Refrigerators & Freezers

INDUSTRIAL CODES

NAICS: 33-5222 Household Refrigerators and Home Freezer Manufacturing

SIC: 3632 Household Appliance Manufacturing

NAICS-Based Product Codes: 33-52221000 through 33-522232

PRODUCT OVERVIEW

Household refrigerators and freezers are cooling appliances used primarily to store perishable foods in order to maximize the time over which these foods may be safely consumed. Humans have always stockpiled food as a way to get through the seasons that are not productive agriculturally. Stockpiling perishables for any length of time was not possible without first treating the items—by salting, drying, or canning them, once the technology for canning had been invented in the early nineteenth century—until the icebox and then the refrigerator and freezer were invented.

Foods kept at low temperatures last longer than those kept at room temperature or higher because cold inhibits the growth of bacteria. In a refrigerator the temperature is maintained at a low point but above the freezing point of water, 0° Centigrade (C) or 32° Fahrenheit (F). A freezer stores frozen items and household freezers usually maintain an interior temperature of approximately −18° C or 0° F. Household refrigerators usually include a freezer compartment. They vary in size but usually stand upright. Household freezers are less common than refrigerators. They, too, vary in size and come in both upright and chest-shaped configurations.

Commercial refrigeration predates the invention and rapid adoption of the household refrigerator. The trade in ice predates both. Before refrigerators were available for home use, ice blocks served a similar function in many homes. Customers purchased ice blocks from companies, many of which included a home delivery service, and placed them in cabinets that were insulated with materials such as straw, cork, and sawdust. People placed ice blocks high in the icebox cabinet so that the cooling air they generated as they melted would circulate down through the compartment. The melted water had to be captured in a tray and removed frequently. To this day, one will still hear people refer to the refrigerator with the term used for its predecessor, the icebox.

The first hermetically sealed, standalone home refrigerators were not introduced until 1925. These early refrigerators were designed building on the pre-1900 work by Marcel Audiffren of France and Christian Steenstrup of Schenectady, New York. The early refrigerators used toxic gases such as methyl chloride and sulfur dioxide as refrigerants. Leaks were a problem with the earliest models, and instances of poisoning or even explosion were not uncommon. The development of Freon, a non-toxic, non-explosive refrigerant, heralded in the beginning of the modern home refrigeration era. Freon is one of several different chlorofluorocarbons (CFCs), a group of aliphatic organic compounds containing the elements carbon and fluorine, and, in many cases, other halogens like chlorine and hydrogen. Freon is a trademark belonging to E.I. du Pont de Nemours & Company (Dupont).

General Electric's "Monitor-Top" refrigerator was the first model to see widespread usage. It was introduced in 1927 and used sulfur dioxide as the refrigerant. During the 1930s, the household refrigerator market grew with the development of models that used Freon. It wasn't until the late 1930s in the United States that refrigerators with freezer compartments became available, and in the 1940s these models became popular.

How They Work

Refrigerators and air conditioners both work on the principle of cooling through evaporation. A refrigerator uses the evaporation of a liquid refrigerant to absorb heat from the food compartment. The Second Law of Thermodynamics, in simple terms, explains that over time, differences in temperature, pressure, and density tend to even out within a closed system. Hot things sitting next to cold things will exchange heat. Putting this natural law to work in the refrigerator is accomplished by having a closed system of pipes through which a gas which cools at a low-pressure level—a refrigerant—flows. This system includes three basic parts: (1) a serpentine, coiled set of pipes called heat exchanging pipes, some of which are inside the refrigerator and some outside, (2) a compressor, and (3) an expansion valve. The refrigerant flows through this system of pipes, being heated through the application of pressure and cooled as it passes through the expansion valve from high-pressure to low-pressure parts of the pipe system. The refrigerant is a cold liquid as it flows through the interior heat-exchange pipes. As it evaporates it pulls heat out of the compartment. The refrigerant is a hot gas as it flows through the exterior heat-exchange pipes, venting heat from the rear of the refrigerator into the air in the surrounding room.

