中国冰箱行业战略报告二

CONFIDENTIALIndustrySituationAnalysis:RefrigeratoraaaaaaELECTRONICSCHINA(aaaaaaChina)Thisreportissolelyfortheuseofclientpersonnel.Nopartofitmaybecirculated,quoted,orreproducedfordistributionoutsidetheclientorganizationwithoutpriorwrittenapprovalfromMcKinsey&Company.ThismaterialwasusedbyMcKinsey&Companyduringanoralpresentation;itisnotacompleterecordofthediscussion.aaaaaa010807BJ-refrigeratorKEYMESSAGESRefrigeratormarketisexpectedtogrowat4.6%annuallyfromRMB21billionin2000toRMB26billionin2005.Althoughgrowingatarateashighas31.1%,side-by-siderefrigeratormarketisexpectedtoremainverylimitedinthenext5yearsIngeneral,industryprofitabilityforrefrigeratorismoderate.However,side-by-siderefrigeratorsenjoydoubledigitreturnonsalesExceptside-by-siderefrigerator,refrigeratormarketisledbylocalplayers.However,thereareopportunitiesforMNCstosuccessfullybuilduptheirpositionbyfocusingonmid-to-high-endsegmentsTherefrigeratorindustryisrelatively“low-tech”andhaslowentrybarriers.EntryintoWTOisnotexpectedtohavedirecthugeimpactonthecompetitiveenvironmentWithmarketsharesaround3to4%,aaaaaaismoderatelypositionedinrefrigeratormarket.1aaaaaa010807BJ-refrigeratorMARKETASSESSMENTMarketassessmentSupply(competitor)analysisDemand(customer)analysisOverallenvironmentanalysisMarketdefinition2aaaaaa010807BJ-refrigeratorMARKETASSESSMENTSupply(competitor)analysisDemand(customer)analysisOverallenvironmentanalysisMarketdefinitionEvaluationcriteria,weightandratingAssessmentofmarketattractivenessMarketassessmentProduct/servicedefinitionRelevantregulatoryenvironmentandtrendsRelevanttechnologicalenvironmentandtrendsMarketsizeandgrowthrateKeybuyingfactorsDistributionchannelstructureMarketsharebycompetitorIndustryprofitabilityoreconomics3aaaaaa010807BJ-refrigeratorMARKETDEFINITIONProduct/servicedefinitionSupply(competitor)analysisDemand(customer)analysisOverallenvironmentanalysisMarketdefinitionMarketassessment4aaaaaa010807BJ-refrigeratorPRODUCTSCOPE–WHITEGOODSProductgroupProductcategoryAirconditionerWashingmachineWhitegoodsMicrowavePackagedA/CCentralA/C*Side-by-sideRefrigeratorProductsubcategories*Usedbyresidentialsandsmallbusinesses5aaaaaa010807BJ-refrigeratorMARKETDEFINITIONSupply(competitor)analysisDemand(customer)analysisOverallenvironmentanalysisMarketdefinitionMarketassessmentRelevantregulatoryenvironmentandtrendsRelevanttechnologicalenvironmentandtrends6aaaaaa010807BJ-refrigeratorLOW-ENDREFRIGERATORMARKETISLIKELYTOBEDOMINATEDBYLOCALCOMPETITORS.MNCSCOULDSUCCEEDINTHEMID-TO-HIGH-ENDNICHEMARKETSRegulatoryTrends/issuesImplicationsMarkethasbeenfairlyopenandwillremainsoMostleadingMNCplayersarealreadyinChinaandhavelocalizedtheirproductionandsourcingTechnologicalIngeneral,technologiesforrefrigeratorsarenotverycomplicated,esp.forlow-endproductsTechnologytrendistofocusondigitization,artificialintelligenceandenvironmentalfriendlinessEntrytoWTOisnotexpectedtohavehugedirectimpactoncurrentcompetitiveenvironmentThemarketislikelytobedominatedbylocalplayerswhoaremostlynotasstrongintechnologyasMNCplayersbutstrongerinchannelandsalescapabilities,especiallyinthelow-endsegmentsMNCplayersarelikelytosucceedbybeingnicheplayersandfocusingonmid-to-high-endsegmentsCompetitioninproductinnovationislikelytofocusoncustomizationandlocalization7aaaaaa010807BJ-refrigeratorMARKETDEFINITIONSupply(competitor)analysisDemand(customer)analysisOverallenvironmentanalysisMarketdefinitionMarketassessmentMarketsizeandgrowthrateKeybuyingfactorsDistributionchannelstructure8aaaaaa010807BJ-refrigeratorALTHOUGHaaaaaaONDLARGESTMARKETAMONGWHITEGOODS,REFRIGERATORMARKETGROWTHWILLBEMODEST

