floor spots and growing in
those different channels.
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[00:58:39]
NH: Josh, I think that’s a good place to close today’s Interview. Let me close by saying thank you, Josh, for
your time today. It was a really great Interview, a lot to unpack. Clients, if you would like to speak to Josh in a
private call or meeting, please let your relationship manager know. Thank you, clients, for joining Third Bridge
Forum’s Interview today. Have a good one.
JG: Thank you.
Transcription ends at 00:58:54 of the recorded material
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