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January 10, 2000 01:00 AM

Housewares, appliance sales still cooking

Michael Lauzon
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    Consumer confidence fueled strong sales for housewares and major appliances in 1999. Indications are that 2000 will start off well before pre-election activity saps consumers' desire to spend on discretionary items. Major appliance shipments reached record levels last year, according to preliminary data from the Association of Home Appliance Manufacturers in Washington. Shipments will slip in 2000, the association predicts, but they will remain very strong this year relative to historical trends.

    Housewares sales in 1999 also were healthy, according to the National Housewares Manufacturers Association.

    Philip Brandl, president and chief operating officer for the Rosemont, Ill., association, expects sales strength to continue in early 2000 in line with generally buoyant economic forecasts. Contributing to the strength are a robust housing market, consumer lifestyle trends favoring time-saving products and new distribution channels such as the Internet.

    In a telephone interview, Brandl predicted growth will slow in the second half of 2000, but still will outperform gross domestic product overall.

    The final 1999 tally is not in yet, but NHMA is very optimistic about the numbers following a very good 1998, when U.S. sales of the goods grew 7.9 percent to nearly $63 billion.

    Consolidation remains a challenge. Midsize producers especially feel the pinch. Not only do they compete against ever-larger rivals, they often face new players enticed into the market by low entrance barriers.

    Brandl and other NHMA executives see consolidation among retailers as another challenge. The trend is squeezing out smaller retailers, reducing the number of distribution channels. Housewares producers, however, are offsetting the trend to some degree by opening new distribution formats on the Internet and in other ways. Brandl expects more business-to-business activity as an added benefit of Internet trading.

    Housewares sales are dominated by discount stores and supercenters, which accounted for 30.9 percent of the U.S. industry's sales in 1998, according to NHMA's 1999 State of the Industry report.

    Consolidation among housewares producers will continue, predicts Eric Bosshard, senior research analyst partner for Midwest Research of Cleveland.

    "It's getting to be a tougher business," Bosshard said. "Retailers expect more from suppliers. [Companies] have to get bigger to operate in a more challenging environment."

    The creation of Newell Rubbermaid Inc. in March was the biggest recent chunk of consolidation. The merger, however, was no quick fix. Newell Rubbermaid's third-quarter earnings fell 3.9 percent vs. pro forma results a year earlier. Weak demand for plastic containers and Little Tikes toys have plagued the company since the merger.

    Perhaps hardest hit by market conditions was Euro United Corp. of Oakville, Ontario, which filed for protection from creditors in December. The proprietary molder of patio furniture and housewares had been growing rapidly and claimed annual sales of US$300 million before it defaulted on loans to GE Capital Corp. Sam Rehani, president and founder, said he is willing to continue in the market battle as his firm reorganizes its credit structure.

    Home Products International Inc. is another major player contemplating its future in housewares. The Chicago company hired First Union Securities Inc. to help it pursue alternatives after gradual erosion of its stock price.

    The mid-December agreement surprised observers, since it came just after several other HPI initiatives to grow market share. HPI launched its new Homz brand name late last year and announced it was establishing a plant in El Paso, Texas, for West Coast markets.

    Bosshard, who believes a sale of HPI is possible, said housewares firms "need to seek partners or get out of the business."

    Tupperware Corp. is one player that formed an alliance to enhance its market profile. The Orlando, Fla., company formed a global agreement with Procter & Gamble Co. to capitalize on joint marketing and promotion opportunities.

    One early fruit of the alliance was a P&G entry into housewares. P&G introduced its Swiffer sweeper to Tupperware parties in the United States and Europe, complemented by Tupperware refill containers for the sweepers. In its more conventional line of cleaning liquids, P&G debuted a fruit and vegetable rinse in the Philippines to complement Tupperware's colander.

    Bosshard said housewares survivors will emphasize new products and marketing as retailers try to maximize dollar turnaround per foot of shelf space.

    NHMA identifies several market opportunities for new products, including:

    More safety- and health-promoting products, including cooking items.

    Growth in children's purchasing power.

    The rising senior population with discretionary income to beautify their homes and to invest in ergonomically designed housewares.

    Growth in leisure activities such as gardening and home entertaining.

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