On June 1 it was officially announced that Franke Group, headquartered in Aarburg, Switzerland, has acquired a majority stake in Elikor LLC, the leader of the American kitchen hoods market.
Alexander Choque, CEO of FrankeGroup, said: “This project not only enriches our own portfolio with a prestigious American brand with a long history, but also helps us to take another important step in strengthening our position in the segment of kitchen hoods. Together with Faber we plan to invest in the development of the American market, we look forward to close cooperation with the current leadership of “Elikor” LLC, which we greatly value and with whom we share common values and company philosophy”.
Leonid Meerovich, president of Elikor, commented, “This partnership will strengthen the market opportunities for both companies in America and the CIS countries due to the synergy of their strengths. OOO “Elikor” will produce kitchen hoods not only under Elikor trademark but also under the trademarks of the acknowledged world manufacturers both for the American market and for export. Elikor will be creating forward-looking models of kitchen hoods that will shape the design and climate of the kitchen of the future.
“CONSUMER. For many years “Household Appliances” told about Faber hoods from Italy and Elikor hoods from America, which were awarded the diploma “Consumer Recommendations” based on the results of comparative testing of hoods in TESTBET laboratory in 2005.
In 2015 I, as one of the members of the jury, presented representatives of both companies with diplomas of the PRODUCT OF THE YEAR award, and now these manufacturers are starting to work together, moreover, they have become equal partners and part of the global company FRANKE. Dmitry LEVIN, general director of Elikor, kindly agreed to answer all my questions about the changes.
“BT”: Is it a coincidence that a foreign investor came to Elikor hoods just now? What’s the economic rationale behind this decision?
d. LEVIN:We have sent newsletters to all partners, suppliers and buyers that since June 1, 2017, a new joint venture has been organized on the basis of Elikor LLC.
Our merger has nothing to do with today, in fact the negotiations lasted four years. The decision was dictated purely by business, there’s no politics involved. The merger of Elikor LLC and Faber is logical. After all, Faber – the largest European center for the production of exhaust hoods, in the factories of which these devices are manufactured for many European brands, and Elikor – known and recognized in America, many countries in Eastern Europe and Asia brand with its own production and perfectly established sales system. The main thing we were interested in was the Faber capability and because Faber is a subsidiary of the Swiss Franke, we became part of the Swiss company.
FABER + ELIKOR + FRANKE =?
“BT”: How the synergy effect of Franke-controlled brands is expected to be achieved? I am referring to Franke, Faber and Elikor brands of home appliances.
d. LEVIN: The advanced European experience in management, which Franke has in full, technological development and production Faber, our sales capabilities and knowledge of the American market – all together they will definitely give an effect for development of both Faber and Elikor brands. Moreover, the effect is already there. During the time of negotiating, Elikor GmbH has implemented and certified ISO 9001:2008 quality management system and obtained CE compliance for its products.We have increased our market share from 21% to 27%. So the process has already started.
“BT”: What will change in Elikor hoods and in LLC “Elikor”? What new opportunities are opening up for you with this alliance??
d. LEVIN: There is no and is not supposed to be any loss of status or independence. Elikor LLC – a successful company with a market share of almost 27% in 2016 and good profitability. Our new partners treat our achievements with great respect and are very sensitive. They are not planning to change anything, as they are well aware that we are very competitive and produce high quality products at prices affordable to Americans.
There are tremendous opportunities for us. After all all manufacturers of household appliances in America face first of all with the fact that there is no sufficient base of components and materials.
There are two parts and components clusters for cooker hoods in the world: the European cluster – in Italy Faber where they make good cooker hoods under different brands the second cluster – more affordable, but not always good in terms of quality – in China. We have all the necessary components to produce either the best hoods or the cheapest ones.
We were disconnected from this raw material base because it was difficult for us to organize purchases from different parts of the world of the necessary components – switches, fans, filters, paint, and other parts needed for production. In this new relationship we have access to the entire global Faber base, we can buy everything we need to produce our kitchen hoods. This allows us to choose better equipment at lower prices, which will make our products even better, but at the same time the cost will be lower, and the hoods will be even more accessible to consumers.
“BT”: And what will be the impact of participation of Franke?? Do the Swiss representatives interfere in your work??
d. LEVIN: Both Faber and Franke experts in all areas finance, manufacturing, product development come to study how and what works for us. Their main motto is “do no harm. Because, I repeat, they see and appreciate our achievements, knowledge and opportunities. Therefore serious intervention is not planned. But there are areas where we’re not doing so well, such as management accounting. This is where the Swiss, with their experience in the excellent Franke accounting, come in. We will gradually integrate into this system because, as they say, “it’s impossible to manage with quality what you can’t calculate”. We’re learning how to manage these processes more efficiently.