The spread of refrigeration was an important development for humanity, as it allowed for an increase in the intake of proteins and dairy products. Meats and dairy products can be stored safely for much longer periods and shipped further. Freezing foods has also improved the nutritional balance in diets.

MARKET

Refrigerators and freezers have been selling well in the United States during the first years of the twenty-first century, driven primarily by a strong housing market. According to the U.S. Census Bureau's 2002 Economic Census the U.S. refrigerator and freezer market in that year measured $5.3 billion, the value of total shipments. The household refrigerator and freezer industry in the United States included 16 companies, operated 26 facilities, and employed 23,500 people. In 2005 unit shipments of refrigerators and freezers in the United States totaled 16.9 million and in Europe that same year 21.6 million units were shipped.

During the period 2000 through 2005 shipments of refrigerators and freezers in the United States rose 5 percent, from $5.84 billion to $6.15 billion, although shipments fluctuated year to year. The year 2002 was the low point in this period with shipments of $5.33 billion. From this low, shipments grew 15.3 percent by 2005 to $6.15 billion. This healthy increase in shipments coincided with a strong rise in the housing market. In 2006 refrigerator shipments rose slightly but freezer shipments were anticipated to end the year lower than in 2005.

Appliance magazine publishes a forecast of all U.S. appliance shipments each year in January. Their forecast in 2007 anticipated a substantial increase in the number of refrigerators shipped annually in the United States by the year 2009, an increase of 26 percent over actual 2005 shipments, from 14 million actual shipments in 2005 to 17.8 million forecasted for 2009. Freezer shipments, on the other hand, are forecast to decline slightly, from 2.8 million actual units shipped in 2005 to 2.7 million units forecast to ship in 2009.

Almost all U.S. households have refrigerators. The same is true in most industrialized nations. Based on the average life cycle of a refrigerator—14 years—all 110 million housing units in the United States in 2005 will need to replace an old refrigerator at some point in the next 14 years. Consequently, 15 million refrigerators can be expected to sell in the United States annually in order to meet the demand for replacement units alone.

Freestanding freezers have a much lower penetration rate, estimated to be in the 35 percent range in the United States. Freezers are not considered an essential appliance and their sales figures are thus not tied as directly to the housing market as are sales of refrigerators.

KEY PRODUCERS/MANUFACTURERS

The largest players in the home appliance manufacturing business are also the leaders in producing refrigerators and freezers. The three largest are Electrolux, General Electric, and Whirlpool Corporation.

Electrolux

Founded at the beginning of the twentieth century, this Swedish firm was first involved with floor-cleaning devices and later expanded into larger household appliances and commercial-grade kitchen machinery. In 2005 the company's worldwide net sales were $16 billion, and it employed more than 57,000 people in 150 countries. Nearly half of Electrolux's net sales are made in Europe with an additional 40 percent originating in North America. Latin America is its next biggest market, and represented 5 percent of net sales in 2005.

General Electric

General Electric (GE) is one of the largest players in the home appliance sector. Its strength in the appliance category comes from its cooking appliances. When it comes to the sale of refrigerators in the United States, GE is the leader, with 29 percent of the market in 2005. This enormous company had revenue from all operations in 2005 of $150 billion and employed more than 300,000 people worldwide.

Whirlpool Corporation

Whirlpool is headquartered in Benton Harbor, Michigan, and began as the Upton Machine Company in 1911. Washing machines were its first home appliance, but by the turn of the twenty-first century Whirlpool was among the largest manufacturers of household appliances globally. With the purchase in 2006 of Maytag, the company secured this leading position for the foreseeable future.

Whirlpool has annual sales in the range of $19 billion and more than 80,000 employees worldwide. In addition to ovens, stoves, and ranges, this company manufactures washers and dryers, refrigerators, freezers, dishwashers, trash compactors, room air conditioners, and microwave ovens. It has a strong international presence and is a leader in the home appliance field worldwide.

From region to region of the world, the dominance of one player to another changes. General Electric, with 29 percent of market share, was the top manufacturer of standard refrigerators in the United States in 2005. Electrolux and Whirlpool were next with 25 percent of the market each, and Maytag held the fourth-largest market share in the standard refrigerator sector with 11 percent of the market.

