Source: CHEAA-run China Appliance magazine

After more than a decade of high percentage jumps, Chinese kitchen appliance market suffered its first fall surprisingly in 2018 and continues to go down in 2019. Yet this does not necessarily mean “winter is coming”. As mainstream enterprises step up their efforts in product upgrading and channel deployment, emerging categories such as dishwashers and electric steam ovens surge with an awful lot of momentum. The fast-changing industry is embracing a shakeup.

Emerging categories rise amid the overall downturn

Kitchen appliance industry fell by 2.7% year-on-year to a size of 67.8 billion Yuan in 2018 according to Broken down by categories, three traditional categories-hoods, gas ranges and sterilizers-dipped while emerging categories such as electric steam ovens (including all-in-one ovens with steaming function) and dishwashers posted double-digit growth, adding some luster to the gloomy market.

In the first quarter of 2019, retail sales volume of hoods posted 3.435 million units, down by 3.72% year-on-year, gas ranges 4.312 million units, slightly up by 0.8% year-on-year, sterilizers 0.7882 million units, down by 8.31% year-on-year while dishwashers 0.277 million units, up by 23.4% year-on-year, according to China Market Monitor.

Jin Xiangping from the kitchen appliance division of Panasonic believes a crucial factor behind the fall is China’s new rules for real estate market, which partially lead the industry to shift its priority from new market to existing market and enterprises to actively tapping into consumers’ replacement needs.

Despite the overall sluggishness, dishwasher sector and electric steam oven sector both maintained a double-digit growth in the past 2018. Dishwasher sector rose though at a slower pace with built-in models as the mainstream and in-sink models gaining ground. Electric steam oven sector expanded at a steady pace with built-in models accounting for more than 90% and all-in-one ovens with steaming function growing as a main driving force of the market. Ye Danpeng, Marketing Director of Robam, believes the emerging categories have just entered a stage of growth and will maintain a strong momentum for a considerable period of time.

Wang Weiqing, Senior Vice President and Chief Sales Officer of BSH China, says, “Performance of kitchen appliance market last year was sagging in many people’s eyes, which is not true. The market share of hoods and ranges shrank compared to a year earlier, which could be called sagging, but the performance of dishwashers and electric steam ovens have been exciting. Thus the overall performance of Chinese kitchen appliance industry is not bad.”

Mainstream brands posted strong track record

Most mainstream enterprises grew against the headwind, posting satisfactory figures, as our reporter learns from the annual reports of several listed companies. Robam posted revenue of 7.481 billion Yuan and net profit of 1.481 billion Yuan in 2018, a year-on-year growth of 6.61% and 1.36% respectively. Fotile saw its revenue from in-sink dishwashers and electric steam ovens grew by 40% year-on-year though the revenue growth from hoods, ranges and sterilizers slowed down. BSH China saw its built-in electric ovens taking a market share of 39.1% offline and 31.1% online. Haier’s kitchen appliances grew by 49.07% year-on-year. Vatti posted net profit of 0.677 billion Yuan, up by 32.83% year-on-year. Sacon grew by nearly 40% in sales. Rinnai registered a sales growth of more than 30%, though slightly slower than expected. Midea did not disclose annual figures of its kitchen appliance business.

Industry leaders have reached a consensus of no price war. Currently, domestic brands including Fotile, Robam, Haier, Vatti and Sacon and foreign brands such as BSH and Rinnai all adopt a high-end strategy with strong investment in innovation and R&D, jointly maintaining a considerable profit margin of the industry.

An active deployment of electric steam ovens, dishwashers and electric ovens is also a critical strategy for industry players. Fotile’s in-sink dishwashers and electric steam ovens posted dazzling figures. BSH’s built-in electric ovens gained big ground at both online and offline market. Sacon have been stepping up its deployment of emerging categories too.

A shake-up of brand landscape

After a fast-growing decade, the industry is shifting gears to enter a stage of intensified competition, which is expected to shake up the industry landscape.

Ye Danpeng from Robam says, “The industry is shifting gears, which means those who are less competitive in innovation and R&D and inferior brands will be thrown out the game and brands with high quality products and services will remain. This will propel the industry to be better regulated.” He is not alone. Zhang Wei, Quality Expert of kitchen appliance division of AEG, agrees and says, “The market will be increasingly dominated by leading players. There are signs of this trend already.” Chan Jianjun, Manager of Retail Sales of Kitchen Appliances of Rinnai, says, “The market is getting saturated. With more entrants in, the market competition will be fiercer, just like white goods market years ago. At this point, only the most hungry will go all out to have most of the pie.” He adds, “Down the road, a lot of brands will seek to transform. Those who eventually stand strong will be brands that integrated strong products, services, brand concept, reasonable price and smart functions.”

Active responding measures from enterprises

The intensified competition presents challenges as well as opportunities for kitchen appliance enterprises.

While attach increased importance to user experience and services to improve the added value of products, kitchen appliance makers shift their priority from top-tier and second-tier markets to lower tier markets, where great market demands are ready to be unleashed. Plus, industry players are looking at emerging categories while putting more efforts in innovation and intelligent functions.

Speaking of the future of the industry, Zhang Wei is very optimistic. He believes that, the market outlook is promising with the consumption upgrade trend going on and emerging categories booming. And he points out that the post-90s and post-00s generation, with particular requirements for technology, user experience and design, will have a profound influence in the development of future kitchen appliance dynamics.