The 1996 air conditioner market amounted to 206,000 units, according to Central Bureau of Statistics data. But when the manufacturers were preparing for ’97, most projected, as part of the economic slowdown, a significant, 10-20%, drop in sales to somewhere around 160-180,000 air conditioners. Not that ’96 was such a great year in the first place. There was already a 30% drop in sales from the 1995 peak.
And the manufacturers had good reason to prepare for a decrease in sales. The recession atmosphere in all areas of electrical appliance consumption, and primarily the decrease in the pace of building starts to nearly no growth has created a sense that there is no point in replenishing inventories. Actual sales in the first five months of the year bore out the gloomy projections.
In addition to the financial reasons, the weather also played a role. A relatively mild winter, which started fairly late, allowed people to put off the acquisition of an air conditioner until summer.
Best Seller
Electra Consumer Products, a subsidiary of Elco Holdings, leads the Israeli air conditioner market with two brand names, "Elco High Tech" and "Electra", which together constitute a 40% share. Tadiran Appliances, a subsidiary of Tadiran, sells all its air conditioners under the brand name "Manhattan Tadiran" and has a 32% market share. It is the most-sold air conditioner in Israel.
Amcor constitutes a 14% market share, according to industry estimates based on 1996 data. The rest of the market is held by a series of small players, whose market share is expected to grow to 20% by the end of the year, in contrast to the mere 5-10% they have held until now.
Two years ago, air conditioner imports began, mostly Toshiba and Sanyo, however, they do not represent a significant market share.
Electra projected that market tends would lean toward the mini-central models. The company decided to direct all its advertising and marketing resources to supporting this product line, which had been unsupported by advertising until now.
Electra lowered its volume of advertising by 15% this year compared to last. In total, the company is expected to invest $1 million in two campaigns for its brand names.
Tadiran is also expected to invest $1 million in its campaign. The not-so-wonderful balance sheets dictate scrimping. Tadiran ran a maintenance campaign all year, in contrast to Electra’s blast-the-hot-season strategy.
Demand for Mini-Centrals
The industry’s internal sectioning shows that the mini-central models will take more than 25% of the market this year. The rise in the standard of living has created public demand to cool as many rooms as possible. The mini-central solves the problem of cooling each room separately. The volume of sales in this category in Israel is much greater than in the rest of the world.
The mini-central has taken a bite out of the market share of the floor air condition, which dominated the market until now. The floor air conditioners represent 40% of the market and Tadiran controls this category.
A number of years ago, Electra introduced the elevated air conditioner to the market as an alternative to the floor models under the "Elco High Tech" brand name. Electra positioned the brand name as high as possible, with a target population of the upper deciles.
After trying to nibble away at the market from above and below with the elevated and floor models, Electra moved quickly to the mini-central arena, first presented by the company five years ago and becoming more elaborate ever since.
Electra is risking cannibalizing its own market share, particularly the floor model niche, but is hoping to prevent its competitors from establishing themselves first in this arena.
The marketing wars will take on a new facet in the future, due to the expected tipping of the balance. As part of Tadiran’s strategy to bring strategic partners into the company, the Carrier Corporation acquired 26% of Tadiran Appliances’ shares. The corporation also acquired another 3% of the company in an off-floor transaction. And holds the option to increase its holdings to 51% within three years of the deal.
It is a fair assumption that a $6 billion corporation will add its personal touch to Tadiran’s activity. The company will enter new areas of activity, probably primarily the large central air conditioning market. Electra has every reason to remain alert.