Markus Miele: Europe is not weak. However, excessive bureaucracy makes us less effective
The European market for household appliances is going through a very difficult period. Sales of large white goods are weaker, and pressure is mounting from Asian companies, which have bought up many originally European companies over the last decade. We spoke with Markus Miele, executive director of Miele, about these challenges, the sustainability of European manufacturing, and the unique advantages of being a family-run business in a turbulent global market.
Sales of large white goods are weaker, and pressure is mounting from Asian companies, which have bought up many originally European companies over the last decade. How do you perceive this development? And how are you addressing these changes in your strategy?
Our company has been successful because there has always been competition, which kept us awake. When you think of Asia, you mostly think of mass market. This is somewhat separated from the premium segment where we operate, although it doesn’t completely protect us. But I think we can agree that there are different customer expectations. Miele provides a complete premium package, including our own service technicians, which is part of the whole experience we offer.
I think the major domestic appliance (MDA) market is still a little less attacked than the small domestic appliance (SDA) market. SDA sees new entrants scale up very quickly. However, even in SDA, people value quality. For example, we are still growing in our vacuum cleaner business. Interestingly, people still buy a lot of bagged vacuum cleaners, and while that market is slowly going down, it’s very slow, and we still have a huge market there.
Of course, it is not just about growing competition from the East, but also about the situation in Europe itself with regard to rising costs, especially energy. Some time ago, you moved the production of washing machines from Gütersloh, Germany, to Ksawerów, Poland. Is European appliance production economically sustainable at all? In recent weeks, the market has been discussing the situation at Groupe Brandt, and it is no secret that Electrolux also faces many challenges…
The industry is, of course, in a state of change. We always optimize and must be flexible. A lot of our consumers are still in Central Europe. From a logistics point of view, taking CO2 costs and sustainability into account, it makes sense to produce here.
Yes, the production moved to the East a lot but looking further into the future, you might see more automation. If this becomes true, then the difference in wages won’t be so big. The whole topic is about efficiency of the production, and the new wave of automation could even bring factories back. It’s difficult to say if the movement of production so far has been in only one direction. When you look at the global industry, many Asian competitors also have production in Europe, for example for freezers and fridges, because of logistic reasons.
The news that Chinese giant JD.com is buying MediaMarkt has also caused quite a stir in the electronics industry. It almost seems as if European companies are unable to grow and develop without Chinese money… What do you see as the main problem? Is Europe really that weak?
No, I wouldn’t say Europe is weak. What is definitely challenging within Europe are the rules and regulations we have. There is a lot of bureaucracy. I can give you a simple example. Travelling to the Czech Republic, I have to fill out an A1 form, which certifies my social security in Germany. If I have a service technician in Germany near the border and a customer in the Netherlands needs help, I cannot just send him over. I have to fill out this form the processing can take one or two days. And I have to reapply for every single trip. This is the kind of bureaucracy we have created. It costs money, it makes us inefficient, and in the end, the customer has to pay for it. This is where Europe could get better.
But Miele is not the last European household appliances company left. There are many successful companies still operating in Europe. And yes, Chinese money is coming into Europe, but we also have a subsidiary in China and are selling there. They open their markets, we open ours. It’s not a one-way street.
During the summer, APPLiA sent an open letter to the President of the European Commission, appealing for the household appliance sector not to be overlooked. The fact is that politicians and the mainstream media are mainly concerned with the automotive industry and energy. Miele is also a signatory to the letter, along with 14 other companies. Do you feel neglected by the EU? How do you think the Union should support the appliance manufacturing sector?
You are right. We are the “smaller brother” of the automotive industry. If we talk about energy prices, getting energy at a cheaper price would benefit not only the car industry but also the steel industry and everyone else. There is a big discussion in Germany about an “industry energy price”, and if we lower energy prices, it helps everybody.
But the most important topic is that we need to get consumer confidence back. People have a lot of uncertainty about the future due to the whole geopolitical situation. Consumer sentiment is not good, so people tend to save more. The money is in savings accounts, but people are not willing to spend it right now.
I think one of the most important factors is to create a better view of the future so people are happy to spend again. Interest rates are part of this. Construction is now starting again, but at a very low point. We need more construction to cater for the needs of the people, and this will, hopefully, help the MDA industry in general.
Our editorial team attended this year’s International TCG Summit in Prague, which brought together many European leaders from companies producing household appliances. There was a lot of talk at this event about the digital product passport (DPP). Many consider it unnecessary. In an interview for our magazine, Paolo Falcioni, CEO of APPLiA, also described it as such. Do you agree with him? How do you perceive this initiative?
Fundamentally, we know what we put into our appliances. We have the list of materials, we know the software we use. So, in a way, we already have a digital product passport for each appliance. The problem is that there are different ideas about what the DPP should be and what it should look like. Different customer groups want to have different information. I think it is very important to know what is inside the appliance, especially for recycling and reusing materials. Some rules and regulations that are not going in the right way. They add complexity, which is again inefficiency, and that’s not helping either the industry or the consumer.
Miele clearly stands out in the market as it has been a family business since its inception. This is quite a rarity nowadays. What are the advantages of this structure? And what challenges does it pose from a management perspective?
Family companies in general tend to have a longer view. Sure, we also think about the next quarter, but when we look at investment cycles, we are asking ourselves if an investment will help us in 5, 10, or even 20 years. We are not influenced by stock price changes. We ask ourselves: “Do we fulfil a customer wish?” The customer benefit is much more important. This allows us to guide the company in a more sustainable and healthier, long-term way. We look for the “right thing to do” and follow a straight line, not a zigzag course.
However, I think I need to point out that nobody is going into a store saying: “I want a product from a family company”. They want a great dishwasher or washing machine. This means we still have to react to the market and deliver the user benefits customers are looking for.
Miele is a traditional European manufacturer, but you have gradually expanded worldwide. How are you doing in Asian markets and in America?
The US is our second-largest market, after Germany. We have been there for over 40 years, starting in the early 80s. We developed it step-by-step. You can’t just go full America – you have to build up the service organization. We started in big cities like New York, then California, and the Midwest. We still have some states with no dealers because we don’t have the service there. This is the digestive steps approach of a family company. We build the organization at a speed we can digest. And we are still growing in the US, despite competition from local premium brands.
Asia on the other hand is a bit of a mixed bag. We have very successful markets like Australia, which is growing at a good rate. China is the second biggest market for us in the region, but our housing projects business there has been slowing down due to customer uncertainty. Some projects have been postponed. Other countries like Japan and South Korea are doing quite well, but they are smaller compared to China.
When we mention America, of course, the topic of import tariffs cannot be avoided. How have they affected your business in the US this year? Even before Donald Trump took office, you opened your first American factory in Alabama at the end of last year. If I’m not mistaken, you manufacture ovens and stoves there. Will you be expanding the factory with additional production lines?
First, the decision to build the factory in Alabama was taken before Donald Trump was elected. We had been producing ranges for the US market in Germany, and we always said that once we reached a certain number, we would move that production to the US. These are bulky items and shipping them is very expensive.
We also wanted to have the factory there to be closer to the American consumers because their needs are different. We started in the US with 60 cm ovens, which are fine for a Manhattan apartment, but not for Texas so we had to adjust our portfolio for local consumers. We trained the people for the Alabama factory in Germany and had German staff in the US to ensure the exact same quality standards, which is utmost important for us. Right now, we are producing ovens, ranges, and cooktops there. We have no further plans to expand it right now, but let’s see what the future brings. And regarding tariffs, they increase prices. The playing field is different now, but made some adjustments and our business in the US is fine.
Looking at Central and Eastern Europe, which markets are key for Miele? And where do you see the greatest potential for the future?
We have 48 branch offices worldwide, and we have local people in all Central and Eastern European markets. We started this way for sales and, importantly, for service reasons. You can’t send a service technician from Budapest to Prague. Having local teams allows us to gather a lot of insights. There are different needs, cultural habits, and even different dishes people prepare. Our answer is to centralize the things we can, like back-office support, in a cluster hub, which we have in Warsaw. But we must have local people in the different markets. The languages are different, and the markets are maturing at different pace. This is often tied to the income level.
Markets like the Czech Republic and Poland have been very successful in developing their industry, which brings wealth, and people can afford better appliances. These markets can be price-sensitive, but they also require energy efficiency, like our class A dishwashers. As the GDP in Eastern Europe rises, it creates opportunities to sell more premium appliances. Since we are talking in our new Brno office, I have to say that the Czech Republic has done very well. We have a great team here.
