Mabe Expands Its Presence Worldwide

18 Negocios
Photos: Courtesy of Mabe
Mabe Expands
Its Presence Worldwide
The home appliance manufacturer is reaching
new markets and plans to become a leader
in sales around the american continent
by: Xavier villegas
M
abe, the multinational
home appliance manufacturer, is not only the leader
in Latin America domestic
market with a 47% share,
it also sells its products in about 70 countries,
has a total of 15 plants and a first class Technology and Project Center and is one of the
world’s leading ranges manufacturers.
Besides rangers, the company also
produces refigerators, dryers, ovens,
compressors and washing machines.
During 2008 and in 2009, the 62-year -old
company expects to broaden its presence
in the international markets, expanding from
Chile all the way to Russia.
“In the second half of 2008 we bought
GE’s operations in Chile, where they had
a 10% market share. We introduced the
Mabe brand and intend to become a market leader for 2011,” said Rafael Nava,
Mabe’s corporate business director.
The company began operating in Russia through a joint venture with the Spanish
company Fagor, which will allow it to enter
potential markets such as Eastern Europe,
the Middle East and Africa, Nava asserted.
Mabe has also joined the Brazilian market
with the brands GE and Dako and recently
launched the Mabe brand to strengthen its
portfolio and become the second manufacturer by 2011.
The Company is also expanding its
production capacity at its plant in Celaya,
located in the central state of Guanajuato.
The Mexican company will invest 110 million usd and create 1,000 jobs in this plant.
The expansion is set to increase the company’s sales by 14%.
While Mabe is one of the largest manufacturers of appliances in Latin America, it also
having sells stoves, refrigerators, washing
machine and dryers overseas, with the US as
its main market abroad.
“Mexico represents a strategic position for our operations in the US, thanks to
our geographical proximity to the American
market, which is a competitive advantage,
against other producers in other regions of
the world,” Nava added.
MEXICO’S PARTNER: MABE
THE HEADQUARTERS,
of one of the world’s leading
refrigerator manufacturer.
Who is Mabe?
Mabe could become the
second largest home appliance
manufacturer in the world, if
it manages to buy part of GE
business.
Although Mabe is not a public
company, the firm owns massive
percentages of the following
markets:47% Mexico,43%
Colombia, 60% Venezuela,
26% Canada.
In two decades the company’s
sales grew from 100 million to
2.7 billion usd and today it sells
nearly 2.3 billion units.
Who is GE Home
Appliances?
GE Appliances is part of the
second largest conglomerate
in the world, measured by its
capitalization.
It is a 7.2 billion usd business
that employs about 13,000
people worldwide and it has its
headquarters in Louisville, KY.
General Electric (GE) was
established by inventor Thomas
Edison and started out as an
electric company in 1878. Today
the conglomerate has operations
in over 100 countries.
20 Negocios
“During 2008-2009,
the 62 year-old, company
expects to broaden its
presence in the international
market, expanding from
Chile all the way to Russia”
Photos: Courtesy of Mabe
Since 1987, Mabe has been in a joint venture with US -based General Electric and it designs, manufactures and distributes products
under the brands GE, Mabe, Dako, Centrales,
Easy, IEM, and many other local brands.
GE holds a 48% interest in Mabe, with
the rest owned by the Berrondo, Saiz and
Esteve families. Mabe has purchased GE’s
Canadian manufacturing partner, Camco,
to expand its territory in Canada.
In 2007, the company whose name
comes from the lasts names of the families who founded it (Ma for Mabardi and Be
for Berrondo), had sales of 3.6 billion usd,
16% more than in 2006.
Nava estimated that for 2008, sales will
be over 4 billion usd.
“Mabe’s strategic plan is to duplicate its
billing between 2008 and 2011, and up to
now, thanks to different projects, we have
Mexico’s partner: MABE
outdone ourselves and sold more than we
expected” Nava added.
According to Mabe, the company has
a strong presence in each of the markets
where it sells its goods.
In Canada, Mabe’s market share was 17%
in 2005, while in Central America, it has 65% of
the market share. In the Andes region, where
it has a 60% market share in Venezuela and
43% in Colombia, Mabe has sold 1,725,000
units, the Mercosur or the Common Market of
the South, is the largest trading bloc in South
America region and is one of the most promising agreements in the near future.
Mabe intending to buy
GE Appliances in the US.
In June 2008, Mabe began a bid to buy GE
Appliances. The Mexican company is offering 4.9 billion usd for GE’s appliance unit.
