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MP52048

MAPS SMALL ELECTRICAL KITCHEN APPLIANCES 1998

Overview

Table of Contents

Executive Summary

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EXECUTIVE SUMMARY

The market for small electrical kitchen appliances in the UK has consistently outperformed other electrical appliance sectors in the last five years. Unlike larger appliances sectors, such as cookers and washing machines, the small appliance sector has been much more recession proof with sales growing strongly from 1993 as the economy recovered. One of the main challenges facing the industry in the past, however, has been the tendency for consumers to view the products as low value, commodity items for basic household tasks, such as boiling water. It was therefore more difficult to encourage trading up in the early 1990s when there was still a relatively high level of consumer caution with regards to purchasing any appliances. Since 1993, however, the industry has been much more pro-active by investing in research and development into features that add value to what are generally relatively simple products. This has resulted in stronger growth both in volume and value terms.

The small kitchen appliances market is affected by a number of factors, including the general economic conditions and socio-demographic factors such as the increase in the number of single person households and the increase in the number of women working outside of the home. Other factors affecting this market include the levels of product innovation and technical developments, trends in fashion and styling of products, cooking and eating habits and levels of advertising and promotion. Of these, styling and design are becoming increasingly important as consumers are starting to view small kitchen appliances more as aspirational fashion statements than merely functional products. There has also been an upsurge in interest in cooking and food in general, as evidenced by the growing popularity of television cookery programmes and the ever expanding number of cookery and food based magazines available in the high street.

In 1997 the overall small kitchen appliances market was valued at £318m, an increase of 27 percent on 1993, with 12.3 million units sold, representing growth of 20 percent over the same period. The market is split into seven main product sectors: kettles, coffee & tea makers, food preparation, toasters, sandwich toasters, deep fat fryers and other table-top cooking appliances. For the purposes of this report, Market Assessment has grouped these sectors into two broad groups: food and drink preparation (covering kettles, coffee makers and food preparation) and table-top cooking (covering all other sectors).

The largest sector within the small kitchen appliances by both value and volume is that of kettles, taking a 36 percent and 43 percent share respectively. Toasters represent the second largest sector, accounting for 19 percent of the market value and 23 percent of volume. Food preparation takes a higher proportion, at 17 percent, of the market by value than by volume (12 percent) as food preparation appliances are generally more expensive to buy.

All sectors within the total market have shown strong growth since 1993 in both volume and value terms. Overall growth by value has been stronger, as the introduction of new features and technologies onto small appliances has encouraged consumers to trade up and spend more. The fastest growing sector in terms of value since 1993 is that of toasters, with a 40 percent increase to reach £59m in 1997. This growth is largely due to improvements in technology such as the development of cool-wall bodies and electronic browning controls. The kettles and deep fat fryers sectors have grown by 24 percent and 23 percent in value respectively while the other major growth area continues to be that of sandwich toasters, experiencing 38 percent value growth between 1993 and 1997. The coffee makers sector, after a period of steady decline, returned to growth between 1993 and 1997 with a rise of 17 percent in value, due largely to the increased popularity of the more expensive espresso and cappuccino makers.

The small kitchen appliances market continues to be characterised by growing concentration of supply, with manufacturing being centralised into a few locations supplying several countries. The market, as such, tends to be dominated by a small number of international companies that operate across Europe and beyond, with manufacturers such as Philips, Moulinex Swan, Tefal, Rowenta and Braun all having their corporate headquarters outside of the UK. Even brands perceived as mainly UK based, such as Morphy Richards, are owned by larger international concerns. In the case of Morphy Richards the brand owner is the Eire based Glen Dimplex Group. The main UK based manufacturerssuppliers are Kenwood and Pifco (who own the Russell Hobbs and Salton brands). Despite this concentration of supply, there are still a large number of brands and suppliers in this sector, and there is likely to be further rationalisation and mergers over the next five years so that companies can benefit from economies of scale.

The leading suppliers of small kitchen appliances in general operate across most product sectors, with many extending their brands into new sectors to benefit from their existing brand reputations. There is still a role for the smaller specialist suppliers, however, especially in the niché sectors within the market. Brands such as Breville, for example, are virtually synonymous with the sandwich toaster sector, and as yet the brand has not been extended into other non-related sectors such as kettles. In the coffee makers market there are also a greater number of specialist brands, such as Gaggia and Krups, operating at the premium end of the market.

Levels of main media expenditure in the small kitchen appliances market are relatively low, standing at £2.5m in 1996. Expenditure in 1997 is estimated to be much higher, at around £5m, due to several new product and range launches by manufacturers such as Moulinex Swan, Braun, Tefal and Philips. Much advertising spend tends to be concentrated on generic brand advertising rather than for specific product sectors, in order to raise the general level of awareness of the brand. Expenditure on promotion, both above- and below-the-line, is aimed at encouraging earlier replacement of appliances, as well as encouraging first time buyers into the market. This is especially important in mature markets such as kettles, where ownership is over 90 percent, and toasters, with household penetration of 60 percent.

In terms of retail distribution, sales of small kitchen appliances are dominated by the mass merchandisers ie general variety chains such as Argos, Woolworth’s, Boots and Index, and by electrical multiple chains such as Comet and Curry’s. Small appliances are ideal products for mixed retailers such as the mass merchandisers and other high street stores because of their compact size, fast turnover and general simplicity. They require minimal shop display space and most do not require any specialist product knowledge to sell. A proportion of sales is also of a gift nature, and some may be bought on impulse and as distress purchases when products break down. These factors also make them ideally suited to the high street retailers rather than out-of- town superstores, where consumers may have to make a special journey to get to and may not be able to compare the products easily.

The market for small kitchen appliances is likely to continue to show strong growth over the next five years, as consumers become more knowledgeable about product features and more design conscious. At the same time there is likely to continue to be intense competition between the leading manufacturers and possibly further rationalisation and concentration of supply, with more mergers and takeovers. Pricing is likely to remain a key issue, with competition restricting significant rises in average prices, despite the improved technical features of many new products. The industry has had some success in adding value to products and raising average prices in most sectors, but there is likely to be a limit to this growth and it may not be possible to persuade many consumers to pay above a certain amount for functional products such as kettles and toasters.

The total small kitchen appliances market is forecast to reach £387m by 2002, representing growth of 16 percent over 1998. The fastest growing sector is likely to be that of food preparation, which is set to grow by 19 percent to £69m. In volume terms the market is likely to reach 13.4 million units, a growth of 9 percent over the same period.

Text © 1998 MAPS

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