In 2006 things changed. In 2005 Whirlpool announced intentions to purchase Maytag and in 2006 it took control of the company after clearing all anti-trust obstacles and receiving clearance from the U.S. Trade Commission. Although no final figures are known at the time of this writing, the industry anticipates that Whirlpool will take over the top position in terms of market share for standard refrigerator sales in the United States in 2006.

Electrolux held the largest market share of freezer sales in 2005 for both chest and upright freezers. A full two-thirds of the freezers shipped in the United States were Electrolux freezers that year. W.C. Wood accounted for the next-largest share of the freezer market with 21 percent. Qingdao Haier followed with an 11 percent market share, and Sanyo produced the remaining 1 percent of freezers shipped in the United States in 2005.

Compact refrigerators and specialty household refrigerators form a subset of the larger household refrigerator market. Qingdao Haier controlled the lion's share of the compact refrigerator market in the United States with a 20.1 percent share in 2005. U-Line led in wine cellar and beverage refrigerators that year with 36 percent of the market. Marvel came in second, holding another third of that market.

In Europe, BSH and Electrolux were the two leading refrigerator and freezer manufacturers. BSH had a 14 per-cent market share for both refrigerators and freezers sold in Europe during 2005. Electrolux led the freezer market in Europe with a 15 percent market share in 2005 and held the second-largest share of refrigerator sales with 13 percent. Other prominent players in the European household refrigerator and freezer market include Whirlpool, Arcelik, Indesit, Liebherr, and LG Electronics.

The name of one of the world's leading producers of compressors used in six of the world's largest eight refrigerator manufacturers is worth noting. That company is Empresa Brasileira de Compressores SA or Embraco SA of Brazil.

As is the case with most household appliance markets, companies located in Asia began to take on a greater role in world production of refrigerators starting in the late 1990s. The appliance industry underwent structural changes during this period, with traditional U.S. market leaders moving an increasing percentage of their production to lower-cost countries, many of them in Asia. The Asian manufacturing sector has benefited greatly by this increased trade and has begun to expand its market footprint worldwide. Leading manufacturers of refrigerators in Asia include LG Electronics and Samsung of South Korea, Mitsushita and Sanyo of Japan, and China's Galanz, Midea, and Qingdao Haier.

MATERIALS & SUPPLY CHAIN LOGISTICS

The making of refrigerators and freezers—like other durable goods, and household appliances in particular—requires a significant capital investment. Metals and other heavy materials must be transported to the production facility, and an infrastructure of machinery must be present at the facility to transport those items once they arrive and transform them. Forging, stamping, pressing, and enamaling processes are all involved in the making of refrigerators and freezers. The more delicate work of producing, or at least purchasing and installing, compressors, small electric motors, and temperature gauges must be added to the heavy construction aspects of the production of these appliances. Foam-blowing capacity is also necessary since insulating components is an important part of the making of refrigeration equipment. However, less component level manufacturing and an increasing focus on design and assembly are the trends in the appliance industry today.

Data published by the U.S. Commerce Department as part of their 2002 Economic Census provides an overview of the materials consumed by the refrigerator and freezer manufacturing sector. The cost of metals is the single-most costly input to the production process, after labor. These components represent 27 percent of material inputs and include metal stampings, iron and steel castings, steel sheets and bars, aluminum castings, as well as metal bolts, nuts, and screws. The next-largest category of material inputs is the rubbers and plastics category. Rubber, plastic, and plastic resins are used in the forms, tubes, hoses, belts, and gaskets, as well as for the insulation of refrigerators and freezers. Together, these rubber and plastic materials represent 25 percent of the cost of all materials used in the manufacture of refrigerators and freezers. Another large category of material inputs is the electrical components category. Together these components represent 16 percent of the total cost of materials. This category includes such things as small electric motors, compressors, timing mechanisms, and temperature gauges as well as electrical transmission, distribution and control equipment, and current-carrying wire devices.

The two areas in the supply chain that have been of particular interest or concern to refrigerator and freezer manufacturers in recent years are: (1) meeting regulatory requirement on the use of chlorofluorocarbons (CFCs), and (2) basic commodity pricing.