Source: GFK,SINO-MR,LightIndustryInformationCenter,aaaaaa,fieldinterviews,McKinseyanalysis2000Side-by-sideNon-side-by-siderefrigerators20012002200320042005CAGR(00-05)Percent21,13022,06023,05024,07025,14026,260Key

driversRationaleorassumptionsReplace-mentSincethepenetrationrateinChinaishigh(~80%),particularlyinmajorcities(>100%),majorityofthedemandfornon-side-by-siderefrigeratorswillcomefromreplacementpurchaseIncomegrowthIncreaseinaveragedisposableincomedrivesdemandformid-to-largecapacityandmid-to-highendrefrigeratorsAveragepriceDropsat4%p.a.74961261662172854.64.431.1RefrigeratormarketsizeandgrowthRMBmillions,percentUnitssold(non-side-by-side)millionsAveragesellingprice(non-side-by-side)9.414.313.112.111.110.21,8401,9101,9902,0702,1602,2508.8-4.09aaaaaa010807BJ-refrigeratorTHEMARKETISVERYSATIATEDReplacementislikelytobethekeydriverforfuturedemandSource:ChinaStatisticsYearbookPenetrationrateinChinaTier1Tier2Tier3WholeChina103%101%87%80%10aaaaaa010807BJ-refrigeratorMID-TO-LARGECAPACITYREFRIGERATORSHAVEBEENCONSUMER'sFAVORITECHOICESource:SINO-MR,GfK<100L100%=199819992000HistoricalmarketsizebycapacityinmajorcitiesPercent,millionunits0.60.50.4100-150L150-180L180-200L200-225L225-250L250-300L>300LCAGR(00-05)Percent8.69.19.4-18.44.5-22.54.9-5.117.38.7-18.4-18.411aaaaaa010807BJ-refrigeratorSIDE-BY-SIDEREFRIGERATORMARKETWILLBEOFVERYLIMITEDSIZE,DESPITEITSHIGHGROWTHRATERMBmillions,percent200020012002200320042005CAGR(00-05)Percent31.1KeydriversRationaleorassumptionsLivingspaceOnlyhouseholdswithkitchensover30m2*areassumedtopossiblyconsiderside-bysiderefrigeratorsHouseholdincomeOnlyhouseholdswithaverageannualincomeoverRMB500,000areassumedtopossiblyconsiderside-by-siderefrigeratorsLifestyleMostwealthypeoplehavemaidswhodogroceryshoppingeverydayandtheyarenotinhighdemandforsuperlargerefrigeratorsPriceDropsat2%p.a.*ConstructionareaSource: ZhongxiTradingCo.,aaaaaa,LufthansaDepartmentStore,Sci-techDepartmentStore,YYSC,teamanalysis3,5004,6806,2608,38011,21015,00033.8UnitssoldSide-by-siderefrigeratormarketsizeandgrowthAveragesellingprice21.020.620.219.819.419.0-2.0KeycustomergroupsChineseeducatedoverseasExpatriatesWealthylocalpeopleKeymarketsBeijingShanghaiGuangzhouShenzhenShenyang12aaaaaa010807BJ-refrigeratorPRICEISTHEDOMINANTFACTORFORCONSUMER’SNON-SIDE-BY-SIDEREFRIGERATORCHOICEWHILEBRANDAWARENESSISMOREIMPORTANTFORSIDE-BY-SIDEREFRIGERATORFactorstoconsiderwhenmakingnon-side-by-siderefrigeratorpurchasingdecisionsPercentofrespondentsSource: IMI,SCSS2000,interview47282623191714141074BrandimagePriceCapacityEnergy-savingExteriordesignLownoiseNofrostAfter-salesserviceNon-CFCsFreezercapacityOtherKBFsforsidebysiderefrigeratorSoftcommercials,suchasputtingaside-by-siderefrigeratorintheclubofhigh-endresidentialareaisveryeffectiveinincreasingtheawarenessManypotentialcustomersarenotfullyawareoftheexistenceofside-by-siderefrigeratorsinChinamarketWhenmakingpurchasedecisions,thekeyfactorsthatcustomersconsiderarebrand,designandfeatureMr.GuYongGuyManagerZXHYTradingCo.13aaaaaa010807BJ-refrigeratorDIRECTCOOLINGISSTILLTHEPREFERREDCHOICEACROSSTHEMARKETPercentSource: SINO-MR;GfK,fieldinterviewNorthWestEastChinaAlthoughindirect-coolingrefrigeratorisfrost-free,ittendstodryupthefood.Asaresult,itisparticularlyunpopularinlesshumidareassuchasNorthernChinaNorthEastNorthChinaSouthWestCentralWestMarketshareofdirectcoolingrefrigeratorsinmajorcities,200014aaaaaa010807BJ-refrigeratorCHANNELSTRUCTUREFORREFRIGERATORSISFLAT,ESPECIALLYFORLOCALPLAYERSSource: InterviewManufacturersFirsttierdistributorsRetailersLocalmanufacturers=70-80%MNCmanufacturers=30-50%DepartmentstoresHypermarketsSpecialtystoresOthersLocalmanufacturers=20-30%MNCmanufacturers=50-70%15aaaaaa010807BJ-refrigeratorAMONGALLRETAILCHANNELS,HYPERMARKETSANDSPECIALTYSTORESAREEXPECTEDTOGROWFASTINTHENEARFUTURESalesdistributionbychannel---whitegoodsPercentHypermarketsSpecialtystores*DepartmentstoresOthers5199820002003E*IncludeselectronicchainssuchasGuomeiandDazhongSource: Saaaaaa16aaaaaa010807BJ-refrigeratorDISTRIBUTIONSTRUCTUREFORSIDE-BY-SIDEREFRIGERATORSDIFFERBYTIERCITIESTier1citiesManufacturers1sttierdistributorsRetailers2ndtierdistributors20%70%Endusers10%Manufacturers1sttierdistributorsRetailers100%Tier2citiesSource: Fieldinterview17aaaaaa010807BJ-refrigeratorKELON'sCHANNELSTRUCTUREFORREFRIGERATORSSource: Annualreport,fieldinterviewsRongshengKeloniscurrentlyexploringotherchannelstrategies:SetupsalesanddistributioncompanieswithdistributorsCooperatewithlargeretailerssuchasCarrefourandGuomeiinproductplanningKelonRetailers1sttierdistributors95%5%KelonRetailers1sttierdistributors40%60%Kelon18aaaaaa010807BJ-refrigeratorHAIERHASADISTINCTIVEDISTRIBUTIONAPPROACHWHICHISHEAVILYFOCUSINGONDIRECTRETAILSALESFORBASEAND

