Household Refrigerators and Home and Farm Freezers

SIC 3632

Companies in this industry

Industry report:

This category covers establishments primarily engaged in manufacturing household refrigerators and home and farm freezers. Establishments primarily engaged in manufacturing commercial and industrial refrigeration equipment, packaged room coolers, and all refrigeration compression and condenser units are classified in SIC 3585: Air-Conditioning and Warm Air Heating Equipment and Commercial and Industrial Refrigeration Equipment, and those manufacturing portable room dehumidifiers are classified in SIC 3634: Electric Housewares and Fans.

Industry Snapshot

Shipments of refrigerators represented the largest share of the appliance industry and refrigerator-freezers were the most popular major appliance in the world. The total value of industry shipments in 2008 was $5.1 billion, down from the previous year's total of $5.74 billion and the 2006 total of $6.15 billion. The industry reported estimated revenues of $3.7 billion in 2010, a reflection of the struggling economy. There are an estimated 60 million units manufactured each year and some 500 million refrigerator-freezers in use worldwide. The industry was considered one of the most efficient in the country, leaving little room for foreign products to take any significant market share as they had in the car and electronics industries. In addition, prices of U.S. refrigerators and freezers remained reasonable. Several stylish European appliances found a small market in the United States, but they were unlikely to take any significant market share because of their expense.

By the beginning of the 1990s, decades of consolidation left the industry with little room for domestic growth. By the middle of the first decade of the 2000s, the market was dominated by a handful of large corporations, and there were no small companies left to buy. The industry was mature with 99.9 percent of U.S. households possessing refrigerators and about 40 percent of homes containing a freezer.

Organization and Structure

Both refrigerator manufacturers and appliance distributors consolidated in the 1970s and 1980s. As distributors became larger, they wanted more pricing and service concessions. This put pressure on manufacturers to accept smaller profit margins. As a result, manufacturers consolidated, which enabled them to produce more efficiently and maintain tight profit margins despite large volume discounts to giant distributors and mega-retailers.

This trend toward selling directly to mass merchandisers hurt many distributors who had exclusive contracts with particular manufacturers. Many small distributors were driven out of business because they depended heavily upon a particular manufacturer for most of their inventory or depended upon a few large retailers who suddenly decided to deal directly with the manufacturer for most of their sales. Meanwhile, small retailers were concerned that they were too small to have much clout dealing directly with the manufacturer and needed distributors to represent them.

The manufacturers' suppliers--especially the steel industry--improved processes and offered more finished and flexible products in the 1990s that helped to increase profits. Gains in such technology as powder painting and custom steel cutting resulted in faster turnaround and less costly manufacturing.

Some manufacturers also were becoming disenchanted with marketing directly to large retailers, finding that brand loyalty and profits were declining, and loyal distributors and dealers were going out of business. Some companies let their dealers electronically tap into the company's production schedules and place direct orders with a guarantee of two-day delivery.

Traditionally, dealers maintained large inventories of products. However, this trend was changing, and there was some speculation that retail outlets would become showrooms and products would be shipped directly from the manufacturer to the customer. In response, manufacturers had to guarantee delivery of appliances within a two- or three-day period. Manufacturers were also restructuring their sales departments to offer greater exposure of their entire product lines to more distributors and retailers. In the mid-1990s, manufacturers had friendly "showrooms" on the Internet designed to speak directly to the consumer. These sites were packed not only with a catalog of merchandise, but also with tips on how to choose an appliance of the most appropriate size, the proper way to move a refrigerator, and other practical advice.

In the mid-1990s, about 75 percent of all appliance sales were for replacements due to serious repairs, redecorating, or moving. Market saturation for refrigerators was estimated at 99.9 percent in 1996, which meant that most sales were in the new development and replacement markets. For freezers, saturation was at 41 percent in 1996. Compression refrigerators built in the previous few decades had an average life span of about 16 years, and refrigerators and freezers built in the 1990s had an average life expectancy of 15 and 12 years, respectively.

About 25 percent of appliance sales were linked to new construction of houses and apartment buildings. However, because they were frequently replaced, refrigerators were less dependent than other appliances upon housing starts.

