Bloomberg has reported that Haier Group, the Chinese company that is now the world’s biggest refrigerator manufacturer, is seeking acquisitions or partnerships in an effort to build a global electronics brand.
The company, which is buying 20 percent of New Zealand’s Fisher & Paykel Appliances Holdings Ltd., wants to achieve “a similar leadership position” for products including high- definition televisions and washing machines, President of Asia Pacific operations Philip Carmichael said in a recent interview.
Haier must overcome damage to the “made in China” brand caused by a series of safety scandals concerning food, toys and toothpaste in the past two years. The poisoning of almost 300,000 children by melamine-laced milk affected perceptions of quality at China manufacturers, Carmichael said.
We would also add that, to date, many Chinese produced appliances have been of poor quality which has led to a deep seated belief within the industry that all Chinese products are of very poor quality. There is substantial evidence to support that notion in the UK.
“Haier is one of the best-run Chinese companies and they’re famous for quality control,” Shaun Rein, the Shanghai- based managing director of China Market Research Group, said in a phone interview yesterday. The company is “at a critical point” in its drive “to be a truly global brand,” he added.
For its latest acquisition, Haier will invest NZ$46 million ($29 million) for a 17 percent stake, allowing it to expand marketing and distribution rights of Fisher & Paykel in China, and sell its own brand products in New Zealand and Australia. It will also participate in a rights offer, which will raise at least another NZ$143 million for the New Zealand company.
Haier in 2005 pulled out of a bid for U.S. appliance maker Maytag Corp. Whirlpool Corp. bought Maytag for $1.68 billion in 2006 to create the world’s biggest appliance maker.
While China is among the world’s biggest manufacturing centers, few local manufacturers became global brands. There were only five Chinese names, including China Mobile Ltd. and Industrial & Commercial Bank of China Ltd., listed in the world’s top 100 brands BrandZ ranking by Millward Brown Optimor.
Haier found a niche in the U.S. market a decade ago and started supplying compact refrigerators especially to university students living in dormitories and slowly “worked up the value chain,” Rein said.
The company was the world’s top selling refrigerator brand by retail volume in 2008, according to a global survey by Euromonitor International. Haier has more than 30 percent market share in China in refrigerators, refrigerating cabinets, air conditioners and washing machines, according to its Web site.
Best Buy Co.’s sales of local Chinese products have soared as much as 40 percent at stores in Shanghai over the past year at the expense of Japanese and Korean brands, Robert A. Willett, international division head at the world’s largest electronics retailer, told analysts during an earnings call yesterday.
“International brands — Sony, Samsung, declining by nearly 50 percent and 60 percent in Shanghai alone,” Willett said, according to a transcript of the call. “So we are seeing huge shifts which we are learning about.”
While Haier seeks to increase overseas revenue, it’s hampered by perceptions surrounding the “made in China” brand, Carmichael said.
“Melamine has hurt us even if we have nothing to do with it and we have to think of tactics to deal with it,” Carmichael, 54, said June 15 from Scotland’s Gleneagles where he attended a Forbes CEO Forum. “Quality is a cornerstone of Haier but that’s irrelevant to a consumer who’s not heard of us.”
Haier, the unlisted parent of Hong Kong-listed Haier Electronics Group Co. and Shanghai-listed Qingdao Haier Co., last year said it was looking at General Electric Co.’s appliance arm as it seeks acquisitions overseas. GE prefers technology-sharing and licensing projects with other companies, after it halted plans to spin off or sell parts of the unit.
“For us, if we’re looking at any tie-up, it would have to be a cultural fit,” Carmichael said, declining to comment on any possible talks of partnerships with GE. He also denied some media reports it will quit manufacturing.
Phone calls made to GE’s consumer and industrial unit after office hours weren’t immediately answered.
“If they’re smart, they would focus massive advertising campaigns in the U.S.,” Rein said. American competitors are facing reduced marketing budgets and Japanese makers are facing higher costs with a stronger currency and can’t cut prices. “It’s a great time for Haier.”
China’s biggest appliance maker is benefiting from the government’s subsidies to rural buyers of home appliances. About 40 percent of purchases under the program are of Haier products, including “rodent-resistant” refrigerators, Carmichael said.
Sales of appliances under the program rose 42 percent to 4 billion yuan ($585 million) in May from April, according to the commerce ministry.
“The countryside of China is like the second-largest country in the world,” Carmichael said. “We like to lead, it’s a better position than the alternative.”
“Haier is good by really understanding they need to get foreigners in foreign markets and hire them to make decisions,” Rein said.