Mabe is competing with LG Electronics,
Turkey’s Arçelik AS and China’s Haier Group
to buy the unit from the second largest
American company, as measured by market
capitalization.
Analysts have estimated the business
could sell for 2.5 billion usd to 5 billion usd.
According to Fitch Ratings, Mabe’s long
relationship with GE strengthens the company’s business position.
According to a report by the international
credit rating agency in 2007, Mabe’s exports
to GE represented 30% of total consolidated
revenues of 3.6 million usd.
Fitch added than under an export agreement, Mabe produces a wide array of gas
and electric ranges, refrigerators, washing machines and dryers sold by GE in the
United States. Further capacity expansions
at Mabe’s manufacturing facilities signal ad-
ditional growth of this relationship.
GE Appliances and it is a fact that we
are one of the strongest competitors to
keep the business unit. Nevertheless, at
this moment there are several aspects to
be taken into account before any decision
is made,” Nava said.
Even though Mabe’s strategic alliance
with GE has allowed the company to expand
to other countries; today more than 60% of
the new products the company develops
come it Technology and Project Center in
Mexico. In the next five years, Mabe expects
that more than 90% of its new products will
come out of Mexico.
The company has invested around 1.5
billion usd in research and development
in the last decade, allowing it to produce
more and sell between 2 million and 14
million units more each year. n
28 Negocios
infography: oldemar
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PUERTO RICO
30 Negocios
photos: courtesy of whirlpool
COVER FEATURE: domestic consume
Beyond the
refrigerator
door
Success of the Electric Home Appliance
Industry in Mexico
Thanks to its skilled workforce, strategic location, large suppliers and supply
chains, transnational companies that manufacture refrigerators, washers
and heaters have found a good solution in Mexico to being competitive in
the market.
by: itziar gómez jiménez
A
t the start of Gabriel García
Márquez’s novel, “One Hundred Years of Solitude”,
Colonel Aureliano Buendía
remembers the day his
father introduced him to ice. Macondo,
where Aureliano lived, was an extremely hot
place where refrigerators were not known
about and ice was another amazing thing
brought by the circus. Today, it is astounding to meet someone who is unfamiliar with
ice, since we can get as many ice cubes
as we need simply by opening the freezer
door. Also ridiculous is the idea of spending
hours hand washing clothes. Today home
appliances -such as refrigerators, washers
and heaters- are essential instruments that
save time, improve the quality of our activities and make housework easier.
According to data supplied by INEGI
(The Statistics, Geography and Data Processing Institute), an average of 68 hours
per week are devoted to housework in every Mexican home. And a study by home
appliance manufacturer Easy found that
Mexicans spend 22,800 hours of their lives
washing clothes. This means that home
appliance manufacturing companies have a
potentially lucrative market in Mexico. But
that all depends on their appliances performing well and consumers being willing
to pay for quality products. Mexico’s real
estate boom has also opened the door for
this market’s development, said Edgar R.
Jiménez, Sunbeam Mexicana Director.
“There is an opportunity for growth in the
effort to create housing because the more
houses that are built, the more kitchen appliances that will be needed,” he said.
The fact is that total home appliance sales
in Mexico amounted to over 252 million usd
during 2007.
32 Negocios
photos: courtesy of daewoo/whirlpool
mexico is one,
of its seven most
important suppliers.
“For a country to be able to compete with Mexico in our
continent, it would have to be established here since
a refrigerator brought from China costs more due to
transportation costs”
The inconvenience for many of these
companies in the worldwide market has
been to maintain being competitive and
that is mainly due to constant price increases in raw materials and transportation
costs. However, directors of transnational
companies have found a good solution in
Mexico, thanks to its skilled workforce,
strategic location, large suppliers and supply chains, and logistics easiness. These
factors significantly reduce their production costs, Friedrich Air Conditioning Company President and CEO Charles M. Mari-
no said after announcing the opening of
his company’s air conditioning and heater
manufacturing plant in Mexico.
“The city of Monterrey was selected because of its skilled, stable workforce, strong
supplier base and strategic location near the
San Antonio headquarters,” he said.
ANFAD (The National Association of Home
Appliance Manufacturers) has 23 members
from the electric home appliance industry.
They may seem like only a few companies,
but they represent about 80% of the segment’s production and sales. Most of them
are part of international companies
that have established themselves
in Mexico.
ANFAD’s general manager, Pablo
Moreno Cadena,
believes transnational companies
have come to
Mexico for several
reasons.
