The little town of Ecully, located just outside Lyon in east-central France, is comfortably wealthy, though somewhat dormant. Groupe SEB, headquartered in Ecully, is neither little nor dormant, but in sync with the feel of the town it is comfortably wealthy, with annual sales worth €3.6bn bringing a 23% profit margin.
Although Groupe SEB itself may not be a household name, its brands most certainly are. As the owner of the likes of Tefal, Krups and Rowenta, it is the world leader in the small appliances sector, selling six products globally every second. From a tin workshop in Burgundy established in the 1850s to its first forays into the domestic appliance market a century later; and from being a France-centric company, to Europe-centric, to a company that operates around the world, SEB's growth and ability to reinvent itself is impressive.
“Very early on we realised that if you want to manufacture products [in the small appliance sector] only for European markets, the plans of your factories will be very small and consequently you will not be very competitive. That is why we decided to offer our products in other European countries, and then in the US, Brazil, Japan and other countries around the world, ” says Jean-Pierre Lac, chief financial officer and senior executive vice-president of SEB, who adds that internationalisation is one of the pillars to the company’s success. Currently more than 80% of the company sales come from outside of France, and emerging markets account for 44% of its sales.
Up-and-coming economies are especially important for the company, as the growing middle classes in these countries demand more household appliances. “As people grow wealthier, they look for ways to make their life easier... And that is exactly what our products are made for,” says Mr Lac.
Since the company bought Tefal and its five European subsidiaries in 1967, Groupe SEB has been reinforcing its position overseas and now employs more than 23,000 people in 51 countries, while operating in almost 150 countries. For Groupe SEB, at the most basic level internationalisation means tapping into existing distribution networks. That is something that Mr Lac dubs "a suitcase model". “We enter a new market with two suitcases. In one suitcase irons, in the other one frying pans – these are our flagship products and we try to sell them. It works in places where there is no market leader. Such a model proved successful in countries such as Russia and South Korea,” says Mr Lac.
Finding a way to gain access to a distribution network is another catalyst for Groupe SEB’s successful sales. When a distribution network is dominated by a strong local brand, the company looks for an alternative way to establish its business.
“We tried our suitcase model in Brazil. It did not work. All the distributors would tell us that they prefer the local brand – Arno. What did we do? We bought Arno,” says Mr Lac, half-jokingly. He adds that local brand acquisitions should not be seen simply as a takeover of the market share. By passing on tips on approaching different vendors and expanding the range of offered appliances and by including other products from the Groupe SEB’s rich portfolio after the acquisition, the company’s subsidiaries manage to increase the market share of its subsidiaries. The company is now looking to kick-start its sales in India, where Mr Lac says “we will be one way or another in 2012”.
An Asian appetite
SEB Groupe’s appetite for doing business in Asia is understandable, given the company’s spectacular success in China. In 2006 Groupe SEB acquired Supor, the Chinese leader in the cookware industry. Since then SEB’s subsidiary has not only been awarded a 'Consumers' Favourite Brand' title in 2007 and been named one of the most valuable brands in China, it also increased its sales threefold in the past four years. “Instead of staying here in the Lyon region and complaining about the nasty Chinese guys manufacturing cheap products, we went out there and it was a fantastic move,” says Mr Lac.
Although two-thirds of all small appliances sold worldwide are manufactured in China, for Groupe SEB, starting to sell its products in the Far East did not mean it would move all of its production to Asia. Of the 24 factories that Groupe SEB owns, 10 are located in France. “We call ourselves 'the last of the Mohicans', as there is really not many of us left who keep the producing facilities in Europe,” says Mr Lac. While Groupe SEB is expanding its Chinese plants, as in the case of other countries, these will supply products mostly for the domestic markets. Such structure of the supply chain enables the company to quickly respond to changes in demand or queries from outlets selling SEB’s products.
Mr Lac adds that in some markets, customers are willing to pay premium for products manufactured in Europe as they are perceived to be of a higher quality and more prestigious than those produced in other parts of the world. “That is true especially in the Middle East and Japan… It is [a status symbol],” says Mr Lac.
As for its own status, it would appear that Groupe SEB has enough cash in its coffers to remain in the lead in the small electrical appliances sector. “Sales is vanity, profit is sanity, but cash is reality,” says Mr Lac.