08/23/2016 16h52

Midea plans to triple revenues in Brazil by 2020

Valor Internacional

Chinese appliance manufacturer Midea plans to triple its size in Brazil within five years. If the target materializes, by 2020 the company’s net revenue in the country will surpass R$4 billion, which would place it among the three largest in the industry, behind Electrolux and Whirlpool — the owner of Brastemp and Consul brands. The first step towards the target is being made now, with a 50% increase in its product line sold in the country. The launches include cookers, fryers and vacuum cleaners. 

Felipe Costa, president of Midea in Brazil, says the company does not want to compete with brands such as Mondial, Philco and Britania, which sell cheaper products. The idea is to find a price position ranging from average to high, competing more directly with Philips Walita.

For now, Midea is focused on expanding its relation with retailers, preparing the ground so within three years it could be present in the highend appliance segment, the so-called T3, made up of refrigerators, stoves and washing machines. The company even sold stoves, kitchen hoods, compact ovens and two-door refrigerators last year in Brazil. But with the weakening of the real against the dollar, the operation became unviable, Mr. Costa says.

Midea arrived in Brazil in 2011 through a joint venture with Carrier, which makes air-conditioner brands Springer and Carrier. In its portfolio, it also has microwaves, air conditioners, heaters, air purifiers, drinking fountains, refrigerators, electric ovens and wine cellars. The company has two plants in the country: one in Manaus (Amazonas) and another in Canoas (Rio Grande do Sul). Altogether, it employs 1,500 people, while its net revenue amounts to R$1.4 billion. Of this total, 85% comes from the sale of air conditioners. According to research firm Euromonitor, Midea accounted for 2.4% of total home and kitchen appliances sold in retail in 2015, a 0.3 percentage point increase over 2014.

The company’s global revenue reached $22.3 billion in the fiscal year ended in March 2016. The figure is slightly higher than that of Whirlpool, which reported sales of $21 billion last year. According to Euromonitor, Midea is the
world’s second largest home-and-kitchen appliance maker, with 4.7% of total sales, only behind Dutch group Philips, with 5%.
Mr. Costa says the new products to be sold in Brazil will come from China. But the idea is to make them locally over time. "But we will not simply take products off the shelf and bring to Brazil. We are investing to make adjustments to the [local] market’s reality, "he said.

Investments to expand the portfolio total between R$12 million and R$15 million, Mr. Costa says. The amount also includes expenses to merge the air conditioning brands for residential consumers, Springer and Midea, under a transitional brand: Midea Springer. The goal is to strengthen the Midea brand over the time. Larger equipment for companies will continue being sold under the Carrier brand.

The recession has hit hard demand for home appliances, kitchen appliances, air conditioners and ventilation systems. Retail sales of stoves, washing machines and refrigerators fell 9.8% in the first half, to 6.7 million units, according to trade group Eletros. The decline compares with the 11% drop in the same period last year, but there’s nothing to be celebrated since the total volume continues falling. Appliance sales shrank 19% in the period.

Despite the scenario, Mr. Costa believes this is the right time to invest in the country. "We want to take advantage of the downturn to be well positioned when the situation improves," he says. Among the opportunities described by Mr. Costa is the bankruptcy of competitor Mabe early in the year, and its subsequent exit from the market.