Philips leaves U.S vacuum market

Philips leaves U.S vacuum market

A year and a half after it acquired the bankrupt floor care vendor Regina Consumer Products Co., Philips Electronics North America Corp. said it plans to walk away from the vacuum cleaner business in the United States. The move to discontinue the manufacturing and marketing of Regina floor care products comes on the heels of disappointing third quarter sales and income for the corporation. Philips has decided to take quick action in addressing underperfoming product segments.

Operations at the Regina manufacturing facility in Long Beach, Miss., which manufactures upright vacs and extractors, will cease on Dec. 31. The 300 employees affrected will be offered severance packages.

For the past several weeks, rumors had been circulating that Philips was looking to sell its Regina business.

“Certain assets of the Regina floor care business will be put up for sale,” said Jon Kasle, vice president of corporate communications for Philips, who added that the company is not selling the brand name. Philips will retain the Regina brand name and “is open to the possibility of re-establishing a position in U.S. floor care some time in the future,” according to a company statement.

“The current situation in retail pricing and related margins in the U.S. floor care market are not sufficient to merit further investments at this time, particularly given the cost of marketing,” Kasle reported. “There has been continued price erosion and market compression,” he noted of the past year.

Philips is an established floor care player in Europe and other markets under the Philips brand. In May of 1995, Philips purchased financially troubled Regina in hopes of establishing a U.S. presence in the floor care market and of rebuilding the century-old Regina name.

Regina — once the number-four maker of vacs — had filed a Chapter 11 bankruptcy petition, had halted production and had laid off most of its 800 to 900 employees earlier that year.

At the housewares show last January, Regina — under Philips’ leadership — launched three redesigned upright extractors and a line of uprights.

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Ten months later, Philips has decided to exit the floor care arena in the U.S. because the profitability and growth of the Regina business has not measured up to company expectations, and the company did not foresee a change, Kasle said.

The plan does not affect Philips-brand floor care, which is not sold in the U.S.

The vendor’s new initiatives also call for the continued emphasis on building Norelco’s share of the shaving market and expanding into other categories of personal care and domestic appliances, Kasle said, pointing to such segments as dental products, air cleaners and irons as examples.

Buyers expressed surprise at Philips’ decision to halt its Regina business.

“I was surprised because I thought that Philips had invested quite a bit of money,” said one buyer at a regional mass merchant. “But they didn’t seem to have made any impact on the industry.”

Another floor care buyer said he believed the company could have turned around the Regina business in five years if it had sharpened its positioning. He noted the Philips brand canisters sold in Europe were “nice and sleek” and could have been a welcome addition to the U.S market. In uprights, “They could have been a good low-end source” at the $59 to $89 level, he added.

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