Changes in refrigerants

Early household refrigerators and freezers used CFCs, a group of aliphatic organic compounds containing carbon, fluorine, and, in many cases, other halogens and hydrogen as a refrigerant. Freon is one such CFC. Chlorofluorocarbons proved to be harmful to the stratospheric ozone, and caused depletion of the same. Consequently, a reduction of their use became an important part of the 1989 Montreal Protocol on Substances That Deplete the Ozone Layer, an international treaty designed to coordinate worldwide efforts to protect the ozone.

Passage of the Montreal Treaty ushered in an era of research and development that produced alternative refrigerants for use in refrigerators, freezers and many other devices that had previously used CFCs. The 1990 Clean Air Act and subsequent EPA regulations promulgated thereunder, called for the complete cessation of CFC production by the end of 1995. The new non-CFC refrigerants that became available in the 1990s required design changes to many refrigerators and freezers, not to mention air conditioners and other cooling devices. Advances in non CFC refrigerants are still being made. As these advances continue, so too does the need for refrigerator manufacturers to invest in continual fine-tuning of their designs and systems.

Commodity pricing dilemma

A strong economy is a good thing for manufacturers as it usually translates into high demand for the goods being made. However, as all economists know, there is an optimum growth rate for any economy, one that is fast enough to drive activity but not so fast that it overheats and causes inflation and shortages.

The global economy has been doing quite well during the first years of the twenty-first century. A relatively brief recession began in 2001 which was exacerbated by the terrorist attacks on the United States in September of that year, and by subsequent attacks the next year in Europe, Indonesia, and the Middle East. But by 2003 a recovery was underway. In some parts of the world, particularly in China and India, the growth has been remarkable. As these developing countries transition into consumer economies, the strong demand for basic commodities that has been experienced so far in the twenty-first century is likely to continue apace. This means that high prices for basic commodities will likely remain in place.

For refrigerator and freezer manufacturers, two of their large material input categories have been dramatically impacted by these price increases, and related volatile price swings. In the first six months of 2004, for example, global steel prices rose 36 percent, and the price of oil has been fluctuating rapidly since 2002. With the development of just-in-time supply chains in the 1990s, commodity price increases and wild pricing fluctuations make planning and scheduling an increasingly difficult task for manufacturers.

The rising prices of material inputs to the refrigerator and freezer manufacturing process have not been easily passed on to the consumer in the form of higher prices for the end product because of competitive pricing for the appliances themselves. This has been at least in part the result of changes in the structure of the distribution channels through which household appliances are marketed, and is the subject of our next section.

DISTRIBUTION CHANNEL

The household appliance market went through a period of consolidation during the 1970s, 1980s, and 1990s. The distributors were first to do so. As they consolidated into larger organizations they applied pressure on manufacturers to provide them with pricing and service concessions. This was followed by a wave of consolidation within the ranks of manufacturers. As they grew in relative power and gained efficiencies in the production process manufacturers began to contract directly with the emerging number of mass merchandisers and Big Box store chains.

In the late 1980s several home improvement retail chains began to expand their facilities and to create the warehouse style stores that have since come to be known as Big Box stores. Home Depot and Lowe's, the two largest home improvement chains today, were among the first to expand in this way from their more traditional but smaller store formats. Warehouse clubs such as Costco and Sam's Club were also gaining retail ground during the 1990s.

This shift in the retail industry provided refrigerator manufacturers and distributors with new outlets for selling their products to the public. It also forced these players to revamp their inventory arrangements and service agreements. Traditionally, dealers and distributors maintained large inventories, which was a benefit to manufacturers as the dealers and distributors took on the many costs associated with managing and maintaining these large inventories. As profit margins thinned these middlemen and larger mass merchandisers no longer wanted to inventory large quantities of merchandise, thus putting pressure on the producers to provide them with appliances on a quick turnaround. They attempted to cut back on their inventories in favor of a more streamlined system in which products moved from the assembly line to the retail outlet as needed. The same just-in-time supply chain arrangements that manufacturers had earlier insisted upon from their suppliers were now pushed on them by distributors, dealers, and large retailers.