HUBCITIES..Source:Fieldinterview;McKinseyanalysisSpecialtyshoresFirsttiercityaaaaaaondtiercityThirdtiercityHaiershop-in-shopsRetailersinfirsttiercitiesRetailersinsomelargeaaaaaaondtiercitiesSpecialtystoreHaiershopinshopsRetailersinaaaaaaondtiercitiesSpecialtystoreHaiershopinshopsRetailersinthirdtiercitiesSpecialtystoresHaierA/CsalesCo.HaiersalesbranchesinsmallaaaaaaondtiercitiesWholesalesinsomethirdtiercitiesHaiersalescenterinfirsttiercitiesHaiersalescenterinsomelargeaaaaaaondtiercitiesHaiersalescentersinfirstandaaaaaaondtiercitiesHaiersalesbranchesinbigthirdtiercitiesEastregionNorthregionWestregionSouthregion19aaaaaa010807BJ-refrigeratorMARKETDEFINITIONSupply(competitor)analysisDemand(customer)analysisOverallenvironmentanalysisMarketdefinitionMarketassessmentMarketsharebycompetitorIndustryprofitabilityoreconomics20aaaaaa010807BJ-refrigeratorWHILETHEMARKETISGETTINGMOREDOMINATEDBYTOPPLAYERSCOMBINED,MNCPLAYERSAREGRADUALLYTAKINGMORESHARES*RongshengandKeloncombinedSource:SINO-MR,GfK,LIIC100%=1998Others1999200037.415.58.72.732.435.713.88.25.95.728.030.912.38.610.08.826.1aaaaaaElectroluxMeilingKelon*HaierSiemens8.69.19.4HaierandKelonaretheleadingplayers.However,theirmarketsharesaredecreasingAlthoughlatecomerstothemarket,ElectroluxandSiemensarequicklybuildinguptheirpositionsbyfocusingonmid-tohigh-endandhigh-endmarketsComparedtootherMNCplayers,aaaaaa'sgrowthinthemarketisratherslowMillionsunits,percentRefrigeratormarketshareofmajorplayersinmajorcities4.5-6.215.6270.7101.23.9-6.9-5.0CAGR(98-00)PercentaaaaaaHaier/Kelon/MeilingSiemens/Electrolux2.63.32.70.721aaaaaa010807BJ-refrigeratorEAST,SOUTHANDSOUTHWESTCHINASEEMTOBETHEWINNINGTERRITORYFORMNCPLAYERS*KelonandRongshengcombinedSource:SINO-MR,GfK,LIIC100%=NorthChinaOthersaaaaaaElectroluxMeilingKelon*HaierSiemens2.33.50.5ElectroluxandSiemensaredoingparticularlywellinSouthwestApartfromSouthwest,MNCplayersaredoingbetterineastChinaandSouthChina,relativelymoreaffluentareasaaaaaaisrelativelystronginEastChinaandSouthChinaNorthEastEastChinaCentralSouthSouthWestNorthWest0.90.71.432.011.68.59.85.31.730.836.616.111.57.65.90.421.926.06.29.79.48.210.130.331.014.36.99.710.53.324.420.411.09.819.218.50.320.833.818.29.68.60.124.15.6Marketshareinmajorcitiesbygeography,2000Millionunits,percentaaaaaaHaier/Kelon/MeilingSiemens/Electrolux22aaaaaa010807BJ-refrigeratorLOCALLEADINGPLAYERSAREDOMINATINGINALMOSTALLPRICESEGMENTS,MNCPLAYERSTENDTOBESTRONGINMID-TO-HIGHENDMARKETS*AnotherKelon'sbrandSource: SINO-MR,GfK,LIIC100%=<1,500OthersaaaaaaElectroluxMeilingKelonHaierSiemens0.92.30.3Siemensisfocusingonveryhigh-endmarketwhileElectroluxisfocusingonmid-to-highendmarketaaaaaademonstratedstrengthinlow-pricemarketKelonusesmulti-brandstrategytotargetbothlow-to-midendmarketandmid-to-highendmarket1,500-

