HUSQVARNA 2011 ANNUAL REPORT – Strategy And Financial Goals, Brand Strategy, Global Distribution Network, Broad Product Offering, North America Market - EXCERPTS
The Group’s strategy involves improving internal efficiency throughout the entire supply chain, in order to create a framework for increasing investment in product development and brands that will further strengthen the Group’s position. The strategy is based on the Group’s primary strengths: strong brands, efficient global distribution network, a broad product offering and a flexible supply chain.
The Group’s Primary Strengths Goals
1) Strong Brands 1) Increase sales of premium brands.
2) Efficient global distribution network. 2) Increase dealer channel sales.
Reduce selling and administrative costs.
More efficient customer service.
3) Broad product offering 3) Sales growth.
Higher market shares.
Reduced time-to-market.
4) Flexible supply chain 4) High flexibility.
Lower production costs.
Increased LCC sourcing.
High delivery accuracy.
Reduced inventory level.
STRONG BRANDS
Fewer, stronger, more global
Husqvarna, Gardena, McCulloch and Diamant Boart are the Group’s global brands. The Group also has regional and tactical brands. Having a portfolio of brands is essential for maintaining a leading position in a range of price and product categories, appealing to different end-users and throughout sales channels and regions.
Husqvarna represents technological leadership
Husqvarna has long been a strong global premium brand for professional users and consumers who demand high performance. The brand stands for technological leadership, professional performance and high quality. In 2011, it accounted for approximately 48 percent of Group net sales.
Gardena is the leader in watering
Gardena is the leading premium brand in Europe for watering products and garden tools for consumers. The brand´s offering also includes battery-powered products. In 2011, the Gardena brand accounted for approximately 12 percent of Group sales.
McCulloch launched globally
The launch of a new product range under the McCulloch brand began in 2011 and in 2012 it will be available in the retail chains. The range includes forest and garden products for consumers in the higher price and performance segments and is initially being launched mainly in Russia, Germany, the Nordic region and the U.S. The range will gradually be expanded and launched globally in the long term.
Diamant Boart global brand for the stone industry
Strong and consistent focus on product development and quality has given Diamant Boart recognition as the leading global brand in the stone industry. The product offering includes a complete range of diamond tools for processing natural stone.
The number of brands will be reduced
In order to increase efficiency and to reduce costs, the Group will decrease the number of product brands. The Group will increase its share of sales to the premium segment, where profitability is higher. Brand investments and product innovations will thus focus mainly on the Group’s global brands.
Tactical brands increase flexibility
The Group’s tactical brands hold strong positions in regional or local markets, or in specific product categories. The tactical brands create scope for flexibility and can, for example, be expanded into new geographic markets or product categories if required. The Group’s regional brands also hold strong positions in their local markets, but there are no plans to expand them into new markets.
Initiatives to strengthen operations
- Prioritize Husqvarna, Gardena, McCulloch and Diamant Boart in terms of brand investments and innovation
- Launch McCulloch as a global premium brand for consumers.
- Reduce the number of regional and tactical brands. During the year Yazoo|Kees was discontinued and the Partner brand is gradually being replaced by McCulloch.
- Strengthen the position of the Husqvarna brand as a professional brand with dealers.
EFFICIENT GLOBAL DISTRIBUTION NETWORK
Increased sales through dealer channel
The Group’s forest, park and garden products are primarily sold through two distribution channels – retailers and dealers. The retail chains focus on consumer products in the mid- and low-price segments as well as spare parts and accessories. Dealers, which include thousands of small, local, independent specialty stores, sell a more advanced range of products, spare parts and accessories to professional users and consumers with a high demand on performance. Most dealers also offer servicing.
The Group holds strong positions in both channels selling to about 25,000 dealers and to most large retail chains. Products under the Husqvarna brand are primarily sold through dealers and, to a lesser extent, by retail chains in the U.S.
Sales to the dealer channel accounted for 47 percent of Group sales, sales to the retail channel 47 percent and sales to other channels (rental companies, sawing, drilling and demolition contractors, and stone quarry customers) accounted for the remaining 6 percent of Group sales.
Products for the construction industry are mainly sold to rental companies and specialized dealers, as well as directly to contractors.
Husqvarna Group’s comprehensive distribution network has been developed over many years, providing a substantial competitive advantage.
There is good potential for growth in both distribution channels, on the condition that the Group can offer appropriate product ranges and efficient service to the respective channels.
Increased sales to dealers is a top priority, especially in North America and Latin America, where Husqvarna Group’s position in the dealer channel is not as strong as it is in Europe. In addition to offering a wide range of competitive products, availability of spare parts, product training, service programs and timely delivery are all important factors in recruiting new dealers. Brand-building measures aimed at dealers, such as customized shelf systems to display Husqvarna Group products, are also important.
Initiatives to strengthen operations
· Improved service through enhanced product training and service programs etc.
· Broader offering and increased availability of spare parts.
· Brand building at points-of-sale.
BROAD PRODUCT OFFERING
Attractive and innovative products that meet customer needs.
The Group has a broad and competitive product offering. Its position is particularly strong in handheld products, such as chainsaws, clearing saws and trimmers, as well as in riders and garden tractors. The Group is the European market leader for watering products and garden tools under the Gardena brand. It also has a strong product offering in cutting equipment and diamond tools for the construction and stone industries.