“One of them
is our skilled work-
force. Companies look for a workforce with
the ability to manufacture equipment under
the required standards, mainly because most
of it is subject to safety and energy efficiency
standards,” he said. “The other aspect is our
geographic location in relation to the United
States and Latin America. Besides, (home appliance) clusters in the states of Nuevo León,
Coahuila, Querétaro and San Luis Potosí are
very important elements of competition that
have benefited companies.”
Clusters: Competitive Centers
Home appliance clusters have provided
companies with advantages that make
them very competitive. First, companies
are located in the same geographic center,
allowing them to group as a sector and cooperate amongst themselves. These same
sites also incorporate suppliers, auxiliary
industries, recycling and training institutions and many other services, substantially improving their competitiveness.
For example, Nuevo León is the leading
state in home appliance production in the
country. Within Mexico, Nuevo León has
20.9% of the industry’s employment and
COVER FEATURE: Domestic consume
today home appliances,
are essential instruments that
improve the quality of our lifes.
32.2% of its gross internal product (GIP).
The state employs more than 15,000 people in this sector, which makes up 4.6%
of the manufacturing personnel in Nuevo
León.
Nuevo León’s government established
a home appliance cluster in 2006, made
up of companies such as Whirlpool, Hussmann, Carrier, Criotec, IMPCO, York, Mabe
and LG Electronics. It also has educational
institutions such as ITESM, Universidad
Autonoma de Nuevo León, Universidad
de Monterrey, UNITEC, Universidad Regiomontana and Universidad Tecnológica
de Santa Catarina.
The appliance cluster partners with the
educational institutions on such things as a
human resources program that connects the
sector with students. The cluster also works
to integrate and strengthen the suppliers’
network, stimulate the creation of enterprise
development systems and help with financing
needs. Moreover, a council was established
to improve logistics and circulate merchandise faster and more efficiently.
On this respect, Pablo Moreno asserts:
“Having home appliance clusters in several
states also leads to the development not
only of manufacturing plants to produce the
appliances but also of plants that supply the
‘just in time’ needed materials. A series of
established agreements have significantly
increased suppliers’ infrastructure around
manufacturing plants, allowing them to be
better supplied with materials on time.”
For example, Brazilian-based Embraco,
a producer of hermetic compressors, has
opened a commercial office and warehouse
in Monterrey, Mexico, the company’s sixth
overseas business unit. The company says
its presence in Mexico was a strategic decision based on trends in the competitive
cooling appliances market. Large refrigerator manufacturers have chosen the country
as a production base for exports to the US
-Embraco’s main market.
Mexico: A home appliance
manufacturer’s paradise
In Pablo Moreno’s opinion, all these production advantages make it difficult within
the continent to compete with Mexico in
the large home appliances sector. ANFAD’s general manager explains that this
industrial sector has two branches: large
home appliances such as refrigerators and
ranges; and small home appliances, such
as blenders and mixers. “For a country
to be able to compete with Mexico in our
continent, it would have to be established
here since a refrigerator brought from
China costs more due to transportation
costs,” Moreno stated. From his perspective, the only countries that could compete
are Brazil and the US However, businessmen from the US prefer Mexico and are
moving their plants to our clusters.
If we looked into an American, Mexican or
Canadian home, we would find that most of
its appliances -washer, dryer, range, refrigerator, vacuum cleaner and microwave oven- are
made in Mexico. For most companies, North
America represents an attractive share of the
electro-domestic market. Mexico, the US and
Canada represent 27% of over 47.4 billion usd
that LG sold in 2007. The company’s three
plants in Mexico supply 90% of LG products
sold in Mexico and 80% of those sold in the
US LG also manufactures for Latin America,
which represents 10% of the company’s total
sales worldwide. Antonio Hidalgo, LG’s mar-
34 Negocios
illustration: oldemar
Main products
Made in Mexico
and sold in US
Microwave oven
Coffee maker
Juice extractor
Dishwasher
Air conditioning
Range
Blender
Vacuum cleaner
Refrigerator
Mixer
Washer
Dryer
From the production
sold abroad, 80%
goes to the US, less
than 20% to Latin
America and a very
small percentage
to the European Union.
Source: ANFAD
Iron
The sector’s
main goods
produced are,
in order of
importance,
steel, aluminum,
copper and plastic.
Source: ANFAD
The ANFAD groups
companies
such as Mabe,
Whirlpool and
Sunbeam, which
together
represent 80% of the
domestic market.
Accumulated growth from January
to August of the home appliance
sector in Spain is -17.47%. Mexico
has had an approximate 0% growth
in the same period, which gives us
a very high advantage in relation
to other countries.
Source: ANFAD – ANFEL
The home
appliance industry
generates about
35 thousand
direct jobs and
110 thousand
indirect jobs.
