In an interesting article in the Financial Times The Electrolux chief Keith McLoughlin explains to the FT that he wants the group to move away from the lower cost products and to move the brand more upmarket.
It was also interesting to see that former Electrolux boss, Hans Stråberg, had closed down a whopping 34 factories in only 16 years, more than two per year moving production away from Europe to low labour cost countries.
McLoughlin is trying to change that mindset in Electrolux and move the brand more into the upmarket and, better quality territory and quite likely win back customer loyalty to the brands. “What we are trying to do is build off the history of generating cash flow,” he said in an interview.
“We want to invest a portion of that productivity into growth and have a focus on innovation. So we have increased investment in R&D, marketing and design. And the global heads of those three report directly to me.”
The FT notes that one problem Electrolux has faced is the slightly downmarket feel of its core Electrolux brand in the UK. So Mr McLoughlin pushed for the launch of professional kitchen appliances for home users.
“It is about growth,” he says. “But it is also about supporting the brand strategy.”
The approach appears to be gaining at least some traction with analysts and investors. “They are in an industry where you have to run to stand still,” says one top-10 shareholder reports the FT. “It is becoming a very different company. But it is clear that Electrolux hasn’t had a brand equity that is the same across Europe.”
Electrolux’s shares are up 65 % in the past year, beating a 28% rise for the broader Stockholm market which would tend to indicate that the company is doing something right.
The FT says that the Swedish analysts are generally positive, even if they are not enamoured of everything. One points to his turnaround of the US business in difficult circumstances, reviving the Frigidaire brand and improving profitability in a declining market.
“He is very common sense which hasn’t been the case before. It is a tough industry to be in. People want to pay less but get more features,” the analyst says, before adding: “He is very American and with everything that comes with. He is a bit of a car salesman; sometimes I wish he would tell it like it is.”
Mr McLoughlin himself is unapologetic about how uncomfortable his focus on design and technology can make some employees. He says, “For a while I was the most hated person in Electrolux. It is a high hurdle to get over. It caused a lot of angina. You stay firm to it. And people started to pass the first time and then a second one and you gain momentum.”
Growth is predominantly expected to come from Electrolux’s existing operations. Of its 13% rise in revenues year-to-date, Mr McLoughlin says 6% came organically, 6% from acquisitions and 1% from currency.
“We want to do one or two digestible acquisitions a year and get 1-2% growth from acquisitions,” he says.