Whirlpool’s Market Share Takes A Hit From Private Labels, Rising Costs

Whirlpool of India Ltd. has been steadily losing market share over the past few months impacted by rising commodity costs and stiff competition from private-label peers, according to Emkay Global Financial Services.

In the refrigerator segment, the company has been the biggest loser with a 160-basis-point share loss year-to-date, the brokerage said in a Sept. 8 report, citing its checks across retail distribution channels. “It has consistently lost share since March 2022 on a month-on-month basis.”

Demand for refrigerators has not seen a major uptick despite the summer being hotter than expected. While an industry-wide recovery was seen in the mid and premium segment, the economy segment was subdued amid high inflation. The category saw 3% volume growth on a three-year CAGR and competitive intensity in this segment remains heightened, Emkay said.

This caused the combined market share of the top five brands to contract 190 basis points year-to-date, and 330 basis points over FY21.

LG and Godrej, according to Emkay, are the gainers.

Godrej’s market share in the refrigerator segment has consistently sustained over 9% since April. Tail brands such as BPL, Kelvinator and other private labels are the “major” gainers. Share of Voltas Beko’s was stable at 2.5%. Lloyd, albeit on a very small base, is also gradually seeing traction, it said.

Whirlpool lost market share in the washing machine segment as well.

“July was the seventh consecutive month of share loss,” said Emkay. Whirlpool’s market share has contracted 210 basis points year-to-date. The company has lost 90 bps share in FY22 versus FY21, and 130 bps versus FY20.

Demand for washing machines was robust with volumes up 13% year-on-year in July and 11% on a three-year CAGR (YTD basis), said Emkay.

“Strong volume trends, however, were underscored by seasonality and gradual demand recovery in entry-level products.”

Samsung, Haier, Bosch, and other tail brands gained share. Share of Voltas Beko and Lloyd was stable at 2.3% and 1.3%, respectively, Emkay said. Overall, however, the category has seen a contraction of 500 basis points in combined market share of the top five brands, which Emkay attributed to rising competition from private labels.

According to Nirmal Bang, Whirlpool was among the first to take price hikes owing to cost pressures. In the last six months of 2021, too, it lost some market share after it had taken two consecutive price hikes during the year, whereas market leaders like LG and Samsung raised prices much later,

Analysts, however, expect Whirlpool’s margin to improve with commodity prices now abating. Demand is also likely to pick up due to the early onset of the festive season and the need for further pricing action staying out of the picture.

But Whirlpool’s margin will remain restricted to 9-10% over the medium term, according to Chirag Muchhala, research analyst, consumer durables, Centrum Broking. That’s because of heightened competitive intensity with the foray of deep-pocketed players such as Voltas Beko and Lloyd and with peers like LG, Samsung and Haier becoming aggressive.

Analysts at Edelweiss Securities concurred. Whirlpool’s operating margin came in at 5.9% in Q1 FY23. “A steep miss on Ebitda—in high double-digits—suggests disruptive inflation and competitive forces continue to be in play,” it had said in a report on Aug. 18. It expects margin to somewhat normalise, despite current weak profitability, as input costs are falling.

“A lot though would depend on how well Whirlpool delivers on ground—new plant ramp-up, pricing and distribution, among others,” it said.

Whirlpool, according to Nirmal Bang, has launched dealer schemes pan-India to correct prices. The brokerage said the company will be able to ramp-up its positioning in premium products after import of higher-end products was adversely impacted due to Covid-led disruptions, although it is lagging against key competitors like LG and Samsung.

In a post-earnings conference call, Whirlpool acknowledged that inflation has peaked and its impact on consumer spending, especially entry segment, is putting stress on demand. It expects the short-term external environment to remain volatile.

According to most brokerages, Whirlpool’s market share is likely to stablise as pricing comes down due to easing of raw material prices.