Background and Development

The history of electric refrigerators is relatively short. In the 1920s, few U.S. households had refrigerators. Ice and iceboxes (insulated boxes or cabinets in which a block of ice was set) were the norm for keeping items cold. The ice could keep for several days if the box was well insulated and well sealed. Every few days, the ice had to be replaced.

During the nineteenth century, many inventors patented mechanical refrigerating machines that could make ice and others that could keep things cool in a large compartment. In the Northeast, natural ice was available during the winter months. However, selling manufactured ice became a big business in the southeastern United States by the 1890s, and a few years later in the North as well. Breweries all over the country adopted refrigeration. Cold storage buildings became common in cities, meat packers were using refrigeration units, and even railroad cars and ships provided refrigerated transportation. However, home refrigeration was not routine for several decades because refrigeration required a bulky cooling system that was not practical for home use.

The quest for an effective mechanical refrigeration system for the home was widespread. Large companies as well as individual inventors recognized that home refrigerators would become popular. People working to develop a refrigerator were often backed by large manufacturers who knew that if their inventors were successful, the invention would be worth millions of dollars because the market was so vast. Cities in the United States and abroad were expanding, and people lived farther and farther from the places where food was produced. They needed to keep more supplies on hand, but they needed a place to preserve them. Use of iceboxes was widespread, but a refrigerator would be more convenient.

A home refrigerator needed many qualities that commercial units lacked. The home unit had to be small enough to fit easily into the house. It had to be automatic and not require an operator as the commercial units did. It also had to use safer chemicals than the highly toxic or flammable ones used in commercial units. In addition, the unit had to be affordable, which meant mass production.

Early in the twentieth century, two avenues of development were being pursued: compression technology and absorption technology. Compression required electricity to power a pump called a compressor. Absorption required gas power and did not need a motor. The first functional household refrigerator, the Domelre, was produced in Chicago in 1912. Six years later, American Nathaniel Wales designed a unit called the Kelvinator, which employed compression technology. The Kelvinator became the first mass-produced home refrigerator. In 1919 General Motors bought a small refrigerator company called Frigidaire, which also made compression refrigerators. By 1920 about 75,000 homes had refrigerators.

Because gas was the most widely used energy source, the absorption refrigerator might have seemed a better choice than compression. However, dozens of companies were involved in refrigerator development, and the few that had substantial corporate backing were working on compression machines.

General Electric Co. (GE) had been developing commercial and household refrigerators for many years, but it was not until 1923 that it put substantial resources into developing the home version. Because refrigerators on the market had not yet been perfected, whoever solved some of the early problems could dominate the market. For one thing, refrigerators had dropped in price but still cost $450 for the most inexpensive model, which was a great deal of money in a time when most people had annual incomes of less than $2,000. These early compression models used the refrigerants ammonia, sulfur dioxide, or methyl chloride, which could explode and were toxic if leaked. The refrigerators also had a short life because these refrigerants were corrosive.

The first home refrigerators were also noisy and needed repairs every few months. The noisy motor was separate from the cooling box and could be put in the basement or elsewhere, but the separation of the two parts also forced the compressor to work harder to pump the refrigerant to the cooling box in the kitchen.

Considering that government requirements in the 1990s called for refrigerators that would run on less electricity, it is ironic that in the 1920s, a compelling reason to pursue compression technology was that it required electricity 24 hours a day and would use a lot of power. The use of electricity was in its infancy, but GE was betting that electricity would become more popular than gas. General Electric was also watching out for the interests of the electric utility companies, their main customers.

In 1927 General Electric began marketing the first refrigerator with a hermetically sealed motor and an attached cooling box. It was called the "Monitor Top," because the motor was in a circular box on top of the cooling compartment. By 1929 the company had sold an astonishing 50,000 Monitor Tops. That same year, GE replaced the wood cabinet with steel and brought out its first all-steel refrigerators. In 1931, GE produced its one millionth Monitor Top refrigerator.

In the 1930s General Motors' Frigidaire company developed the first use of chlorofluorocarbons as a refrigerant. This technology became the standard for decades and essentially eliminated the danger of fire and poisoning. In 1939 GE produced the first refrigerator with a freezer compartment as well as a cooling compartment.

