It was nearly a year ago that Spectrum Brands CEO Andreas Rouvé took the reigns of the consumer products company after a 13-year career spent largely with its European division.
Rouvé has taken the helm as company sales during fiscal year 2015 grew 5.9% to $4.69 billion. Entering 2016, he has talked openly about some of the price pressures faced by key segments of Spectrum’s business, including small kitchen electrics, and how the company is working to overcome those challenges. Rouvé recently shared his thoughts with HOMEWORLD BUSINESS® on the current state of his company and the electrics industry as a whole.
HomeWorld Business: With Spectrum Brands having a diverse portfolio of brands, was there a learning curve for you as the new CEO in any categories, for example, small appliances or personal care?
Andreas Rouvé: The benefit of having a broad portfolio is that we can leverage our infrastructure to gain distribution in more channels and countries. However, it is crucial to understand that our different product categories may require different go-to-market and marketing strategies. In the small appliance and personal care categories, it is very often key to educate the consumer about new features and sometimes even about completely new technology.
HWB: In a recent company conference call, you mentioned that the Spectrum First growth initiative is gaining traction. How is this impacting the small appliances and/or personal care divisions?
AR: The Spectrum First growth initiative includes many growth accelerators, where we leverage our competencies across regions and divisions. We take advantage of key talent to fill key management positions across divisions. From a product standpoint, we had some great promotions from appliances to pet or from pet to global auto care. Another priority is our effort to leverage experts in shared services to be more efficient. Here we enjoy increased benefits, for instance, in shared freight negotiations. We are also starting to utilize our global R&D organization better to roll out innovative products such as our Remington Beard Boss grooming line and ShortCut Pro clipper.
HWB: Within categories such as small appliances and personal care, what have you learned about the U.S. market?
AR: Many trends in small appliances and personal care are global. The biggest surprise about the U.S. market, however, is really the importance of extremely aggressive price promotions that impair profitability, and yet on the other side the desire and need for meaningful innovation at higher pricepoints.
HWB: When you look at the small appliances category as a whole, what do you feel are some of its weaknesses and strengths?
AR: The biggest weakness is potential saturation trends, which can lead to price erosion. However, there is a great opportunity in that society pays more attention to quality of life and enjoyment. Cooking is becoming increasingly a fun event, where people enjoy cooking with friends or family. This means small appliances are no longer tools to fulfill an unpleasant chore, but instead enable consumers to have fun and feel good. This enjoyment trend is well addressed by our line of George Foreman grills where cooking is fast and convenient with a health benefit of fat reduction. This is linked to the trend of having higher quality products with more features and benefits.
HWB: Within small electrics, is it challenging to improve earnings in a retail environment that is focused on pricepoint?
AR: Price compression during key selling seasons put pressure on profit margins, so our strategy is to continuously develop new, innovative products. We believe that price is not the only thing the consumer is focused on. The consumer is intelligent and looks at the ratio of product performance compared to the price. The consumer is willing to pay higher prices, if they see a good value because of better product features and benefits. Continuous improvement of existing products and the launch of new products remains a key element in our strategy.
HWB: With retailers driving the demand for lower priced, lower margin items, how does Spectrum Brands convince its retail customers to carry items that have added/unique features, but are also higher priced?
AR: Retailers have two challenges to handle. On the one side, they have to attract consumers into the stores or to their websites. This can often happen with lower priced items. But at the same time, they also need to generate profits to survive long term. This is where category expertise comes into play, so that retailers offer a portfolio of products to accomplish both targets. Spectrum Brands is focused on providing strong value-focused product supported by excellent category management to all our retail customers.