These new distribution networks, centered around large retailers, offered manufacturers from other parts of the world a natural point of access to the U.S. consumer through contracting directly with the retail outlets. As the editors of Supply Chain Digest explained in a article titled "Asian Manufacturers Take Aim at the Appliance Market," the move by leading U.S. manufacturers of an increasing portion of their production activity to lower-cost countries is among the many changes seen in the appliance market in the last twenty years. Over time this has strengthened the manufacturing base in these countries, and they are now beginning to export to the United States. Those companies are now "grabbing market share by exploiting innovation and changing distribution channel … Though foreign brands still have a small amount of U.S. market share, that percentage is likely to see strong growth."

Low-interest rates, a strong housing market, and a cultural trend toward spending more time at home combined in the first years of the twenty-first century to produce a robust market for household appliances. Such a strong market has encouraged retailers who have not traditionally been involved in home appliances to realign their offerings and try to get involved or to increase their involvement with this robust market.

As the leading retailer of home appliances in the United States Sears, Roebuck, and Company plays a unique role within the sector. Sears is both a major appliance retailer and a major consumer of appliances for branding with its Kenmore label. Sears contracts with manufacturers to produce its line of Kenmore home appliances. Within its retail outlets, Sears sells its Kenmore brand as well as other name brands. After the purchase of Sears in 2004 by the discount retailer, Kmart, Kenmore appliances which had been sold until then exclusively through Sears stores and catalogs began to appear in Kmart stores for the first time. Kmart has subsequently begun to expand strongly into the appliance arena.

Lowe's and Home Depot are the second- and third-largest retail outlets by sales of kitchen appliances. These two large home-improvement retailers have benefited from the strong housing market and cocooning trends, and have each expanded their lines of kitchen appliances. Both retailers carry most of the largest stove brands and highlight their floor displays with whole kitchen vignettes. This is something the "big box" stores can more easily do than their retail competitors; the latter have a higher cost per square footage for space, like those in traditional shopping malls and downtown locations.

The increasing number of retail outlets offering major household appliances has weakened the relative power that manufacturers have in their relationships with retailers. Competition for favorable positioning within a store and within the retailer's web presence has become more important for manufacturers. They must work hard to have their products stand out in the crowd. Having many brands of refrigerators and freezers presented side by side for easy comparison increases competition and makes it harder for customers to see products as anything more than a commodity differentiated from other like items by price alone. These factors give retailers a more powerful position in the relationship between manufacturer and retailer.

KEY USERS

According to the Statistical Abstract of the United States: 2007, there were 106 million occupied housing units in the United States in 2003. An estimated 99.8 percent of these, or 105.8 million, as well as temporarily unoccupied housing units, had at least one refrigerator. In fact, according to the Energy Information Administration of the U.S. Department of Energy, 17 percent of U.S. households had more than one refrigerator in 2001. The owners of residential properties are all potential refrigerator buyers. Everyone living in one of these housing units is a refrigerator user.

Most purchases of new residential refrigerators and freezers in the United States are what are referred to as distress purchases. This means that the purchase is made in order to replace an appliance that has failed or broken. With a penetration rate of refrigerators in U.S. homes at 99.8 percent it is not surprising that distress purchases account for almost three-quarters of the sales of new refrigerators in North America.

Household, freestanding freezers have a much lower penetration rate (32 percent) within U.S. households. Consequently, fewer people use household freezers and the market has potential to grow by expanding the penetration of freezers into American homes.

ADJACENT MARKETS

The trajectory of the housing market has a strong bearing on the market for refrigerators, and to a lesser extent to the market for freezers. Since the average house has six major appliances, the number of new houses built annually has an important impact on sales of all major household appliances. The refrigerator is the appliance with the second-highest penetration rate of the six major appliances in the average U.S. home. Water heaters are the only major household appliance found in more U.S. homes than the refrigerator.

Although only 25 percent of the sales of refrigerators each year are directly associated with new housing stock, the strength of the housing market also has an important impact on sales associated with upgrading appliances. Since 1990 kitchen remodels have been among the most popular ways to spruce up a home in advance of trying to sell the home. When the housing market is strong, housing prices are pushed up. This leads to people investing the increased value of the house into upgrades and additions.

