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Rising raw material prices and power rationing are opportunities or challenges for the kitchen power industry?


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2021-11-25

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Rising raw material prices and power rationing are opportunities or challenges for the kitchen power industry?

Recently, "rising prices of raw materials" and "power curtailment" have become an unavoidable topic in the kitchen electricity industry.

 

According to data from the website of the National Bureau of Statistics: in September 2021, factory prices for industrial producers nationwide rose 10.7 percent year-on-year and 1.2 percent month-on-month; among them, industrial prices for raw materials rose 20.4 percent and processing industry prices rose 8.9 percent. From January to September, the average ex-factory price of industrial producers increased by 6.7 percent over the same period last year, and the purchase price of industrial producers increased by 9.3 percent.

 

The price increase of raw materials has not stopped, and a "power restriction order" has once again disrupted the positions of major companies. The end of September this year near the National Day holiday, the state issued a power policy. Subsequently, many places across the country began to implement power rationing policies. Among them, the power rationing of the first generation in Jiangsu and Zhejiang is more severe, and even some regions have begun to implement harsher power rationing policies from October 1-all high-energy-consuming enterprises will be shut down.

 

An industry insider said that the increase in raw material prices superimposed on the power restriction and production restriction policy, under the influence of multiple factors, it is bound to have a certain impact on production capacity and commodity prices. "Now Foshan has 2 stops and 5 stops, Zhongshan has 1 stop and 6 stops, Dongguan and Huizhou have 3 stops and 4 stops. Zhejiang is better. Most of them have 5 stops and 2 stops. It is not clear whether it is dangerous or opportune."

 

At present, many kitchen and electric enterprises have issued price increase letters. A kitchen appliance company in Guangdong issued a price increase notice, stating that due to this year's epidemic, the continuous rise in raw material prices, and the implementation of the national off-peak electricity policy, the prices of raw materials such as stainless steel, glass, motors, copper, and packaging boxes have risen sharply. As a result, the cost of products continues to rise, and the company has no choice but to decide to increase the price of all products by 5% on the original basis from October 1.

 

The author noticed that not only the traditional stove enterprises, but also the integrated stove industry ushered in a new round of price increases. A head brand of integrated stoves issued a price increase notice on September 30, 2021, saying that according to the company's business and strategic needs, it decided to adjust the price standard of offline integrated stoves, with an increase of "disinfection cabinet 380, steamer 480, steaming 600, and a single price increase of 1000 yuan for some products".

 

It is undeniable that the rising prices of raw materials and the introduction of the "power curtailment order" have brought unprecedented challenges to the kitchen appliance industry. On the one hand, the continuous rise in raw material prices and tight supply will lead to an increase in the company's production costs and affect the gross profit margin of products; on the other hand, under the policy of power restriction and production restriction, the production of new production capacity of enterprises is blocked, which affects the release of enterprise performance.

 

But from another perspective, the emergence of "price hikes" and "power curtailments" will not only bring the above-mentioned adverse effects, but also have a positive effect on the development of enterprises and industries.

 

First of all, in the case of rising cost pressure, the industry will accelerate the reshuffle, and some enterprises with low added value, no core technology and poor anti risk ability will be gradually eliminated. After all, in the face of rising prices, consumers will be more inclined to buy more secure products and services, and the head companies that have a good reputation and pursue product quality will show more advantages in this competition.

 

Secondly, the fierce market competition and cost pressure are also forcing enterprises to accelerate the transformation and upgrading, and promote the transformation of the kitchen electricity industry to intelligent and high-end. For kitchen appliance companies, actively optimizing the product structure and using more competitive products to impact the market may be able to radiate new life in such a "wave of price increases.

 

In addition, with the help of the price hikes of upstream suppliers, kitchen and electricity companies have also increased their profit margins by raising product prices. According to Gfk Zhongyikang data, in the first half of 2021, the average prices of range hoods and gas stoves were 2262 yuan and 1137 yuan, up 8% and 10% year on year. The average prices of new types of dishwashers and integrated stoves were 4559 yuan and 8135 yuan, up 16% and 11% year on year. The average prices of other kitchen appliances such as disinfection cabinets, rice cookers, electric pressure cookers and coffee machines also rose.

 

The significant increase in the average price of products has enabled kitchen and electric enterprises to maintain a high level of profitability. According to the previously announced semi-annual financial report of the kitchen appliance company, Boss Electric H1 achieved a net profit of 0.79 billion yuan, an increase of 29.08 percent year-on-year; Vantage's net profit was 0.239 billion yuan, an increase of 45.42 percent year-on-year; Wanhe Electric's net profit was 0.449 billion yuan, an increase of 34.79 percent year-on-year; Zhejiang Meada's net profit was 0.254 billion yuan, an increase of 49.16 percent; Martian net profit was 0.139 billion yuan, an increase of 178.23 percent.

 

To sum up, although this wave of price increases and power curtailment is surging and caught off guard, it may not be a bad thing for the industry. Great changes in the environment often promote the transformation and upgrading of the industry. Industry insiders said that this round of price increases and power rationing may last for a long time, and the most fundamental thing for enterprises is to enhance their competitiveness, especially product competitiveness. When supported by the "hard power" of the product, coupled with continuous investment in branding, marketing, and services, consumers can be firmly grasped no matter how the environment changes.

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