Swedish transport law says that after 1 December every year, all cars must be fitted with studded tyres to grip the icy roads, lest they swerve off the slippery roads. Through October and November, when the temperatures starts dropping to freezing point, motorists drive to tyre fitters, not too dissimilar to a Formula 1 pit crew, who lift the car, take off the summer tyres and affix the winter treads. Businesses called ‘Tyre Hotels’ then look after your unattached set until late spring, when drivers return to reverse the process.
Paul Reid was just getting used to this constant change when he received a call from Panasonic’s global HR team advising him that longstanding Australian MD Steve Rust was retiring and they wanted him to return to the local office to take the reins. Reid had been Rust’s director of marketing and sales since 2006, after joining the Japanese subsidiary from emerging Korean brand Samsung in 2004. In 2011, when the opportunity came up to run a subsidiary, Panasonic Nordic, Reid seized his chance and moved with his young family to Stockholm, Sweden’s capital, where the electronics giant manages that and four other counties: Denmark, Norway, Iceland and Finland. The combined population of this region is only slightly more than Australia — 26 million vs 23.5 million — but Reid learned quickly that the markets were very different.
“The Panasonic brand is not nearly as strong over there as it is here — it’s just not as well known,” he said in an interview with Appliance Retailer at Panasonic Australia’s Macquarie Park head office. “Fundamentally, people don’t know Panasonic; the level of awareness is much, much lower.”
Making adaption just a little bit harder, the Nordic countries are far from homogeneous. All five countries have their own language and, to make things really confusing, only Finland has adopted the euro, so the company is also trading in five different currencies.
“Five languages and five currencies, five different cultures and five different ways of doing business,” summarised Reid, but the real difference — the “big learning curve” — was in the dynamic between retailers and suppliers.
“It’s very much driven by performance — product, price and delivery performance — and supply chain efficiency,” he said. “It’s quite similar to the US business model, where retailers will typically decide their product assortment in the northern spring, around March/April, and that is fixed for the full 12 months.”
This contrasts with the Australian industry, where relationships, handshakes and rebates still permeate. Deals are done on the golf course and people like doing business with people they know and trust.
“There is less wheeling and dealing and the focus is on getting the assortment right at the start of the year, and then driving the sell out. It’s all about maximising the sell out through the course of the year, and driving the sales out in stores.”
While Reid says that, “There is still plenty of pragmatism in the Australian market”, he adds that, “being a trustworthy, reliable, honest, fair supplier still counts for a lot in the Australian market”.
The only constant is change is a mantra that Reid returns to throughout our interview and drastic change has definitely been visited upon Panasonic since he was last working in the Australian subsidiary. Globally, the company initially struggled to adapt to changing market conditions, and posted an AUD $8 billion loss for its 2012 fiscal year. There was barely any improvement over the next 12 months and the company posted another similar loss. Then, for fiscal 2014, Panasonic posted a $1.26 billion profit. A company-wide restructure that saw 10,000 employees (or 3 per cent of the work force) depart and the exiting of its unprofitable plasma businesses were contributing factors.
The Australian office, which is essentially a sales and marketing company, has itself changed, with sales reps outsourced to an agency, Crossmark, and new categories explored. Since Reid was last in Australia, Panasonic has introduced washing machines and refrigerators, greatly expanded its air conditioning range and completely reinvigorated its Business Systems Group with new faces and new products. Since taking control almost three months ago, Reid has assessed the state of Panasonic Australia and is optimistic.
“We are a company filled with opportunity, we can be doing much more than we are today,” he said. “I have been meeting with retailers one-by-one, trying to identify where the opportunities are for Panasonic to improve our business and how to work more closely with them. We have a lot of scope to grow in almost every area of business.”
Sources say that throughout the 2000s, Panasonic Australia’s revenue was largely derived from sales of plasma TVs. The advent of LCD and then LED LCD technology and the emergence of cheap alternatives gradually ate away at these sales and, because of the global abandonment of plasma, Panasonic must now shift focus to LED LCD. I think it is fair to say that although it has always marketed LCD TVs, Panasonic’s plasma proselytization resulted it in conceding much of the LCD mindshare to Samsung, Sony and LG. I ask Reid if he thinks Panasonic has scope to grow its TV business.
“Yes, absolutely,” he replies. “TV has been a tough business for Panasonic in recent years, no doubt, but our market share, if you look holistically at our TV business, is relatively small. That means that, even in a tough market, there is plenty of room for us to grow.
“In the TV business, we are seeing a very clear shift towards larger screen sizes and Ultra High Definition, and both of those will lead to increases in average selling prices, so I think there is great opportunity in the TV business.”
Having sold Panasonic’s market-leading plasma TVs for a decade, Reid was understandably grieved by the death of the format.
“I was very much sad to see the end of plasma — it was the end of an era. If you look at what was written by commentators around the world: really wonderful things were said about that product and there was a lot of sadness by journalists, editors and bloggers. It really showed that plasma was really appreciated.”
Respected rival hack and notable TV reviewer Campbell Simpson of Gizmodo Australia echoed this disappointment in a remarkable obituary full of pathos and hiraeth:
For me, the start of this year has been a time of quiet disappointment. I really hoped that plasma would make some strides forwards in energy efficiency and power consumption; to bring those annoying niggles into line with its excellent, as-yet-unmatched picture quality and value-for-money performance.
