High-quality growth has been the standout feature of this year's "financial reporting season" for Chinese home appliance companies. On March 27th, both Haier Smart Home and Midea Group released their 2023 annual reports. Observers in the home appliance industry noted that both companies saw profit growth rates exceeding revenue growth rates, achieving double-digit increases. Building new productive forces under the high-quality growth paradigm is emerging as the new engine for the development of the Chinese home appliance sector.
For mature Chinese home appliance companies, investors prioritize two key indicators: sustained growth and future potential. The compound annual growth rate (CAGR) of profits over the past three years has become the primary observation point. Public data reveals that Midea Group achieved a profit CAGR of 8.6% over the past three years, while Haier Smart Home reached 12.7%. Haier Smart Home, with the highest growth rate among leading companies, not only reflects its own long-term steady development but also signals new changes in the industry.
Opportunities in the home appliance industry lie in the pioneering exploration of leading enterprises. In recent years, the most discussed topic in the home appliance industry is whether there is still room for growth and where the driving force lies in the mature yet uncertain path ahead.
The answer lies hidden in the financial reports of industry leaders, who, under the combination of high-end and globalization, collectively constitute the current development momentum and future space for enterprises. An analysis of the home appliance industry reveals that by focusing on these two forces, Haier Smart Home is not only a pioneer but also a continuous leader.
Firstly, while many peers have only recently embarked on the transformation towards brand premiumization, Haier Smart Home has already established Casa Di as the most influential and growth-oriented high-end brand globally. The 2023 financial report shows that Casa Di has been the top brand in the high-end market for eight consecutive years, continuously leading the industry. In particular, in the offline market, refrigerators priced above 15,000 RMB accounted for over 50%, washing machines priced above 10,000 RMB accounted for as high as 84%, and air conditioners priced above 15,000 RMB accounted for 28%. Focusing on the high-end market, Casa Di has also achieved first place in high-end standards, patent awards, and original technology, establishing a solid "moat." Currently, Haier Smart Home is not content with just leading in the high-end market, but has also surpassed itself by creating the world's first scene brand, Three Birds. In 2023, Three Birds' retail sales increased by 84% year-on-year, with complete sets accounting for over 60%, and scene transaction volume exceeding 5.1 billion RMB.
In recent years, many home appliance companies have hit a growth ceiling in their overseas trade exports, prompting them to seek opportunities for business transformation through strategies like establishing their own brands and overseas factories. Haier Smart Home, which pioneered the "three-in-one" localization model over 30 years ago, has quickly become a template for the industry to learn from. However, the home appliance industry has noticed that Haier Smart Home is once again undergoing a cycle of self-evolution in globalization: moving from independent branding to high-end branding, and entering a period of harvest. GE Appliances has become a leading local home appliance company, with Europe experiencing the fastest market growth for eight consecutive years. Additionally, Haier holds the top position in the New Zealand market, as well as being the top seller of washing machines in South Asia's Pakistan, air conditioners in Southeast Asia's Thailand, and refrigerators in Thailand.
In the midst of a volatile market, Haier Smart Home has consistently adhered to the strategy of "bold investment and stable development" to create opportunities amidst uncertainty. Whether it's igniting the upscale trend in branding, leading in scene-based innovations, or executing a three-tier leapfrog strategy of localization, independent branding, and high-end branding under a global perspective, Haier has shown courage in its initiatives, securing a steady and swift pace in the market. Seen within the home appliance industry, as a leading enterprise, Haier's strategic foresight and long-term approach to management provide the impetus for achieving differentiation and comprehensive leadership in the global market, injecting true innovation into the future development of Chinese enterprises.
Digitization for efficiency enhancement has unleashed the latent potential for development within enterprises. Since the onset of 2024, companies have witnessed a new turning point in high-quality development propelled by new productive forces. However, observers in the home appliance industry have noted that leading companies such as Haier Smart Home and Midea Group initiated comprehensive digital transformation across the entire industry chain many years ago, breaking away from traditional paths of productivity development and economic growth models to establish more high-quality and efficient dynamics.
While Gree Electric Appliances' digital transformation is currently more focused on new retail reforms, Midea Group's digital transformation has entered a phase of reaping rewards, with its profit growth jumping from less than 5% in 2021 and 2022 to over 14% in 2023, serving as compelling evidence. Haier Smart Home's digitization, on the other hand, is still a work in progress but has already yielded significant interim results, indicating greater potential for future performance improvement and profitability.
Presently, Haier Smart Home is driving enterprise-wide transformation through digitalization, achieving efficient operations in research and development, manufacturing, marketing, and order systems. The financial report for 2023 revealed a continuous optimization of the company's expenses, further reducing costs by 0.23 percent. Over the past few years, Haier Smart Home's expense ratio has consistently improved, indicating the potential for performance enhancement and profit increase in the near future.
In contrast to competitors whose digital transformations are primarily focused within China, observers in the home appliance industry have noted that Haier Smart Home's current digital transformation is synchronized globally. Through a tripartite strategy of localization and a layout that bridges global research and development with a global supply chain, Haier has achieved unprecedented innovation speed and efficiency. The industry-first Combo washer-dryer, priced at $2899, has disrupted the North American market by addressing users' pain points: completing a full load wash and dry in just two hours, thus becoming a market hit. This product, jointly developed by the United States, China, and Europe, not only saves 20% of time but also reduces energy consumption by 50%. Anticipating sales of 30,000 units at launch, it sold 120,000 units throughout the previous year, illustrating its high demand and short supply.
The X11 washing machine, which was the first to be launched in Europe, was developed by the Haier Smart Home China R&D Center for hardware and software design. The Australian R&D Center was responsible for motor upgrades, the European R&D Center tackled energy-saving issues, and the American R&D Center provided solutions for fresh air technology. Manufacturing took place in China. This product represents a new achievement in global R&D and supply chain integration, with its launch causing a surge in washing machine prices exceeding 275 on the index after its release in Poland. This demonstrates the efficient collaboration and maximization of benefits across the global R&D and supply chain within Haier Smart Home.
In the home appliance industry, digital transformation for companies should not merely focus on cost reduction and efficiency improvement but rather enable companies to quickly adapt to markets worldwide, better meet user needs, and create value. Ultimately, this integration of corporate development with industrial transformation will serve as a new engine for growth.
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