Italian Firm Plugging Into Home Appliances

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This year the domestic appliances market finally came to after the crisis of 1998, which saw the markets volume reduced by 40 percent.

Today the market is developing rapidly, and the home appliances sector is growing.

Moreover, the pool of Soviet home appliances purchased back in the 80s is finally wearing out. Soon millions of Russians will be faced with the need to purchase new refrigerators, washing machines and stoves. The blessing is that the populations solvency is growing along with the market. Italian firm Merloni Elettrodomestici SpA probably the most energetic manufacturer of quality European technology occupies a leading position in the Russian market: The company controls 35 percent of the entire market. This is no surprise.

Merloni Elettrodomestici SpA has been in Russia for a long time. In Soviet times the company built the Vyatka washing machine factory, known today as the Vesta factory, and later the Stinol refrigerator factory, which the company bought back from the Novolipets metallurgical factory in a deal worth $119.3 million last June.

Merloni Elettrodomestici SpA is internationally renowned for its aggressive advertising strategies. This year, for example, the company will spend $10 million promoting its Ariston and Indesit brands in Russia alone. Last weekend in Monte Carlo, Merloni officially presented a new line of its Indesit brand designed by the well-known company Giugiaro Design, which has worked on products for Apple, Seiko, LOreal and Volkswagen. Merloni has invested 30 million euros ($26 million) worldwide for promoting the new Indesit model.

Merloni Elettrodomestici SpA is one of the largest manufacturers of home appliances in Europe. The companys 13 firms employ about 7,800 people annual turnover exceeds $1.3 billion. With the purchase of Stinol, Merloni will become the largest operator in the Russian domestic appliances market. Its three trademarks, Stinol, Indesit and Ariston, will control over 35 percent of the market. The most significant lead will be in the sector for refrigerators. Last year, Stinol produced 40 percent of domestically manufactured refrigerators 1.7 million items.

Vittorio Merloni, the founder and president of the company, talks about his companys strategy for the world market.

Q:
To what extent are the processes occurring in the international technology market reflected in Russia?
A:
We were the first company to start working in Russia after the Berlin Wall came down in 1991. We had very good opportunities from the word go, since the company has had connections with Russia since the 70s. It is our opinion that in Russia, the home appliances market has huge potential; it is very attractive today. Since weve been working in Russia, we have invested money in various areas: management, technology, manufacturing, etc. Today we are leaders in the Russian market. We feel confident in the Russian market. We had some pretty serious problems after the 1998 crisis, but now we are confident that the effects of the crisis have been overcome. This was one of the reasons why we decided to purchase the Stinol refrigerator factory. In our opinion, the Russian market will develop actively over the next 10 years.

Q:
After your company purchased the Stinol factory in Lipetsk, you said the company would expand production and invest an additional $50 million in its development. What form will the output expansion take? Will Stinol produce washing machines as the former administration had intended?
A:
We plan, first of all, to directly develop the refrigerator factory. Not the factory specifically, but the number of models it produces. The fact is that the refrigerators the factory produces today have become outdated. They are a bit big. Stinol only produces big models, the 60-centimeter size, while market demand is for narrower, more compact models. In any case, even prior to the modernization, we must understand Stinol itself the companys interests, the people who work there. In our opinion, we will be making washing machines.

Q:
How much do you plan to invest in manufacturing washing machines, what kind of output do you plan, and which trademark will they be made under?
A:
The amount we will invest depends on the volume of the Russian market, how many machines we can sell and what the opportunities for export are. I think that investments will be a little higher than the sum we named earlier $50 million.

Q:
Merloni has always invested vast amounts in advertising Ariston and Indesit. Now you have another brand Stinol. Will you continue to manufacture under this brand name?
A:
Stinol is very well known in Russia. We will certainly continue to sell goods under the Stinol trademark. Our Lipetsk factory will also produce Indesit, our all-European brand.

Q:
Will you export Stinol?
A:
Nobody knows Stinol outside Russia. Indesit is made in various countries Portugal, Greece, Turkey and is well know internationally. Stinol, on the other hand, makes Russian goods for the Russian consumer.

Q:
When is it planned to increase manufacturing of washing machines?
A:
It is very difficult to answer this question because I hadnt been to Stinol before the contract was signed. Once we officially receive the Stinol shares, which will happen before the end of September, our team of 20 will go to the factory, and the production starting dates will be determined on the basis of this visit.

Q:
When will the new Indesit line appear in Russia? How much do you plan to invest in promoting the new line? What will happen to the old Indesit line?
A:
We will stop making the old models. They will be gradually taken off the shelf. The new Indesit will appear in Russia at the same time as it does in other European countries. We have invested 30 million euros in advertising the new line.

Q:
How are you developing in the global market? What directions interest you?
A:
In recent years we have been actively developing an "intelligent" household technology system. Our priority today, therefore, is to expand our servicing system. In other words, we will sell goods with a full package of services. For this to be a success, we need to create communication between the goods, as well as telecommunications with the outside world. We aim to establish a system such as this over the next five years.