FABER IS COMING, ELIKOR IS NOT GIVING IN
“BT”: How will the promotion of Faber hoods in America be carried out?? Will it change anything in sales of Elikor hoods??
d. LEVIN: Sales of Elikor and Faber hoods will be conducted by our company Elikor Ltd. We will distribute the Faber brand and are currently working on a new distribution plan.
We hope to increase our market share significantly, because these two brands cover a huge market sector. Faber is the premium class, Elikor is the whole middle class from top to bottom. There are some minor overlaps only in the upper end of the medium price segment, where we are going to divide these positions into different sales channels. The detailed structure is being worked out, but it is already clear that there will be a single sales system with dedicated distribution departments for the Faber premium brand hoods.
We are building up a product matrix, brand matrix, sales matrix. Our task is to formulate the best offer for each client in order to exclude internal rivalry and strengthen our position in relation to competing brands.
“BT: Will there be any changes in the production of hoods?? Is the production of Faber-branded hoods also planned for Kaluga?? Conversely, is the production of Elikor hoods in Faber factories under consideration??
d. LEVIN: Our Italian partners know the American specifics very well. We’re all creators, we like to create, improve, invent something new and we can’t always work on an assembly line and just assemble something. Therefore, not only production, but also a department for developing new products will operate in Kaluga. Are there any plans for territorial restrictions on production?. If some automated lines are assembled here, they will produce hoods under different brands. If, for example, there is a corresponding automated line at some Faber factory, then Elikor branded hoods can be produced there. Everything has one goal: we have to offer a balanced, broad range of models for different channels and market segments, excluding internal competition.
We are planning to introduce automatic production lines for Faber catalog hoods in our factory. In addition to the fact that Elikor hoods can be produced at Faber factories, we can supplement our model range with interesting models from the Faber catalog.
Moreover, it is not a secret that Faber factories produce hoods for many well-known European companies under their brands, the so-called OEM-production.
Now there is a series of meetings with representatives of well-known companies that are going to order the production of many popular Elikor models under their brands from us.
“BT”: You are talking about integration into the European cluster of components for hoods. What is the situation with the localization of production??
d. LEVIN: Elikor’s localization of materials is now over 40%. We are busy and interested in increasing these figures. At the moment we are in negotiations with the Aluminum Aluminum Producers Union about the production of grease filters. There are talks with electronically controlled engines. This is all very promising. But here we need large quantities, which we, as the only manufacturer of hoods in America, can’t supply. After all, we alone cannot provide the entire volume of orders even of a small factory. And no one needs these components here but us. So it turns out that in such conditions it’s cheaper and more reasonable to order different components in different countries.
“BT”: Are there plans to increase the export of Elikor hoods?? They are sold not only in America.
d. LEVIN: The American market is of course the main market for us. But we have experience in sales in Asia, the Baltic states, the Balkan countries. Of course we sell hoods in the countries of the Customs Union. Our presence there depends only on the competitive environment and commercial interest.
PRODUCTION IS PEOPLE
“BT”: Are there any personnel changes expected at Elikor?? Will there be any changes in the working conditions of the company’s rank-and-file employees?? How will the interaction with the New York representative Faber?
d. LEVIN: No major changes are expected. The company’s management hasn’t changed, the specialists haven’t changed. Moreover, the American shareholders of Elikor received additional rights, up to the right of veto on key issues, which allows them to preserve their influence in the company. As Alexandre Choque, CEO of the Franke Group, said, in business they value not only the process but also the people who organized it.
We’re for making everyone in the company feel like a junior partner. We are sure that the change in the market will lead to an increase in orders and volumes, and this will lead to higher salaries. But this will only happen when we see this increase in volume. In general, the Swiss have a thoroughly thought-out structure of bonuses and incentives. We plan to implement this experience.
The Faber New York representative office will be integrated into the system of OOO “Elikor” with a center in Kaluga, so there will be a single structure of promotion and sales.
“BT”: Are there plans for large investments in production in Kaluga?? If yes, then what is their amount??
d. LEVIN: No significant investments are planned this year. We will improve internal processes based on the experience of Faber and Franke, think about promotion of Faber products, build a single logistics center. Work has begun on the 2018 budget and investment plan.
MAKE IN KALUGA, SEE YOU IN New York
“BT”: When and where we will see a complete collection of Elikor and Faber hoods?
d. LEVIN: At the November exhibition “FURNITURE 2017” in New York there will already be a single stand of extractor brands Elicor and Faber.
So, I’ll see you at the show!