Toshiba domestic appliances a money-loser in 2016 is now showing signs of a comeback under Midea Group as it leverages its new Chinese parent’s sales channels across Asia.
The Toshiba appliance business “is an important component in the globalization of Midea. We want to grow it into a world-leading appliance maker,” said Fang Hongbo, chairman and president of Midea.
Toshiba appliances disappeared from Chinese shelves in 2015 due to sluggish sales. They returned a year later via the retail network of Midea, which acquired Toshiba’s appliance business, Toshiba Lifestyle Products & Services.
“This is a popular product that uses Toshiba’s advanced technology,” says a saleswoman at a Midea appliance shop in the southern Chinese city of Guangzhou. Amid the shelves of Midea products stand Toshiba-brand microwaves, of which the most expensive costs 12,999 yuan ($1,922) — around twice the price of its Midea equivalent.
The multifunctional Toshiba microwave can be used to make a variety of dishes, such as employing high-temperature steam to broil fish. “It’s also very durable,” the saleswoman said. “Those who enjoy cooking hold it in high regard.”
Midea is a big presence in the appliance market, generating sales of around 240 billion yuan in fiscal 2017. But its core lineup consists of inexpensive products limited to basic features. The company is working to move upmarket and has positioned the Toshiba brand as its top of the line.
Under Midea, Toshiba Lifestyle is accelerating its overseas expansion. Midea plans to open a new plant in western India as early as 2020 and will locally produce and market such Toshiba-brand products as washing machines and microwave ovens, marking the brand’s return to the market after a 2012 exit. Depending on demand, other items like refrigerators may be added to the mix. Investment of more than $1.8 billion is expected over the next five years.
Toshiba Lifestyle is also cultivating the entire Southeast Asian market, including places like Cambodia and Myanmar. Besides using its own factories in Thailand and China, Toshiba Lifestyle is procuring products from Midea under an original equipment manufacturer arrangement.
In the second half of 2018, Toshiba put more than 30 new items on sale in Thailand, including refrigerators where the freezer is on one side, a type little seen in Japan.
When Toshiba Lifestyle was under Toshiba, it was never more than one division of a larger engineering company. When earnings faltered at the parent, it did not receive sufficient money for product development, falling into a cycle where it became less competitive.
But after it was bought by Midea, Toshiba Lifestyle began receiving enough funds to develop products that met the needs of the marketplace, company executives say. The goal now is to use Midea’s marketing network to increase the portion of overseas sales at Toshiba Lifestyle to 50% from the current level of around 30% by 2020.
Earnings are recovering as Toshiba Lifestyle’s revenue jumped more than 50% from fiscal 2015 to 250 billion yen ($2.3 billion) in calendar 2017. The company probably moved back into the black last year even without restructuring measures like layoffs. Cost-cutting moves such as production at Midea’s Chinese plants and joint parts procurement seem to have had a positive impact.
Other Japanese brands revived under Chinese parents include the white goods business of Sanyo Electric, which returned to profitability several years after being sold to Haier Group in 2012.