The housing market in the United States soared to record levels during the period 2002 through 2005, buoyed by low interest rates and flexible lending practices. Housing starts as well as sales of existing housing stock have both set records during this period. Housing starts, as measured by building permits issued, grew every year from 2000 to 2005.

Sales of existing homes peaked in 2005, according to the National Association of Realtors, reaching just under 6 million homes sold. The pattern of strong growth in the housing market came to an end in 2006, when sales began to slow and the inventory of housing stock on the market grew.

The food service industry is another market adjacent to refrigerators and freezers. The more that people eat outside the home, the less wear-and-tear they cause their refrigerators and freezers and the longer life those appliances are likely to have.

The tendency of Americans to eat out has been rising for several decades. Between 1986 and 1996, total food service sales in the United States grew 69 percent to $286 billion. Growth continued at a brisk pace and by 2005 had reached $476 billion according to the U.S. Department of Agriculture. The indirect impact that this has had on refrigerator sales is difficult to quantify but all cultural influences on food preparation do have some bearing on the fluctuating demand for kitchen appliances.

RESEARCH & DEVELOPMENT

Research and development is an ongoing task for all manufacturers and experimentation on new features is always part of that effort. Refrigerator and freezer producers focus much of their research and development resources on developing more energy-efficient and environmentally safe appliances.

Energy Efficiency

In 1992 the U.S. Environmental Protection Agency (EPA), working in conjunction with the U.S. Department of Energy, introduced a voluntary labeling program designed to identify and promote energy-efficient products to help in efforts to reduce greenhouse gas emissions. It is called the Energy Star program. The Energy Star label can be applied to any appliance or other electrical device that meets the requirement for that product category established by the EPA. In order to meet the Energy Star labeling requirements for refrigerators and freezers, manufacturers have had to greatly improve the efficiency of their appliances during both the 1990s and the first decade of the twenty-first century, as the EPA's Energy Star efficiency requirements have increased periodically since the program's inception. The Energy Star program and other government efficiency standards have made energy efficiency the most important research and development focus in the area of appliance design.

A review of the changes in unit energy consumption (UEC)—a measure of electricity consumed per appliance per year—for refrigerators provides a gauge of the impact that government efficiency standards have had on this appliance. According to a report by the Energy Information Agency of the U.S. Department of Energy, the average new refrigerator had a UEC rating of 976 kilowatt hours (kWh) in 1990. By 2001 new refrigerators in the United States were required to use half as much energy as their 1990 predecessors-a UEC rating of 476 kWh. Over time, as older refrigerators are replaced with these newer and far more efficient models, the UEC rating for the average refrigerator in use in the United States will decline from its high 2001 rating of 1,239 kWh.

Reducing the Environmental Impact

The disposal of refrigerators and freezers poses problems. They are bulky and they contain chemicals—the older ones contain Freon and the newer ones non-CFC refrigerants—that are damaging not only to the ozone but to soil and groundwater. EPA regulations require that before a refrigerator or freezer can be disposed of or separated into its constituent parts for recycling the CFCs and non-CFC refrigerants must be removed. This process is highly regulated and only certified technicians, using EPA-approved equipment can do the chemical removal.

Much done by manufacturers in the design phase of refrigerator and freezer development to maximize the quantity of materials in the product that can be recovered and recycled.

Antimicrobial-coated steel was introduced in the middle of the first decade of the twenty-first century for use in a line of freezers and refrigerators for laboratories, hospitals, research facilities, and cleanrooms. The steel coating used to produce antimicrobial-coated steel uses silver ions. Moisture activates the controlled release of silver ions to suppress the growth of microbes such as mold and bacteria. Research is being carried out to find economical ways to use this new coating compound in kitchen appliances used in the home and may in the future prove to be useful in household refrigerators and freezers.

Finally, research in the area of providing ever more silently running appliances continues apace.

CURRENT TRENDS

New features are being brought to the market annually in the competitive field of kitchen appliances. Refrigerators and freezers are being redesigned to incorporate new features like finishes that hide fingerprints to appliances that include a built-in flat-screen television. Increased levels of computer power are also being built into many appliances, often these are called smart appliances. Some of the more popular features which have appeared in recent years are listed here.

