The cookware market has been experiencing a slow growth over the last few years as manufacturers continue to struggle to produce innovative products that match consumer behavior. Technological advances have been changing the way we do things.
On the other hand, people are increasingly becoming sensitive to what they eat, and this has led to increased activity inside the kitchen at home.
Since the world has become literally mobile, consumers want to prepare their meals in the simplest of ways in a bid to catch up with their fast-paced schedules. As such, cookware manufacturers have been forced to come up with more innovative products including smart cooking pans, cutlery and electronic gadgets among others.
The cookware market relies on increased activity in the kitchen because, when more people are cooking at home, more cookware products are bought – and subsequently, this leads to increased wear and tear, which in turn results in more replacement purchases. This is also the reason why consumers take their time to choose products such as pans and pots of the highest quality.
The industry currently identifies with a few leading cookware manufacturers and several retailers and distributors. Most consumers tend to trust the more recognized cookware manufacturers like Stanley Black & Decker (SWK, Financial) and Whirlpool Corp. (WHR, Financial), which makes it difficult for new entrants to join the market at that level.
Opportunities are plentiful in the lower echelons of the industry with the retail market presenting a massive opportunity for startups. E-commerce provides one of the lowest barriers to entry, and entrepreneurs have seized the opportunity to join the cookware market at retail level via online platforms.
Consumers are also changing the way they buy things, and this change is redefining the retail market. As per recent studies, consumers looking to shop for kitchen gadgets already know what they intend to buy before they visit the store.
Research has also revealed that many consumers now tend to buy what’s popular among people they know, and this is giving retailers a challenge of their own to ponder. Most retailers are now relying on multiplatform integration in what is being referred to as omnichannel selling.
Others are also looking to incorporate resources like the Internet of Things in a bid to understand what consumers want. This is also having an impact at the manufacturing level because most cookware manufacturers rely on retail distributors to sell their products.
In respect to this, companies in the cookware market have been working on ways to streamline their businesses by either acquiring popular brands or divesting to focus on other lines of business.
A good example, in this case, is Newell Brands’ (NWL, Financial) sale of its tools brands as well as the heaters, humidifiers and fans businesses within its consumer division. Newell sold 10% of its portfolio to Stanley Black & Decker for $1.95 billion worth of gross proceeds last year. The transaction is expected to close in the first half of 2017.
Newell Brands is slimming up from a gigantic portfolio of 32 divisions to a leaner model of 16 business units. The company also launched a global e-commerce platform as it seeks to capitalize on the increasing rate of online purchases among consumers.
This will also help it to integrate various information platforms such as social media to a great effect. The company has set its sights on concentrating on growth products and is going to use some of the proceeds from the divestiture from its tools brands to improve its debt-EBITDA ratio.
While revealing the new growth plan to investors via a statement, Newell Brands President Mark Tarchetti said, "The combination of Newell Rubbermaid and Jarden (JAH, Financial) has created a unique platform for transformative value creation, and the actions we are taking to reshape the company will unlock this opportunity, bringing greater investment and growth to our highest potential categories like writing, home fragrance, baby, food storage and preparation, appliances and cookware and outdoor and recreation."
This is a clear indication that the company remains positive despite the overall industry slowdown in the appliances and cookware market.
Conclusion
In summary, the appliances and cookware market may be experiencing a slowdown in growth, but even then, companies seem to be willing to adapt to the change in consumer behavior as technological advances continue to dictate the way people shop for various products and services.
Opportunities seem to be limited at the top tier of the industry, but down below in retail and distribution, startups can capitalize on the impact of e-commerce. The likes of Newell Brands also seem to have realized this fact and are now optimizing their businesses for global e-commerce.
Disclosure: I have no position in any stock mentioned in this article.
Start a free seven-day trial of Premium Membership to GuruFocus.