2,5002,000-

2,5002,500-3,0003,000-

4,000>4,0002.01.92.024.112.51.217.819.624.80016.012.60.17.74.145.713.828.316.50.18.510.031.51.93.447.39.71.15.98.87.21.318.736.32.03.82.919.326.09.40.429.80.14.34.70.348.10.312.5Rongsheng*0Marketshareinmajorcitiesbypriceband,2000Millionunits,percentElectroluxKelon/RongshengSiemensaaaaaa23aaaaaa010807BJ-refrigeratorLOCALPLAYERSAREDOMINANTINMOSTPRODUCTSEGMENTS,MNCPLAYERSHAVESTRENGTHINMID-TO-LARGECAPACITYMARKETS*AnotherKelon'sbrandSource: SINO-MR,GfK,LIIC100%=<100LOthersaaaaaaElectroluxMeilingKelon*HaierSiemens0.21.00.7HaierisleadinginmostmarketsElectroluxandSiemenshavestrongpositioninmid-to-largecapacitymarketsaaaaaaisverystronginsmallcapacity(<100L)marketandisrelativelystronginmidcapacitymarket100-150L150-180L0.61.23.1180-200L200-225L225-250L250-300L>300L2.60.03Rongsheng*40.47.8036.90.119.851.213.401.49.602.821.424.823.30.59.07.76.51.127.129.89.10.813.75.27.54.229.735.511.70.85.911.010.12.922.123.45.41.17.824.12.61.234.417.28.55.25.013.730.419.90.125.1019.02.61.152.00.20Marketshareinmajorcitiesbyproducttype,2000aaaaaaHaier/Rongsheng/KelonSiemens/Electrolux24aaaaaa010807BJ-refrigeratorGEISTHELEADINGPLAYERINSIDE-BY-SIDEREFRIGERATORMARKET100%=Others*aaaaaa1,0003,500ThemarketisdominatedbyMNCplayersaaaaaahassignificantshareinthemarket.However,GEclearlydominatesNewplayerssuchasHaierareenteringthemarketThehigh-endside-by-siderefrigeratormarketislikelytoremainMNC’sterritorywhile“localplayers”willfocusonlower-endsegmentsUnits,PercentUnitmarketshare60*IncludesHaier,LG,Whirlpool,etc.Source: ZhongxiTradingCo.,aaaaaaGE19992000Growthpercent250N/A31921125aaaaaa010807BJ-refrigeratorKEYMNCPLAYERSENJOYPRICEPREMIUMSINSIDE-BY-SIDEREFRIGERATORSGEenteredthemarketfirstandhasthestrongestbrandimage.It’’spriceisthehighestaaaaaa’spriceis10-20%lowerthanGE’sOtherplayers’pricesareonaverage10%lowerthanaaaaaa’sSource: Fieldinterview;GfK26aaaaaa010807BJ-refrigeratorKELONANDMEILING’SFINANCIALSSHOWTHATMANUFACTURER'SPROFITSUFFEREDOVERTHEPASTFEWYEARSANDAREEXPECTEDTOREMAINLOWSource: MorganStanleyDeanWitterreport,annualreportsMeiling19972001E2000E19991998KelonEBITmarginPercent27aaaaaa010807BJ-refrigeratorMARKETASSESSMENTMarketassessmentSupply(competitor)analysisDemand(customer)analysisOverallenvironmentanalysisMarketde