Source: ANFAD
COVER FEATURE: domestic consume
Chihuahua
Nuevo León
Electrolux
Panasonic
Fiedrich Air Conditioning
LG
Whirlpool
Coahuila
Whirlpool
Sunbeam
Mabe
Main states with
home appliance
production plants
Refrigerators
washers
Blenders
Tamaulipas
SLP
Mabe
Mabe
Ranges
Vacuum cleaners
Air conditioners
Microwave ovens
Guanajuato
Querétaro
Whirlpool
Mabe
Daewoo
Mabe
Source: ANFAD
Pool heating systems
Pool heating system
Water heater
Total home
appliance
sales in
Mexico
exceeded
194 million USD
during 2007.
Water heaters
Production value of home
appliances manufactured
during June 2008 was
129 million USD
and the sale value of products
manufactured during the same
period 127 million USD.
Source: INEGI
US is the country with
the highest direct investment
in Mexico in this sector during
2007 and 2008, (120 MD),
followed by Corea (172 MD)
and Japan (3 MD).
Source: Ministry of Economy.
Foreign Investment Office
Refrigerators, followed
by washers and heaters
are the home appliances
that attract the highest
foreign investment
to the country.
Source: Ministry of Economy.
Foreign Investment Office
36 Negocios
photo: courtesy of whirlpool
there is an opportunity,
for growth in the effort to create
housing because the more houses
are built, the more appliances that
will be needed.
keting director in Mexico, said “the company
supplies from Mexico to two of its seven most
important countries”, which means that for LG
Mexico is a strategic partner in the development of its electric home appliance branch.
Strong, even under crisis
In spite of the economic problems affecting
some pockets of home appliance consumers
worldwide, Jose Luis Berrondo Avalos, Mabe
technology and projects vice president, said
that the company had more than a 10% increase in sales during 2007, compared to the
previous year. “And that is how we want to
grow, between 11 and 14% at macro level,”
he added.
On the other hand, ANFAD’s Pablo Moreno
said that “in recent years the sector has grown
moderately, but there has been growth nonetheless. We have had only one digit increases,
either 1 or 2%. During the first quarter of 2008,
we managed no growth. But this encourages
us because we have had no losses.” However,
he added that these figures might go up by the
end of 2008, since the buying trends of this
industry are based on two big sale seasons:
May and December. “The latter is the most important, because even when growth is small
for the first quarter, we can have an increase
during the second quarter,” Moreno said.
The US is Mexico’s main customer for
the home appliance manufactured here.
However, Mexico seeks to strengthen commercial relationships with Central and South
America. Washer exports from our country
totaled 125 million usd, an increase of 8%,
during the first quarter of this year, according
to information supplied by Banco de México.
This was boosted by exports to Central and
South America. From January to June 2008,
washer exports to the US were 54 million usd,
a 3.6% drop from the same period last year.
In contrast, sales of those appliances to Central and South America totaled 63.3 million
usd, an increase of 17.7%.
Pablo Moreno said refrigerator manufacturers will have considerable sales increases
thanks to PFAEE (the Financing Program
for Electric Energy Saving), which plans to
replace 1.8 million obsolete appliances with
energy saving ones. In order to carry out the
program, it received governmental support
of 2 hundred million usd.
“The idea is to replace inefficient refrigerators with new ones that save up to 70% more
electric energy,” Moreno added.
Additionally, Moreno said that compliance
with quality and environmental standards are
other advantages for manufacturers in Mexico. For example, the Air-Conditioning and
Refrigeration Institute (ARI), which develops
technical standards for manufacturers of airconditioning and commercial refrigeration
equipment sold in North America, and the
Asociación de Normalización y Certificación
(ANCE), the electrical standards development agency in Mexico, signed a memorandum of understanding (MOU) in 2006,
in Mexico City. The MOU will help bring together ARI and Mexican HVACR technical
standards. It will also promote collaboration
on standard development to advance international trade as well as strengthen the industry’s efforts to improve energy efficiency
and reduce refrigerant emissions.
Finally, the main distribution channels have
contributed to the success of the electric
home appliance industry in Mexico. Appliances are now sold in supermarkets, department
stores and wholesale furniture shops which
have transformed their showrooms. There are
also many financing and credit programs that
allow consumers to buy home appliances at
fixed prices or at reasonable interest rates.
Thanks to the prosperous electric home
appliance industry in Mexico, if Colonel Aureliano Buendía had been born in Mexico, and
not in Macondo, he would have known the
pleasure of ice cubes from his own refrigerator made in our country. n