Major changes planned as GUD looks to reverse Sunbeam’s decline

-Revenue from GUD’s consumer brands (Sunbeam and Oates) down 11 per cent.
-Decline blamed on house brands and Retravision collapse.
-Sunbeam looking for international business partners.
-Major brand refresh planned, including online accessories sales

GUD Holdings has blamed the collapse of Retravision, European competition and house brands for an 11 per cent sales decline and a 40 per cent drop in earnings before interest and tax on its consumer products, primarily the Sunbeam and Oates brands.

The outlook for the Sunbeam brand is strong, however, through a brand refresh, new marketing materials and direct selling through a new website.

Overall, GUD Holdings reported a net profit after tax of $31.5 million, down considerably from $92.8 million the preceding year, though this comparison is skewed because GUD Holdings realised a $49.4 million profit in FY2012 from the sale of its Breville Group holdings.

Consumer products performed poorly for GUD Holdings during FY2013, with revenue dropping from $219 million to $194 million (-11 per cent) and earnings before interest and tax declining from $32.7 million to $19.9 million.

Low consumer confidence was one of several reasons outgoing managing director Ian Campbell attributed this result to.

“Sunbeam experienced intense competition from retailer house brands and increasing product proliferation, especially from European appliance brands,” Campbell said. “The collapse of the Retravision group of independent retailers also led to a reduced retail presence for Sunbeam.”

There are signs of a turnaround, however, with Campbell highlighting Sunbeam’s strong Mother’s Day program, market leadership several core categories and new product initiatives.

“Sunbeam is instigating a number of initiatives aimed at building the brand’s standing with specific consumer segments. This involves a revised communication strategy and renewed in-store activation program.”

Having observed Breville’s success with international partnerships and distribution, and been intimately involved through its past shareholding, Sunbeam is now “pursuing a number of with opportunities with potential international alliance partners”.

As an example of what is achievable, Breville has partnerships with American companies SodaStream and Sous Vide Supreme, a strong distribution network through up-market American retailers and has recently launched the Sage by Heston Blumenthal brand in the United Kingdom.

Sunbeam, however, is expected to go down a different path, offering its products to suppliers in other regions to market under their own brand names. This is expected to not only increase revenue, but allow Sunbeam to raise its production runs, creating greater scale for the local operation so prices can remain competitive with its rivals.

Campbell has previously lamented the “incessant” demands made by Chinese sourcing partners to increase manufacturing levels. These companies are known to be particularly ruthless, and importers can be quickly priced out of a market if they do not comply with these demands. If Sunbeam were able to increase its production levels without needing to sell more stock in Australia, it could retain price points that are both competitive and profitable, placing less downward pressure on average sales prices and margins.

GUD Holdings invested $8.6 million into product research and development during FY2013, with a “substantial amount” going towards Sunbeam’s Christmas and Mother’s Day products. A similar investment is expected during FY2014 because the market “demands constant innovation and freshness”. GUD has used Sunbeam’s re-entry into the steam station category as evidence of this development program’s success.

While this was going on, GUD Holdings launched an internal audit to assess Sunbeam’s brand strength in a market becoming more saturated with white label, house brand and retailer brands. GUD says this proliferation has “intensified competitive new product launch activity”, a fundamental change in a market Sunbeam has traditionally dominated through its very high mindshare position.

GUD expects to see the results of this audit borne out through product releases and marketing activity in the near future. This will include a new brand campaign, refreshed point of sale and create executions specifically targeting the Gen Y demographic.

In a bold move for a brand that has always had strong partnerships with large retail chains, Sunbeam will be soon start selling accessories directly to consumers through a new, highly optimised website.

“In relation to brand health,” GUD Holdings reports, “Sunbeam will undertake a number of actions, including a new brand architecture aimed at addressing specific needs of consumer segments and implementing a new brand campaign and refreshed point of sale materials aimed at engaging young consumers.

“In addition, Sunbeam will commence selling accessories directly to consumers utilising its new website technology.”

Although there is nothing to indicate Sunbeam plans on expanding these direct sales to actual appliances, it should be noted that other brands have tested the water with online accessories sales in advance of launching full service online stores. Examples include Dyson, Canon and Logitech.

Ian Campbell is stepping down as GUD Holdings at the end of July 2013 and will be replaced by Jonathan Ling on 1 August 2013.

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