I’m still holding out hope that Panasonic might make a surprise announcement in the coming months about plasma’s miraculous rebirth but you and I both know that’s just not going to happen.
Reid said Panasonic is now focused on taking plasma’s legacy — it’s unrivalled picture quality — and shifting those attributes to its LCD TV business.
“Our mission,” he says, “is to once again deliver industry leading picture quality through other technology in TVs.”
Can you look a consumer in the eye and say your LCD TVs are as good as your plasmas were?
“Well, they’re different, the technologies are entirely different, the characteristics of the TVs are different. Plasma delivered a certain kind of picture quality. Our LCD TVs deliver a different kind of picture quality from a different platform, and understanding those differences, I think we can say that our LCD TVs are outstanding and amongst the best in the business.”
Another area earmarked for growth in audio. Rather than rallying around a single style, technology or form factor, consumer tastes are diverging. Reid’s research has revealed that some consumers want high-end personal audio in the form of a fancy pair of headphones, others are looking for portable Bluetooth speakers, while others still want the convenience and flexibility of a multi-room system. Because of Panasonic’s long heritage in audio systems, it is well-placed to capitalise on this growth with diverse products at premium price points.
“There is a fundamental shift happening in the audio business and it is returning to growth. The audio business is diverging and we’re seeing a shift in consumer preference,” Reid says, citing a move from home theatre systems to soundbars as a pertinent example.
“We’re seeing TV buyers appreciate that there’s a real benefit to having higher quality audio; as TVs become thinner, there’s demand for high quality audio to supplement the TV’s sound. We’re seeing an increase in demand for music streaming and Bluetooth systems. We’re seeing demand for party systems, which in Australia has been hugely successful for us: there is nothing like it.
“It’s not about audio trends coming together — it’s more about audio trends diverging — to cater for different markets altogether.”
While growing both value and volume share “would be nice”, Reid says value is more important. Under his tutelage, Panasonic’s product portfolio will be positioned at the premium end of the market and the intention is to compete on brand and features, not on price.
Although change is constant, Reid has been blessed with a relative rarity in this industry: personnel intransience. While Panasonic’s fiercest rival, Sony, has been riven by staff changes, including the hamfisted departure of its senior management, so many of Reid’s old colleagues remain. Richard Tassone, Sophie Barton, Doug Campbell, Alistair Robins, Mathew Harrison, Daniel Priess and Colin Harm are all highly regarded salespeople and/or marketers and their institutional intelligence is a priceless asset.
“We have a great team of people – I can’t stress that enough – they are all passionate about what they do and they are determined to make a difference,” Reid said. “I think we’ve got a good mix of the longer-term team members and also some new people. I think it is good to have people with fresh ideas coming into the business that can contribute something new and present a different way of thinking.”
Over the first six months of 2014, Panasonic has been very active in its business to business (B2B) marketing, rolling out an attractive product program in what it calls its Business Systems Group. We’ve seen new Toughpad PCs and tablets, monitors, projectors, professional video cameras and even a lavish installation at Cockatoo Island in Sydney Harbour as part of the city’s Biennale celebrations.
Reid says this increase in activity in the B2B sector is not at the expense of consumer electronics.
“We are focused on B2B and we have lots of room to grow with our Toughbook computers, our IP security cameras and our commercial projection systems. But you shouldn’t understand it to mean that we are shifting our focus from CE to B2B — that’s not the case — actually we plan to grow the consumer electronics business as well. Both of those areas are very important.”
On the subject of introducing cooking appliances into Australia, Reid says this is currently “under study” and that the United Kingdom is currently being used as a test market for a range built-in ovens. Performance in the UK and perceived demand in Australia will determine if Panasonic joins the 100-plus brands currently fighting for share in this local market.
“We’ll progressively look to expand that business (cooking appliances) to other markets in Europe and we’ll talk to Australian retailers about whether those products are right for Australia, and based upon that feedback, we’ll consider whether to introduce them or not.”
Reid sees the move towards connectivity and the growth of the Internet of Things as major trends in the appliance industry and Panasonic will be a part of this evolution.
“This is an important industry trend and one that Panasonic is working towards. In the years to come, we’re going to see an increasing prevalence of device connectivity and we’re working on our own products and platforms to deliver on the networked home.
“It’s an area that presents lots of challenge and opportunity for the industry but Panasonic will be right in the thick of it and will be a player in that business.”
If Panasonic is going to thrive in areas like the connected home, in TV and audio and laundry appliances, it must successfully compete with the aggressive Korean brands and their ferocious appetite for marketing derived customer share. Can Panasonic match brands like Samsung stride for stride? Reid was at his most considered and deliberative when responding.
“What we should remember is that marketing budgets and investment tend to come and go over time and, if you’ve been in the industry a long time, you’ll remember certain times over the recent decades where different brands have invested a lot of money at different times with different outcomes.
“Panasonic is a company that’s been around for nearly 100 years, and in Australia, in one form or another, for the better part of 50 years, and we’re not going anywhere anytime soon.
“There are times when our marketing budget will be bigger than our competitors, other times when it will be smaller, but we’re here for the long haul.
“We’re a company that’s very much trusted and relied upon by consumers and businesses all over the country and I don’t see any issue with Panasonic continuing to compete strongly with brands from any country.”