Opinion by James Wells
Like a boxing match, when it comes to the leading contenders in business, it inevitably comes down to the Blue Corner vs the Red Corner — for example Pepsi vs Coke or Ford vs Holden. In the small appliance market, it is Breville vs Sunbeam.
But with the recent 20 per cent share in Breville taken by Sunbeam’s parent company GUD Holdings, it is important to consider the ramifications if the two companies came together — is purple the result?
Market commentators are in agreement, the result of a potential merger of Sunbeam and Breville would not be greater than the sum of its parts. Sure there would be cost savings at the back end and it would establish an incredibly formidable opponent for the remaining companies still in the game. But retailers like diversity, and so adding Sunbeam to Breville, Kambrook, Ronson, Goldair and the distribution of Philips shavers and irons (as well as potentially Saeco coffee machines) makes for an interesting rep call. Brands like De’Longhi and Tefal must be rubbing their hands in anticipation.
Should ‘Sun-ville’ exist, subject to the authorisation of Graeme Samuel at the ACCC, Sunbeam will get the overseas distribution it requires to grow the business and Breville will conquer the company that has gradually worn it down to become the 30+ per cent value share brand leader in the marketplace. The Australian market can represent the design and administration, China the manufacturing, and export markets then become the cash cows.
If GUD MD Ian Campbell can pick up 19.4 per cent of Breville for $18 million, then stretching to buy the next 30 per cent shouldn’t be a major issue. Campbell claimed he was approached to buy the shares from Harbinger and has no current intention to acquire further shares or take a seat on the board, but in the next breath he said it would make a lot of sense for the shareholders of both companies if a merge was to occur.
Campbell has been telling the market for years now that he has a war chest and is ready to splurge on a major acquisition. Other than Oates, there is nothing else that has whet his appetite.
The silent party in all of this remains Breville and significantly the former CEO of Sunbeam — Jonathan (Jack) Lord. After a very sudden departure from Sunbeam and Campbell, Lord was immediately approached by Breville who recognised the talent of its former adversary and a role was created from scratch. The day the non-compete clause expired, Lord arrived at Breville. Lord is the interesting part of the puzzle — can he create a new marketing-led culture at Breville, like he did at Sunbeam where his staff were so passionate they felt like it was their company. Can Lord do this independently of management while allowing the sales team to hit the road, or will Campbell return to once again pull the strings?
But Lord wasn’t the first person to defect to the blue team — Breville’s poaching of Sunbeam’s leading industrial designers, Keith Hensell and Richard Hoare, early this decade is infamous. With these two small appliance masterminds, Breville owned the heads that planned the future of the Sunbeam design portfolio for the next few years.
Design may seem like a fairly minor area of distinction, but with mass commoditisation now the norm, a switch, water window, die cast body or a unique durable plastic compound can be the difference between marketing genius and an expensive prototype.
The Australian Design Awards, the Olympics of the local industrial design industry, were an annual showdown for the two companies. So that the new team at Sunbeam put the expensive old guard to the sword, it was with much satisfaction.
For retailers, the downside of this stalemate and potential merger could be a lack of passionate new product development previously created by these talented design departments of fierce rivals.
Time will tell whether the blue and red become purple or whether the two companies continue to remain black and white.
This article originally appeared in the July 2009 edition of Appliance Retailer magazine.