The absorption unit was not completely out of the picture, however. Inventors were still working on improved versions, and once perfected, they would have offered many advantages over the compression machines. They were not as noisy, had fewer movable parts, and in many places, gas was less expensive than electricity. However, the companies developing these machines slowly went out of business, having received very little development or promotional capital from the gas companies or other corporations. Between 1926 and 1957, only one large company, Servel, manufactured and marketed absorption refrigerators. By 1940 there were four major manufacturers of compression refrigerators, and each was associated with a large corporation: GE, Westinghouse, American Motors' Kelvinator, and General Motors' Frigidaire.

Iceboxes remained common during the 1930s and even into the 1940s, but refrigerators were becoming a large industry by the 1930s, despite the Great Depression. Prices came down with improved mass production, and consumers could also buy the appliance on an installment plan. The industry grew as refrigerator motors and refrigerant systems were made smaller and safer for home use. The refrigerator was constantly being improved, with such features as automatic defrost, ice makers, and redesigned interior shelving.

A similar appliance, the freezer, has not been nearly as successful as the refrigerator. The process for quick-freezing food began to gain popularity during the 1920s, when families bought frozen food to keep in their new freezers. In the 1940s and 1950s, freezers and the convenience of frozen food were in their heyday as families saved money by purchasing meat, frozen vegetables, and other items in large quantities. However, freezers were expensive to run, which offset any savings from bulk purchases of food.

Until the early 1980s, there were 15 to 30 domestic appliance manufacturers. Consolidation whittled them down to five major companies. Some of the most familiar names in U.S. refrigerators and freezers--Frigidaire, Kelvinator, White-Westinghouse, Gibson, and Tappan--were owned by a Swedish company, AB Electrolux. Between 1970 and 1985, Electrolux bought more than 300 companies in 40 countries. In 1987 Electrolux greatly expanded its presence in the United States with the acquisition of White Consolidated Industries.

Raytheon, an aerospace company, joined the appliance business when it acquired Amana in 1965 and produced refrigerators and other products under that established brand name. Amana was a cooperatively owned company run by the Amana Society, a German religious sect that had emigrated to Iowa. The Society had begun making refrigerators in 1934. By the 1990s, Raytheon also owned the brand names Caloric, Speed Queen, Unimac, and Heubsch.

The top refrigerator in the mid-1990s was Whirlpool's Kenmore (sold by Sears, Roebuck and Co.) with 20.1 percent of the market. It was followed by GE's Profile line with 19.6 percent, Whirlpool's own brand with 11.5 percent, and Amana with 8.5 percent. Other brands with small fractional ratings included Hotpoint, Roper, Maytag, Admiral, and White-Westinghouse.

Among leading freezer brands, according to the May 1996 edition of Dealerscope, Tappan held the lead in 1995 in a fragmented market with 5.3 percent, and Amana followed with 4.2 percent. That year, a total of 4.87 million refrigerators and freezers were sold, according to Appliance magazine.

Refrigerators and freezers recorded increasing sales during the favorable economic climate of the late 1990s, shipping $4.8 billion worth of merchandise in 1997, $5.2 billion in 1998, and ending the 1990s with a high of more than $6 billion in shipments in 1999, according to the U.S. Census Bureau. Of the 25 establishments that manufactured products in this category, 17 made household refrigerators as their primary product, 3 primarily made household food freezers, and 1 made parts and attachments. Only three of these establishments had fewer than 100 employees.

Refrigerator and freezer sales began to lose ground at the beginning of the new millennium, with a total value of shipments of $5.9 billion in 2000, down from a high of more than $6 billion the previous year. As the economy worsened and the economic effect of the events of September 11, 2001, were being felt, shipments decreased again in 2001.

Sales began to rebound in 2002, with the sector showing a 5.8 percent increase over the previous year. That year, the U.S. industry shipped goods valued at nearly $5.5 billion, which increased to more than $5.9 billion in 2003.

The inconsistent economy of the middle of the first decade of the 2000s resulted in minimal growth. Industry shipments in 2006 totaled $6.15 billion, up slightly over previous years. Revenues declined further the following year to $5.74 billion while the global economic recession, which began in late 2007, took its toll on the industry, decreasing sales to $5.1 billion in 2008.

In the early years of the first decade of the 2000s, Whirlpool's Kenmore brand held the largest share of the refrigerator market, followed by GE and Whirlpool. Other brands leading the market included Frigidaire, Maytag, Amana, KitchenAid, and Hotpoint. New entries in this market, largely from Asian competitors, in the middle of the first decade of the 2000s were both high-end and versatile, including models with built-in televisions and Internet access.

Current Conditions

According to the Association of Home Appliance Manufacturers, the industry shipped 8.39 million 6.5 cubic feet and over refrigerators in 2009, increasing to 9.36 million units in 2010. Freezer shipments fell to 1.95 million units, of which 1.55 million units were chest freezers and 820 million units accounted for upright freezers compared to 2.04 million units in 2009. The industry reported revenues totaling an estimated $3.7 billion in 2010 and a gross profit of about 31.47 percent.

Originally GE planned to invest $600 million in U.S. appliance manufacturing in both 2009 and 2010, but GE added another $432 million to the endeavor to establish four U.S.-based refrigeration design and manufacturing "centers for excellence," slated for completion by 2014. New product development was expected to focus on the upcoming 2014 Energy Star standards.

Industry leader Whirlpool Corp. planned to downsize its workforce by more than 5,000 employees, of which about 1,200 constituted salaried employees. By mid-2012 Whirlpool also planned to consolidate its Fort Smith, Arizona, operation with other manufacturing plants in North America. Chairman and CEO Jeff M. Fettig told " Appliance Magazine in October 2011, "�we experienced weaker than expected global industry demand and elevated material costs," adding that "We are taking necessary actions to address a much more challenging global economic environment." Whirlpool stated further steps will follow to "enhance organizational efficiency" in both North America and Europe. Whirlpool's target was to cut its production by about 6 million units.

Meanwhile, Whirlpool filed an anti-dumping complaint with the U.S. Department of Commerce alleging that four appliance manufacturers located in Mexico and two in South Korea were dumping "bottom-mount refrigerators" in the United States for retail sale, which is prohibited under both the United States and international trade laws. Early in the investigation the Department of Commerce determined that four Mexican appliance manufacturers, including Samsung, LG, Mabe, and Electrolux, along with Korea-based Samsung and LG, were dumping "bottom-mount refrigerators" in the United States, reinforcing Whirlpool's complaint. As reported in the October 2011 issue of Appliance Magazine, "affected importers will be required to post bonds as security for future payment of anti-dumping duties if United States' wholesale sales prices on bottom-mount refrigerators are not raised to fair value." The Department of Commerce was expected to release its determination on or around April 30, 2012.

While some standard refrigerators have lasted a minimum of 10 years and some as long as 16 years, the average standard refrigerator lasts about 13 years before having to be replaced. According to a report in Appliance Magazine in June 2011, 9.09 million units were expected to need replacement in 2012 and another 9.21 units were projected to have reached the 13 year mark in 2013. In addition, 1.96 million freezers were forecast to be replaced in 2012 and another 2.21 million units were expected to reach their 12 year replacement age in 2013.

Industry Leaders

The U.S. household refrigerator and freezer industry and the appliance industry in general were dominated by three companies: Whirlpool Corp., General Electric Co. (GE), and Maytag Corp. Most of these companies sold appliances under many brand names that had been around since home refrigeration became feasible in the late 1920s.

In 2008 Whirlpool, based in Benton Harbor, Michigan, had 70,000 employees and sales of $18.9 billion. For 2010 the company reported net sales of $18.4 billion with a workforce of 71,000 employees. It owned the Whirlpool, KitchenAid, Roper, Coolerator, and Speed Queen brand names, and many of its appliances were sold under the Kenmore name through Sears, Roebuck and Co. The company had started out making only washing machines but became a full-line appliance manufacturer in the 1950s and 1960s. At that time it also became the principal supplier of the Sears Kenmore brand. Sears accounted for less than 15 percent of Whirlpool's revenues in 2006.

In second place, General Electric Consumer & Industrial had sales of more than $15 billion in 2006, which included sales from other divisions. The company, a huge U.S. conglomerate that competed in various industries, had expanded its European presence in the mid-1990s by purchasing a 50 percent share in a British appliance company. It also had made a landmark agreement with Japan's Kojima to distribute products directly through the 160-store Japanese retailer.

Maytag International, Inc., based in Schaumburg, Illinois, after being sold in 2005, posted 2006 sales of $33 million. It made refrigerators under the Maytag, Jenn-Air, and Magic Chef brand names. In the early 1980s, Maytag had been a small company making top-of-the-line washers and dryers. With a decade of consolidation beginning, Maytag management recognized that it either had to expand its product line or risk being taken over by a larger company. By the 1990s Maytag was making refrigerators, freezers, stoves, washers, dryers, microwaves, and even soft-drink vending machines and dollar-bill changers. It had plants in eight states and eight foreign countries. Maytag's acquisition of Hoover gave the company an instant presence overseas. In the United States, Hoover was known as a vacuum cleaner company, but overseas it also made refrigerators, washers, dryers, and dishwashers. In 2001 Maytag acquired Amana Appliance, based in Amana, Iowa, from Goodman Manufacturing. In 2005 the company was acquired by Ripplewood Holdings.

Workforce

According to the U.S. Census Bureau, this industry employed 14,750 people in 2007, down from 20,367 in 2006. Total payroll for the industry in 2007 was just over $606 million. Production workers accounted for the vast majority of the workforce, 14,714 in 2006, and they earned $561 million in pay.

America and the World

The leading export markets for U.S. appliances were Canada and Mexico, with Germany and Taiwan also importing significant amounts. Exports to Canada increased during the 1990s after tariffs were removed on appliances sold to that country.

In 2006 Whirlpool's European sales totaled $1.8 billion and the company was the third-largest appliance seller in Western and Central Europe. Whirlpool employed approximately 16,000 people in the region. The company also had manufacturing sites in Sweden, Germany, France, Italy, Poland, Slovakia, and South Africa. In 1991 Europe accounted for about a third of Whirlpool's sales and 15 percent of Maytag's sales. In 1996 Whirlpool's European profits fell, but the company posted record earnings in 1997, due largely to stronger markets in North America and Latin America.

GE especially looked overseas in the mid-1990s to increase profits and invest for long-term growth. Because European demands differed from U.S. demands in appliances (European appliances tended to be smaller and more stylish than those in the United States), GE redesigned the distinctive Profile line of appliances in 1996 to appeal to the European eye. In 1996 GE also struck a deal with Japan, allowing GE products to be retailed directly to Japanese consumers. Southeast Asia was a tough market that U.S. makers for the most part had left alone because it is dominated by three Japanese businesses: Matsushita, Hitachi, and Toshiba.

As of 2008, the United States held a significant trade deficit in this industry with imports totaling $3.2 billion while exports totaled only $900 million.

Research and Technology

During the 1990s, Congressional bills called for manufacturers to recycle both packaging and the products themselves. The bills stipulated that new products had to be easier to disassemble for recycling and that some packaging had to be reusable.

In addition, refrigerator and freezer makers faced strict new guidelines from the U.S. Department of Energy for 1993. The guidelines required higher efficiency standards, and manufacturers were making small changes to meet the energy-use goals, such as improving insulation, compressors, motors, and door gaskets. Interior dimensions on some machines were to be smaller to allow for thicker walls and doors.

For the typical home of the early 1990s, a frost-free refrigerator or freezer was the second most expensive home appliance to operate besides the water heater. Appliance makers were required to include labels listing an estimate of the annual cost of running each appliance so consumers could compare costs and energy usage.

A typical 15-year-old refrigerator consumed about 1,700 kilowatts of electricity, for an average annual cost of $136 based on a cost of eight cents a kilowatt hour. That meant a consumer would pay five or six times the price of the refrigerator in energy costs over the refrigerator's lifetime. New models consumed less than half as much, generally about 700 kilowatts annually, and many state-of-the-art refrigerators consumed 350 to 525 kilowatts. According to the Environmental Protection Agency (EPA), that represented an annual savings for U.S. consumers of half a billion dollars or more in electric bills. This reduction in energy use would in turn reduce the need for coal, oil, and nuclear materials that generate electricity. The EPA estimated that widespread adoption of the new refrigerators would save the country 3 to 6 billion kilowatt hours a year, which would require from 5 to 10 million barrels of oil to generate. According to utility companies, refrigerators and freezers consumed 20 percent of the electricity used in a home. Development of more efficient refrigerators would even curtail the need for new power plants.

The refrigerator and freezer industry was also under pressure to find an alternative coolant to chlorofluorocarbons (CFCs), that were believed to cause depletion of the ozone layer that protects the planet from dangerous cancer-causing ultraviolet rays. A compression refrigerator works by pumping refrigerant, a liquid chemical, through tubes in the cooling cabinet. The refrigerant evaporates there and pulls heat from the air. The gas is pumped out of the cabinet and into the compressor and condenser where the heat is expelled into the room. The evaporator chemical becomes liquid again and is pumped back into the food area.

Chemical companies, as well as refrigerator makers and environmentalists, were involved in development of alternative refrigerants. One of the alternative refrigerants suggested was a hydrofluorocarbon (HFC). Use of an alternate substance such as this would allow refrigerator makers to retain the current technology of the vapor-compressor refrigerator. One of the other proposed refrigerants was said to be dangerous because it posed a risk of fire or toxic fumes. Environmentalists claimed that another posed an environmental threat because, although it was not harmful to the ozone layer of the atmosphere, it might contribute to the "greenhouse effect," an atmospheric condition thought to contribute to global warming. Furthermore, because chlorofluorocarbons (CFCs) were also used in refrigerator insulation, several possible replacements would require new liner materials.

Another approach was represented by the work of U.S. physicist Steven L. Garrett, who was developing a thermo-acoustic refrigerator that used sound instead of CFCs to transfer heat. This technology, which was first designed for military satellites, would be less harmful to the environment than any substance in a vapor-compressor refrigerator. Even so, thermo-acoustics would require big changes by manufacturers to retool their facilities or send their production workers back to school to learn a new technology. Alternative refrigerants would not require these changes.

Researchers financed in part by the EPA built demonstration CFC-free refrigerators that were 8 percent to 16 percent more energy-efficient than existing refrigerators cooled by CFCs. These test refrigerators also cooled freezer and refrigerator sections separately instead of using the same air to cool both sections, as traditional models did.

German scientists were working on a refrigerator that used a mixture of propane and butane in place of CFCs. The unit they were developing, however, had no freezer compartment and used more electricity than a typical refrigerator cooled by CFC vapor compression. Italian scientists used the same vapor-compression technology that is found in CFC refrigerators, but they substituted a hydrofluorocarbon, HFC-134a. The refrigerator had two modules for refrigeration and one for freezing; the modules were made from polystyrene and made recycling and manufacturing easier. The power pack was easily removable for recycling or repairs.

Throughout 1994, most manufacturers converted to foams using HCFC-141b as the blowing agent. HCFCs are an ozone depleting substance (ODS), but considered much less so than CFCs and so were singled out as the best transition blowing agent with the goal of a total phase-out of all ODSs. The HCFC conversions were thought of as short-term solutions until zero ODS options that were energy efficient could be developed. Under the Clean Air Act, HCFC-141b could no longer be made in the United States after January 1, 2003. With this date in mind, research was funded to find alternatives. The leading alternatives were identified in 2003 as HFC-245fa, HFC-134a, and cyclopentane, a hydrocarbon (HC). Used in many other parts of the world, cyclopentane was ruled out for use in the United States due to its flammability and volatile organic compound issues associated with use of HCs in the United States. The HFCs were chosen as the best alternative with zero ozone depleting potential, but they still had increased global warming potential. Most U.S. appliance manufacturers converted to an HFC blowing agent in 2003, with the majority of the conversions going to HFC-245fa.

Another significant development in the quest for more environmentally friendly refrigerators came in 2003 when engineers from Penn State University produced a proof of concept refrigerator that operates using powerful sound waves as opposed to chemical refrigerants as a cooling agent. The research was funded by the noted environmentally friendly ice cream business Ben and Jerry's.

© COPYRIGHT 2018 The Gale Group, Inc. This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan. All inquiries regarding rights should be directed to the Gale Group. For permission to reuse this article, contact the Copyright Clearance Center.

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