Finishes

New styles in finishes appeared during the early 2000s. Stainless steel is one of the more popular finishes for U.S. kitchens, but because of the high price of stainless steel many manufacturers are offering refrigerators with metallic finishes that imitate the look of stainless steel at a lower price. Sub-Zero Freezer Company of Madison, Wisconsin is also offering a line of freezers and refrigerators that offer a glass fronted door with an optional on/off switch for interior lighting while the door is closed. Models like this have been successful in commercial operations but we have yet to see if most households wish to see the contents of their refrigerators whenever they are in the kitchen.

As the motivation behind the purchase of a new refrigerator is often a kitchen remodeling project, manufacturers offer as large a range of finishes as possible to allow for customization of the overall kitchen design. This is of particular importance to the manufacturers who do not offer a full line of major kitchen appliances.

Size and Door Configuration

For many years it was standard for a household refrigerator to be an upright appliance with two compartments, the larger refrigerator compartment occupying the bottom two-thirds and a freezer compartment on top, each with a left or right optional side opening door. Then came side-by-side refrigerators in which the compartments were, as the name implies, side-by-side, the freezer section being narrower than the refrigerator section and the doors opening in a French-door style to either side. Now, increasingly, models are being offered that position the freezer section below the refrigerator compartment to allow for the more frequently used refrigerator compartment to be at eye level. Some of these models feature a tilting drawer opening for the freezer section.

Additional doors are offered on many of the larger models. Maytag has a line of refrigerators that look like a side-by-side model combined with a freezer at the bottom. The two upper compartments are refrigerator compartments of equal size that have French-door style openings. The freezer compartment is at the bottom with an optional tilting drawer style door. The promotional material on such models emphasizes the energy efficiency of not opening the entire refrigerator compartment in order to access frequently used items. Customization in both finishes and door configurations is a trend seen on the high end of the market.

TARGET MARKETS & SEGMENTATION

The refrigerator market is larger than the free-standing freezer market and tends to be broken down by price range. The low-cost refrigerators tend to be those that offer only the basic features and few optional elements or finishes. The mid-price segment offers more features and more options. These refrigerators are marketed to those with a comfortable income and a willingness to spend a little extra for the features they think useful. Style plays a role in the purchasing decisions made in favor of models in the mid-price range, but functional features tend to be a higher decision factor than appearance. The high end of the refrigerator market offers the greatest variety and flexibility for customization. This segment of the market is the smallest, but it provides manufacturers and retailers the greatest profit margin and it provides the customer with the highest level of post-purchase service.

Because the vast majority of household refrigerators have freezer compartments, a free-standing freezer is a more specialized need than the need for a refrigerator. That makes the markets for these two products very different. In the early 2000s, while 99.8 percent of U.S. households had refrigerators, free-standing freezers were present in only 32 percent of households, according to the U.S. Census Bureau. Those who buy free-standing freezers have a need for more than the average amount of space for frozen goods. This may be because they are hunters, they live in small towns or rural areas where shopping may be done more infrequently, they have a frozen food delivery service, or they simply have a large home and wish to stockpile frozen items. All of these motivating factors provide manufacturers and retailers with various user profiles that they can use to plan marketing campaigns.

The developing world offers a market opportunity for all appliance manufacturers. The penetration rates for household appliances in many developed nations is still relatively low. Consequently, as these countries' economies grow and they begin to make the transition into consumer economies, the demand for appliances is expected to grow rapidly.

RELATED ASSOCIATIONS & ORGANIZATIONS

Association of Home Appliance Manufacturers, http://www.aham.org

Canadian Appliance Manufacturers Association, http://www.elecrtofed.com

China Household Electrical Appliances Association, http://www.cheaa.com

The European Recovery and Recycling Association, http://www.integra.org.uk

Fabricators & Manufacturers Assoc. International, http://www.fmanet.org

National Association of Metal Finishers (NAMF), http://www.namf.org

North American Association of Food Equipment Manufacturers, http://www.nafem.org

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