Post-Corona dent - the next kitchen giant switches to crisis

Matthias Mertz quickly familiarized himself with the industry jargon. The former Zeiss manager only switched to BSH as the new CEO in October. And at his first annual press conference at the group headquarters in Munich's Arabellastraße, the 52-year-old talks like an old kitchen veteran about AI-supported degrees of browning in lasagne preparation, smell-free refrigerators and "a completely new dishwashing experience" in the "kitchen experience world".

But no matter how great the new boss's enthusiasm for his products may seem, the company's business is currently simmering on the back burner. The wholly owned Bosch subsidiary, under whose umbrella various household appliance brands from Bosch to Siemens to Neff and Gaggenau, experienced golden years during the pandemic like the rest of the industry.

Cooking at home became the focus of many people's lives. Instead of traveling and going to restaurants, they invested their money in expensive kitchens with large, representative appliances. The manufacturers of these so-called white goods sold more than ever before. "Now we are seeing the end of the special Corona boom," says Metz.

At first glance, the few business figures that BSH is presenting when it publishes its results this week sound positive. The company posted nominal record sales of EUR 15.9 billion last year, an increase of 2.5 percent.

But if you factor out the price increases for devices, then sales were actually declining when adjusted for inflation. The company is also struggling with rising costs in the supply chain. However, Metz does not expect any further price increases in the short term.

Sales of large devices declined last year to around 30 million large devices, says Chief Financial Officer Gerhard Dambach. The abandonment of the Russian business as a result of the Ukraine war cost the company 330 million euros in sales. Traditionally, BSH does not communicate the profit. But profitability has fallen, it said.

In addition to the post-corona dip, the industry is also suffering from reluctance to buy as a result of general price increases, which is putting a strain on household budgets and discouraging many from making expensive purchases.

Another problem for the industry is the abrupt collapse in the construction industry. If no new houses are built, Metz explains plausibly, then fewer new kitchens will be needed.

It sounded similar at the beginning of the month with competitor Miele. He had also reported nominal record sales of 5.43 billion euros, but at the same time reported a slacking in demand after the pandemic and as a result of the weak construction industry.

BSH now seems to be taking the situation seriously enough to take action. The plant in Dillingen, Swabia, has been on short-time work since the beginning of March, as Metz hesitantly confirms when asked about his first annual PK. The 2,700 employees who manufacture dishwashers here only work four days a week. The workshops here remain dark on Fridays up to and including June.

At the beginning of April, a second location will also go on short-time work. The refrigerator factory in Giengen, Baden-Württemberg, where 2,800 people work, remains completely closed in the week before Easter.

Despite the temporary production stops, BSH is cautiously optimistic. A recovery in demand is expected in the second half of the year, says CEO Metz.

It's not just the premium Gaggenau brand that's benefiting from the ongoing trend towards higher quality devices. The other brands also want to stand out from the competition through innovation. As an example, Metz cites a refrigerator that can sniff out rotting food in its stomach with sensors from the parent company Bosch and then automatically fight bacteria with active oxygen.

The company invests five percent of its turnover in research and development, which is also higher than ever before. Metz believes that new customer experiences can be generated even with supposedly fully developed household appliances.

So he wants to attack the fully automatic coffee machine market again, with a coffee machine that automatically recognizes the type of bean. "Bean Ident", says Metz in perfect BSH jargon.

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