Dishwashers in Argentina

Headlines

·         Dishwashers achieves the highest retail sales growth in large kitchen appliances with a 19% increase in volume sales and nearly a 40% rise in current value sales in 2008

·         Dishwashers continues to be a niche category that is clearly driven by premium home construction

·         The table-top format shows the largest volume increase at 27%, although it still accounts for just about 4% of dishwashers retail volume sales

·         Increasing raw material costs are behind the sharp unit price rise of 18% in 2008

·         Retail sales growth is forecast to total 23% in volume terms and 30% in constant value terms by 2013

Trends

·         Retail sales of dishwashers achieved a new record with 32,000 units sold in 2008. Sales continued to be driven by premium home construction in the upper-income areas of the country. The limited availability of automatic dishwashing powders, liquids and tablets deterred some potential customers, especially among middle-income families. Moreover, the leading companies, Whirlpool Argentina SA and Argentron SA, failed to address this situation, so this impediment to growth is likely to remain.

·         Table-top dishwashers posted the highest growth, a 27% volume sales increase due primarily to the fact that this format does not require any kitchen modifications. Because of this advantage, the format was a very popular choice for middle-income families who wanted the convenience of a dishwasher right away but did not want to engage in expensive retrofitting of their kitchen.

·         Because most brands of dishwashers were imported from the eurozone, the rise in unit prices virtually matched the fluctuations in the exchange rate which saw the euro rising 18% against the peso in 2008.

·         Throughout the review period, retail sales of dishwashers were comprised nearly entirely of freestanding units due to their lower installation costs. Argentinian consumers are reluctant to install built-in units due to the associated costs and the inconvenience of having to hire professional installers.

·         Dishwashers offered for retail sale were primarily the full-size, 12-dish model featuring multiple wash programmes, since this was also the most popular model among real estate developers of high-end properties. The recent introduction in 2007-2008 of compact and table-top formats orientated towards smaller kitchens and smaller families was not readily embraced by middle-class families. As a result, dishwashers failed to become established as an accepted, general appliance by middle-income consumers.

·         Consequently, dishwashers retained its image as a premium product group aimed at higher-income consumers. This perception, along with its high unit price, effectively limited its target audience. The appliances were sold primarily through electrical goods retailers like Fravega and Garbarino in select locations, such as the Belgrano and Palermo neighbourhoods in Buenos Aires, and through the major hypermarkets.

Competitive Landscape

·         Argentron led in volume sales of dishwashers with a 41% volume share in 2008. The company's aggressive focus on nurturing its relationships with real estate developers and kitchen specialists helped maintain its share despite the loss of retail space in electrical goods retailers due to increased competition from Electrolux Argentina and other companies. Whirlpool Argentina was in second position with a 28% volume share in 2008 (down from 39% in 2007). The nearly 12 percentage point share drop it suffered resulted from its failure to engage real estate developers and increasing competition from Electrolux Argentina in retail outlets.

·         Electrolux Argentina jumped to a 12% volume share following the reintroduction of its dishwashers in Argentina as part of its portfolio expansion into premium products after the company's withdrawal in 2002. The company was able to accrue a significant share of volume sales by virtue of its stellar reputation as a domestic electrical appliance company in Argentina. The company maintained the highest customer satisfaction among high-income consumers as a result of the durability of its products, the ready availability of its products through electrical goods retailers and hypermarkets and its strong brand tradition.

·         Dishwashers continued to be considered a premium appliance due to its high unit price. Even the smaller, economy models offered by Argentron and Whirlpool Argentina were considered premium products by potential customers. Moreover, its high operating cost due to the need for expensive automatic dishwashing powders, liquids or tablets, compounded by its limited availability, continued to deter middle-income consumers from considering the addition of a dishwasher to their kitchens.

·         According to industry sources, technological innovations and marketing are critical factors for the future retail growth of dishwashers. Most Argentinian consumers have not yet realised the benefits of having dishwashers since most of them have domestic help. Furthermore, companies have not launched active marketing campaigns to make potential customers aware of the appliance's timesaving attributes. Many consumers already feel burdened by the expense of domestic help and utility bills. Hence, it is crucial for manufacturers to not only offer quality products, but also invest in marketing campaigns to inform customers about the convenience and time savings offered by dishwashers.

Prospects

·         The demand for dishwashers in Argentina will likely continue to be generated by the construction of premium homes over the forecast period. Despite the fact that the number of consumers who employ domestic help will decrease due to declining disposable income, the introduction of more economical products will be necessary before dishwashers are considered an essential item. Co-branding and cooperative marketing campaigns between dishwasher manufacturers (eg Argentron SA and Electrolux Argentina SA) and manufacturers of automatic dishwashing products (eg Unilever de Argentina SA and Procter & Gamble Interamericas Inc) could increase the exposure of both products groups. Consumers, especially middle-income consumers, would become more aware of the value of dishwashers as a home appliance, and could be assured that automatic dishwashing products were readily available through various retail channels.

·         Problems with dishwashers imported into Argentina in the 1990s created the perception that the appliance has durability problems caused by the hardness of the water, is relatively inefficient and, therefore, has limited usefulness for day-to-day activities. In view of this, appliance and household care manufacturers must collaborate to launch campaigns to educate consumers about the practicality of this appliance.

·         Full size dishwashers units will likely remain the dominant format, since most new dishwashers are installed in newly constructed homes with kitchens that can accommodate a dishwasher without retrofitting. Table-top dishwashers is expected to remain a niche format since most existing kitchens have limited table-top space that is already occupied by other appliances like microwaves and coffee makers. Despite its smaller size, the compact format is likely to have limited success in the forecast period since it also requires a degree of retrofitting to accommodate its installation, which adds to its initial expense.

·         Longvie SA, the leading manufacturer of large cooking appliances, announced its intention to expand into dishwashers. It plans to offer a more economical alternative to the imported brands, which will be favourably received by middle-income consumers who are currently deterred by the high unit price of dishwashers. However, any positive impact on retail sales of dishwashers will likely be offset by declining economic growth and sagging consumer confidence in the forecast period.