The Group’s goal is to be the leader in its core areas. However, maintaining a strong partnership with customers involves providing a complete product range, which includes also offering competitive products outside of the core areas.
Focus on core areas
There is a good potential for growth within the existing product offering. The Group aims to maintain a high rate of product renewal, which is decisive for achieving growth and improved margins. Achieving growth also requires having the right product offering for each distribution channel.
Products are becoming increasingly more global or regional, thus creating opportunities for reducing the number of product platforms and local variants. In the long term, this strategy will also lead to lower development costs per sold unit, together with synergies in production and purchasing.
In an effort to streamline product development, the Group is focusing its development resources on a limited number of R&D centers in key locations, including Sweden, Germany, the U.K, the U.S, China and Japan.
Customer-driven research and development
The Group has a common global process for product development. An effective product development process, including consumer insights and a high level of innovation, is essential to the Group’s growth and profitability. The objective is to generate a continuous flow of attractive and competitive new products. Significant synergies and rationalization gains are being achieved in product development via this process.
Initiatives to strengthen operations
· Focus on core areas.
· High pace of customer-driven product development.
· Development resources gathered in a few R&D centers.
FOCUS – Battery Powered Products
Battery-powered products are gaining popularity. The rising demand is being driven by customers’ growing preference for convenient, quiet and eco-friendly products. The Group is continuously adding new products to its already wide range of battery-powered products. In 2012 semiprofessional battery-powered chainsaws, trimmers, hedge trimmers and a ride-on mower will be launched under the Husqvarna brand. The product offering with the battery powered robotic lawn mower will be expanded with a model for smaller lawns under the Gardena brand.
COMPETITORS: FOREST, PARK, GARDEN
AMERICAS – Retained market positions
Market demand in North America fell during the year due to a weak macroeconomic trend. The Group’s sales declined, but overall, market shares remained stable.
The market for forest, park and garden products in the Americas is estimated at approximately SEK 75 billion. The U.S accounts for around 84 percent of the market, Canada 9 percent and Latin America 7 percent. Brazil is the largest market in Latin America. Sales to dealers are estimated at around 35 percent of the value of the total market in North and Latin America, with the remaining 65 percent sold to retail chains. The four largest retail chains (Sears, WalMart, Home Depot and Lowe’s) account for around 70 percent of the Group’s total market sales to retail chains in North America.
Strong market positions
The Group holds strong market positions for chainsaws, garden tractors, lawn mowers and trimmers. The combined market shares amount to around 20 percent. Historically, sales of consumer products to the retail chains have been Husqvarna Group’s strength in North America, and market shares are thus higher in this market. The ambition is to increase market share in the dealer channel.
Lower demand
Demand in most product categories within forest and garden products declined in the U.S during 2011. The exception was chainsaws, which benefited from favorable weather conditions. Overall demand has declined every year since 2005 with the exception of 2010. The market’s total decline compared with the peak year, 2005, is considered to be around 25 percent. Demand continued to improve in Latin America.
Husqvarna Group’s sales in America declined in 2011, primarily due to lower demand. Production disruptions in the Group’s largest production plant in the region also had a negative impact on sales. These disruptions caused delivery capacity to decline and also had a negative impact on costs. Delivery capacity gradually improved as corrective measures were implemented and in the fourth quarter pre-season production for 2012 began.
Measures to increase sales to dealers continued. The number of dealers selling Husqvarna Group products rose, but sales were adversely impacted by lower demand and by the production disruptions.
Sales growth continued to be good in Latin America, but the increase was based on small volumes and the contribution to the business area’s total sales is thus limited.
New products
Most product launches during the year targeted professional users or consumers with high demands for performance, products generally sold by dealers. Commercial lever-operated ride-on mowers (zeroturn mowers), as well as several new models of chainsaws, trimmers, hedge trimmers, pole saws and snow throwers were introduced under the Husqvarna brand.
Increased presence in the dealer channel
The ambition is to increase the share of sales to the dealer channel since it usually has higher margins than sales to the retail chains. The Group already has a comprehensive offering of products for the dealer channel. Several measures have been taken to increase sales, including branding and product-oriented campaigns, a strong selection of spare parts and accessories, and continued improvements in product training and service programs. Many new dealers were recruited during the year. Customized interiors are also being designed for selected dealers to attractively display Husqvarna Group products in the store.
The Group’s margin in the Americas is lower than in Europe. Compared with Europe, sales of consumer products to the retail chains constitute a larger share of sales. Sales to retail chains have a lower margin than sales to dealers.
FOCUS – Ride-on lawn mowers
The Group made many new additions to its already wide range of garden tractors during 2011.
New launches in 2012 include an upgraded range of premium garden tractors for home and landowners. The tractors feature a 107 cm cutting deck, side ejection or integrated collection, and are suitable for gardens up to 4,000 square meters.
The new U-cut solution gives an extra tight turning radius, meaning more efficient mowing. Many different attachments for both summer and winter use are available.
Several new zero-turn mowers for homeowners and professionals were also launched in 2011. The line will be expanded with additional models for commercial use in 2012. The mowers feature high-performance cutting decks for increased productivity, vibration-insulated operator platform and easy-access service points.
THE ENTIRE 110 PAGE 2011 HUSQVARNA ANNUAL REPORT IS AVAILABLE HERE:
