[Inventory 2014] Smoke stove market: 2014 smoke stove market review: growth rate declines

In 2014, the growth rate of the range hood market saw a significant decline compared to 2013. The first and second quarters witnessed a strong momentum across the industry, but from the second quarter onward, a turning point in market growth emerged. By June, the overall market trajectory began to show a clear downward trend, which continued until the end of the year. While the market grew by 14.6% in 2013, the growth for 2014 was less than 9%. Despite this, the industry's internal factors—such as operational efficiency, product quality, and competitive dynamics—showed notable improvements. Overall, although the initial high growth momentum in the first quarter did not continue, the industry's overall improvement ensured that 2014 still had its share of achievements. **Overall Operations: High Start, Low End** Continuing from the growth momentum of 2013, the range hood industry experienced rapid growth at the beginning of 2014, with the entire sector booming. However, this positive trend did not last. As the second and third quarters progressed, market operations began to slow down. Taking listed companies as an example, brands like Boss Electric, Vantage, Wanhe, and Wanjiale saw their first-quarter performances at 43.22%, 21.33%, 29.29%, and 51.73% respectively. However, by the time of the semi-annual reports, these figures dropped to 38.74%, 9.6%, 13.15%, and 54.73%. In the third quarter, the growth rate further declined, with some brands experiencing drops of 6.19%, 3.26%, 5.88%, and 8.1%. It is important to note that listed companies are usually leading players in the industry, showing strong resilience against market pressures. However, small and medium-sized brands faced more challenges. In areas like Shunde and Zhongshan in Guangdong Province, where many such companies are concentrated, the timing of home appliance exhibitions (such as the Shunde Home Appliances Exhibition and Huangqi Home Appliances Exhibition in March) led to short-term prosperity. However, by July and August, due to poor sales, many small brands were unable to participate in the exhibitions and quickly entered a dormant phase. In total, the sales of range hood enterprises in 2014 reached approximately 19.5 billion yuan, representing an 8.3% increase from 2013. Among them, range hood sales exceeded 11.9 billion yuan, growing by nearly 7.3% compared to the previous year. Stove sales surpassed 7.5 billion yuan, up about 7.1% compared to the same period in 2013. On average, the price of range hoods increased by 7% in 2013 and 8.7% in 2014, while stove prices rose by about 6.8%. Retail data from Zhongyikang also supports this, with the average retail price in January-November reaching 2,556 yuan, up 10.76% year-on-year. From January to November, the sales area of commercial housing was 101.17 million square meters, down 8.2% year-on-year. Residential sales fell by 10.0%, office sales by 9.2%, and commercial sales increased by 7.1%. Commercial housing sales totaled 6.4481 trillion yuan, down 7.8%, with residential sales decreasing by 9.7%, office sales by 20.9%, and commercial sales increasing by 7.2%. Although there is a lag between the performance of the range hood industry and real estate, the trends align closely. Notably, the disinfection cabinet branded "Bearing Wild Goose" did not perform well in 2014, with annual sales below 6 million units and revenue of only 4 billion yuan, which remained relatively stable. Overall, after steady growth in 2013, the industry's overall growth rate slowed in 2014. However, internal changes and improvements continued. Due to the push towards high-end products, the contribution of price increases to sales growth was greater than that of actual volume. That is, the rise in sales in 2014 was largely due to higher unit prices. After a slight decline in 2012, the industry returned to a path of steady growth. Industry data from the National Bureau of Statistics also supports this. From January to October 2014, the output of range hoods reached 2,342.8 million units, up 12.35% year-on-year. The growth momentum was relatively stable during this period, but it dropped by 6.04 percentage points in November. **Brand Structure: Four Major Players, Shifting Positions** From a brand structure perspective, although there hasn't been a complete transformation, the landscape remains diverse. Companies with strong brand power and operational capabilities have achieved good growth. Conversely, some brands that previously performed well have fallen behind. Additionally, rankings within the same group have also changed. Rumei, supported by its strong group background and broad operational strategies, has recently risen in ranking. By 2014, it had entered the top tier, becoming one of the four major brands alongside Boss, Fang Tai, and Vantage. In terms of sales, Rumei even surpassed Vantage. **Market Level: Shifts in Focus, Rise of Cities and Towns** The development of the market is driven by both replacement demand and first-time purchases. The domestic range hood market began to grow significantly in the mid-to-late 1990s, especially after 2003. As a result, these early-purchased range hoods are now being updated rapidly, creating new market space for companies. On the other hand, from a market level perspective, since 2008, the focus of the home appliance industry has gradually shifted. This shift is related to policies promoting home appliances to rural areas, as well as urbanization efforts that have continuously driven home appliance consumption in rural markets. According to third-party statistics, in 2013, the retail sales of range hoods in third- and fourth-tier markets exceeded 3 billion yuan, growing by 60%. In 2014, the retail scale approached 5 billion yuan, with a growth rate still around 60%. In recent years, the pace of urbanization has accelerated, with an average annual increase of about 1% and a breakthrough of 50% in 2011. Data shows that every one percentage point increase in urbanization can drive 7 trillion yuan in market demand. By 2020, if China’s urbanization rate reaches 62%, the rural market will accumulate 4.5 trillion yuan in new home appliance sales. This is considered a “gold mine” that supports future kitchen industry growth, especially given that rural households account for 67.6% of total households and have much lower kitchen electricity ownership rates compared to cities. For example, in the U.S., due to a relatively sound network, especially in the construction of third- and fourth-level networks, Midea has firmly occupied the top position in the third- and fourth-tier markets. This insight has influenced many other kitchen appliance companies. **Product Features: High-End, Intelligent Technology** During the challenging times of 2012, increasing product value became a key focus for companies to improve operational quality. A wave of product consolidation and value enhancement emerged in the industry. By 2013, range hoods featured large suction, quiet operation, frequency conversion, intelligence, and self-cleaning as technical highlights. Brands like Boss, Shuaikang, and Wanhe focused on large suction; Fang Tai on silent models; German and Italian brands like Sakura on frequency conversion; and American brands like Vantage on self-cleaning. These segments formed distinct camps. In 2014, the interpretation of these technical dimensions became more mature, serving as a powerful foundation for the industry's move toward high-end products. The 17 cubic meters per minute hood increased by nearly 8% from January to November 2014. Meanwhile, European-style machines with more high-end products saw a growth rate close to 10%, clearly reflecting the trend of high-end landing. At the same time, from the perspective of kitchen and electrical integration, 2014 can be called the year of kitchen-electric integration. This integration is not just about seamless connections between kitchen appliances but also the combination of kitchen appliances with kitchen cabinets. Midea introduced the concept of the whole kitchen in 2013, and SKI and SKII models priced at over one million yuan received a positive market response. Brands like Ouyi also made great efforts in terminal construction. By the end of 2014, there were 216 high-end integrated stores nationwide, effectively enhancing their management quality. Additionally, smart kitchen appliances based on the Internet have become a means of value-added products in the context of the maturity of the above-mentioned technical factions. For example, in September 2014, Boss Electric launched the next-generation large suction ROKI, equipped with an intelligent system. As the first smart product after establishing an intelligent kitchen and IoT technology research center, ROKI attracted attention from the industry and the capital market. Another leading brand, Fang Tai, also joined Jingdong in November 2014 to launch a cloud-based smart kitchen appliance capable of remote control, smoke stove linkage, hood water heater linkage, and automatic smoke exhaust. Although there are still questions about smart kitchen appliances, such as hardware-software mismatches and network incompatibility, smart range hoods have become a trend in 2014 and are expected to be a key direction for the future of kitchen appliances and the broader home appliance industry. **Channel Characteristics: E-commerce Intensifies, Integration Deepens** In 2014, long-established kitchen and electric appliance companies and real estate developers collaborated with plumbing and building materials channels, making this integration the norm. The rise of e-commerce is breaking traditional industrial boundaries, and the integration between different formats is no longer a choice but a necessity. Under this trend, every company is doing its best. According to a survey by Aiken Home Appliances in early 2014, 94% of mainstream kitchen appliance companies had established their own e-commerce teams. After comprehensive exploration in 2013, the kitchen appliance industry became more sophisticated in terms of e-commerce model division, brand segmentation, big data awareness, logistics awareness, and online-offline integration. However, the impact of the Internet goes beyond this. For existing offline channels in the kitchen and electric industry, they are either passively affected by e-commerce or actively seeking their own space in the Internet era. Currently, although offline sales still dominate, relying solely on decentralized, single dealers to face the challenges of the future Internet is increasingly difficult. Aiken Home Appliances conducted a channel survey in November 2014, selecting 100 dealers in second-, third-, and fourth-tier markets. The results were not optimistic. In the survey, 56% of dealers felt overwhelmed by e-commerce, 61% had never personally shopped online, and 37% held a mindset of "not worrying about the future and making money when possible." This should raise concerns for companies, as offline dealers remain the foundation for supporting the future integration of online and offline virtual reality. **Industry Prospects: Entering the "New Normal," Requires New Thinking** The macroeconomic environment, industry policies, and the regulation brought about by the industry's own development will lead the future of the range hood industry into a new normal. This new normal requires new thinking to address. Firstly, from a macroeconomic perspective, the country will no longer prioritize high economic growth as a target. This means that the overall growth rate (GDP) will be around 7% in the future, with even lower rates becoming the norm. In short, slowing down, adjusting the structure, and innovating power have become the main ways of economic growth under the new normal. This means that the growth market the kitchen industry relied on before will no longer exist. At the same time, the rise of the Internet has brought profound changes to all aspects of economic life. It is a huge challenge for companies that are used to operating in a real economy or physical business model. From a vague market-oriented progression to a true consumer-centric approach; from previous fuzzy order-based production to current customized, flexible production; from past infusion and cramming marketing to current fan interaction—these changes are still ongoing, and while there is no final resolution, companies that do not actively participate will struggle in the future. Regarding industry policy, regulations are constantly being refined. On October 1, 2013, the State Administration of Quality Supervision, Inspection and Quarantine and the National Standardization Administration Committee officially implemented the energy efficiency standard GB29539-2013 for range hoods. On the first anniversary of the implementation of the new energy efficiency rating system, the Implementation Rules for Energy Efficiency Labeling of Range Hoods jointly developed by the National Development and Reform Commission and the General Administration of Quality Supervision, Inspection and Quarantine were implemented on January 1, 2015. This means that, following refrigerators and air conditioners, range hoods have become another household appliance requiring certification to operate. This has greatly squeezed the space once occupied by small and miscellaneous brands. Looking ahead, even if the range hood market expands into the broader home appliance industry, the entire industry will enter a new era. How to adapt to the increasingly standardized policy environment under the Internet era, how to assign value to your brand in the minds of consumers who are more aware of their rights and have individualized needs, and how to engage and guide the 80s and 90s generations who will be the main force in consumption and labor—these are all critical challenges. This will inevitably lead to the reorganization and reshaping of corporate governance structures and corporate culture. A constant enterprise will have no future.

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