Market Insight

Samsung’s acquisition of Dacor follows the strategic footprint of many home appliance makers

August 19, 2016  | Subscribers Only

Dinesh Kithany Dinesh Kithany Lead Industry Analyst, Wireless Power & Power Supply, IHS Markit

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Samsung’s acquisition of Dacor follows the strategic footprint of many home appliance makers

Key highlights:

  • •With the acquisition of luxury appliance brand, Dacor, Samsung gains immediate share within the niche premium and super-premium appliance segments, and further increases its presence in the U.S. market.
  • Leveraging Samsung’s global scale operations, financial muscle, technology leadership and strong position in various product segments across regions, Dacor can more effectively accelerate growth, in order to meet the needs of its high-profile consumers and channel partners.
  • Leveraging Dacor’s expertise, Samsung is positioned to further improve its position in the North American luxury appliance market – and further expand the Dacor brand internationally to gain share in new markets.
  • Samsung and Dacor product portfolios complement each other, with Dacor’s strength in large cooking appliances added to Samsung’s primacy in washing machines, refrigerators, microwaves and dishwashers.
  • Samsung will also be able to enhance its offering within the smart-connected appliance segment, as Dacor has been one of the earlier adopters within the ultra-premium segment of the market. For example Dacor’s Discovery Dual-Fuel cooking Range which is integrated with Android tablet, allowing consumers to download and store recipes.
  • This acquisition signal’s Samsung’s continued interest in expanding its own smart home offerings. Dacor’s buyout also provides synergies with Samsung’s buyouts of SmartThings in 2014, Joyent in 2016, and LoopPay in 2015.
  • This acquisition is in line with Samsung’s plan to invest $1.2 billion in the U.S. internet of things (IoT) market.

Outlook and Analysis

The home appliance market is becoming more and more volatile, with profit margins getting squeezed by low-cost Chinese appliance makers expanding into overseas markets. The smart-connected appliance market -- which is expected to boost revenues and profit margins -- is turning out to be more of a volume market than a value market. Companies that cannot compete at the lower end of the market are either exiting the industry or shifting focus to the premium and super-premium segments.

“Premiumization” -- and getting the consumers to upgrade to higher-end models -- is the key to securing growth and expanding profit margins. And with double-digit growth in the premium segment, this strategy also helps companies increase market share and grow revenue. Putting more focus on the growing builders-segment in the U.S. and Europe, and strengthening the online and mobile channel mechanism, are other routes companies are exploring, in order to sustain growth.

Some recent strategic initiatives confirm the shift toward premium segments, including the following: Haier’s acquisition of Casarte, Fisher & Paykeel and GE Appliances; Middleby’s acquisition of Viking Corporation and AGA Rangemaster; Midea’s acquisition of Toshiba and Kuka; LG’s launch of LG Studio and Signature range; Samsung’s launch of Chef Collection; Godrej Appliance’s launch of NXW range; Robert Bosch’s focus towards Thermador and Gaggenau; Electrolux’s focus towards AEG; and Whirlpool’s focus towards Jenn-air, Bauknecht and Maytag.

Consolidation will continue to be the key way companies increase market share. Although Dacor is one of the few remaining independent appliance makers, there are still opportunities for the market to consolidate further. The next level of consolidation is expected, with mergers and acquisition among smaller personal-care and robotic-appliances makers; joint ventures, tie-ups and strategic partnerships with online relaters (currently seen in China), connectivity module manufacturers and technology companies.

In China, India and other fast-developing markets where product penetration is far below global averages, appliances are putting equal focus on gaining share across various cost segments – from budget through premium. Whirlpool Corporation’s recent statement suggesting expanding its offering in both premium and regular categories is one such example.

The strategy of looping in consumers right from the adoption stage (first-time buyers, starting with basic low-priced models) would help companies build loyalty in the long run, as consumer tend to stay with same brand -- upgrading their devices with enhanced features and functionality, if products meet their expectations, in terms of quality and performance.

Geography
USA
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