Inflationary Pressures Expected to Dampen Demand for Consumer Appliances in H2 2021
Every quarter, Euromonitor International updates industry forecasts based on a combination of our proprietary macro model and category reviews by our global team of expert analysts. The Forecast Dashboard allows users to compare the new baseline forecast against previous quarters as well as other possible economic scenarios, helping to understand the way forecasts evolve through an annual cycle.
In our Q3 2021 statement for consumer appliances, we have adjusted the September 2021 projection downwards slightly, as we expect sales to slow towards the end of the year. The main cause of this is inflationary pressure.
As the world continues its recovery from the disruption of 2020 and is now ramping up production, companies are finding out that they are fighting for the same limited commodities.
Inflationary pressures are everywhere. Steel prices have increased by more than three times compared to 2020, copper prices have doubled, freight prices have quadrupled, and there is an ongoing semiconductor shortage affecting almost every industry from electric vehicles to consumer appliances.
Companies involved in air conditioning are especially affected, as copper accounts for about 20-30% of the costs of manufacturing an air conditioner. With the air conditioning industry being highly competitive, and already very much focused on pricing, companies are unable to pass on this increased cost to consumers. This has led companies to consider switching to aluminium for the heat exchangers. To further illustrate, in Daikin’s May 2021 conference call with investors, it announced plans to halve its copper usage in its products by the 2024 fiscal year.
On a brighter note, as a significant number of consumers continue to spend more time at home, the “everything from home” trend has continued. We expect 2021 growth categories to be focused on hygiene, large and small cooking appliances, and personal care appliances.
Note: 2021 data are based on CAP2022 edition interim data
Evolution of coffee machines
An interesting trend of note is the evolution of coffee machines used at home. The pod coffee machine, notably the Nespresso pod, was a revolutionary machine when it first launched. Instead of the challenge of trying to make a gourmet cup of coffee at home, the addition of a pod was seen by many as a way of achieving gourmet coffee in less than a few minutes. This changed the whole coffee experience at home and enabled Nestlé to develop a new business model around selling high end, single-use pod coffee instead of just coffee machines and powder. Brewing coffee this way was also convenient and fast.
Sales of the pod coffee machine surged in 2020, with home bound consumers buying in droves. However, we expect this trend to peak in 2022 as consumers switch to espresso coffee machines instead. One main factor driving this is that surveys have also shown that consumers find disposable plastic coffee pods to be bad for the environment.
Consumers are now looking at mid to high end coffee machines that provide the gourmet coffee experience typically found in a café. As these espresso coffee machines are also able to brew coffee from premium beans, the cost per cup for consumers also goes down.
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In our latest quarterly statement, we also discussed the explosive growth of window air conditioners in South Korea, selling major appliances through e-commerce in China and the growth potential of induction hobs in the US market.
Read more here.