Berlin, Germany
August 29, 2008 Good afternoon ladies and gentlemen – welcome to IFA and welcome to Philips. I am delighted to have this opportunity to outline how Philips is making a difference to people’s lives - and their lifestyles – this year, next year and beyond. “Lifestyle” may not be the first thing visitors to IFA are thinking about. After all, isn’t this a traditional technology event? Well no. I’m pleased that IFA this year features a strong presence from the home appliance industry. This positively reflects how white and brown goods are now within the same lifestyle marketplace, something we at Philips have said for some time. Consumers are no longer only interested in gadgets and devices, but in applications that address the way they live their lives. This also underlines why we created the Consumer Lifestyle sector I lead. IFA, like many industry trade shows, has historically been defined by what the industry sells, not who the industry sells to. Our focus, at Philips, is ‘the who’: people, our customers - the consumer. Indeed, it is about the consumer that lifestyle is all about. Consumers tell us they want to enhance or simply add to their lifestyle. Yes, that could mean offering them a new home theater system, but it could also mean enabling them to enjoy a healthier and more rewarding lifestyle. Lifestyle means experiences, not technology; understanding what consumers want and involving partners to deliver it. It means making a difference in people’s lives. Our Vision 2010
This time last year we were preparing to announce the Lifestyle sector as an integral part of Philips’ Vision 2010 and an exciting new chapter in the company’s future. Vision 2010 presented a company growing faster and more profitably, with simplified, market-driven business portfolio, made up of three core sectors: Healthcare, Lighting and Consumer Lifestyle. Each sector has its own dedication to people and improving the quality of their lives. Vision 2010 is a roadmap for Philips’ growth towards the end of this decade, shaping a market-driven, people-centric company, built around its promise of Sense and Simplicity, and organized to fully reflect the needs of its customers, while also increasing shareholder value. The Consumer Lifestyle sector brought together the businesses of our former CE and DAP divisions to form a single powerhouse of consumer understanding, and representing some 13 billion Euros’ worth of sales. However, as I will outline further today, the Lifestyle sector is more than just the sum of its parts. From an organizational point of view, a single sector is what our customers want. Retailers increasingly don’t distinguish between electronics categories – they want to deal simply and effectively with a single supplier. We have constructed ourselves in a market-driven manner to put the customer first. We created an organization with tremendous intimacy with its consumers, customers and partners, and a strong track record in excellence as a supplier. We created a business with marketing excellence in its DNA, which understands the application and interpretation of relevant technology, and uses design and insight to differentiate and add value to the end-user experience. An incredible platform
As a single sector we are more agile, and therefore better able to generate sustainable growth. Lifestyle presents an incredible platform to address new value spaces in growth markets – and we are only just beginning to tap into the immense potential of the lifestyle space. Consumer Lifestyle is a pillar of Philips’ evolution from a technology business to one seeking to improve the quality of people’s lives through focusing on their health and wellbeing. Our brand promise – Sense and Simplicity – provides the framework for this transformation. So how does Lifestyle fit into Philips’ health and wellbeing landscape? While our Healthcare sector addresses health with solutions for healthcare professionals and patients in their homes, Lifestyle addresses consumer health and wellbeing through products and related activities that help consumers live healthier lives. We see wellbeing as complementary to health. Wellbeing is a universal trend, relevant in developed and developing markets, growing fast and representing a significant segment of the total global consumer spend. The health and wellbeing categories we have identified as being of interest to us present tremendous potential representing a total addressable space roughly three times bigger than the market categories of our former Consumer Electronics and Domestic Appliances divisions. The consumer we are targeting in this space is well educated and with a good income. This consumer is attracted to strong brands, makes selective purchases, but not necessarily always at the lowest price points, and is enthusiastic about new applications – but especially relevant innovation. We have made very specific choices as to how we address this consumer with our product portfolio. As I will outline, we are building on our traditional categories, opening up new value spaces to creating different and even surprising categories. The consumer health and wellbeing we are addressing is as much about comfort and enabling a sense of security as it as about feeling relaxed; it’s about looking good and feeling good, eating right and sleeping well, learning more and faster, breathing clean air and drinking good water, enjoying great entertainment every time, everywhere. These are all human conditions we are interested in developing into lifestyle business opportunities, where we can apply our unique consumer understanding, our design approach and our brand strength. Within the Lifestyle sector we have a strong health and wellbeing portfolio already: for example, our Sonicare toothbrushes offer consumers and dental professionals alike effective personal oral care possible, and we know that there is a scientific link between healthy teeth and a healthy body. Our fruit juicers deliver all the nutritional benefits of fruit and vegetables in an attractive and stylish product that sits somewhere between health and wellbeing. Our Aurea TV creates a uniquely relaxing and immersive viewing experience, while the Wake-up Light ensures a natural end to a good night’s sleep. These and other categories in our portfolio contribute to a formidable consumer health and wellbeing platform from which the Lifestyle sector will grow. Making the right choices
It’s no secret some of our businesses are operating in tough markets. However, our portfolio choices have always been made and will continue to be made to create sustainable, profitable market leadership. We are challenging the notion that a strong brand has to be present in every market with everything it has in its portfolio. Making a difference means daring to be different, and making effective, sustainable and even bold business choices. It means not getting caught in the trap of thinking biggest is always best. It also means withdrawing from markets where for different reasons we cannot make sustainable, profitable difference. For this reason we chose not to drive our Domestic Appliances business in North America, despite its strength in other markets, and we have applied this same thinking to our television business in North America. Earlier this year we made a very strategic decision to license the Philips brand to Funai, enabling them to take over our North American TV operations. We took this further a few weeks ago when we announced our brand licensing agreement with TPV for our PC monitors business on a global level. These two agreements let us concentrate on our core consumer television business in markets where we can make a difference. They frees us to build on our clear strength in television here in Europe, while leveraging the enormous brand equity we have in Brazil, Russia, China, India and other markets offering opportunities for expansion. Let me be very clear: Philips is determined to continue as a major player in television. We will focus on the areas where we can strengthen our leadership with an exciting roadmap that applies our rich insight-driven product development, heritage and proven excellence in integrating technology.
Our new Essence TV and second-generation Aurea FlatTV – both being launched here at IFA - are key elements of our TV proposition for 2008 and 2009, and reinforce our commitment to advancing the viewing experience. With these and other propositions to be unveiled in the coming months we will continue to challenge expectations about the television business. We will still drive excellence in rational benefits like picture quality, but at the same time we will also drive differentiated design, daring to be different by offering exciting new dimensions in television viewing. We have seen in other businesses – like shaving, for example – that there is always plenty of capacity for applying innovation, to strengthen and continue to grow categories for decades. When we launched the first FlatTV in 1996 we gave consumers what they wanted – something new, exciting and different. We took TV out of the living room corner and hung it on a wall. The FlatTV was a lifestyle statement, revolutionizing how consumers watched TV. I’m sure many of you now own at least one flat screen TV. Think about where you locate it, the furniture you use, the furnishings around it and even the color scheme of the room it’s in. This is a lifestyle statement about yourself. We have, of course, continued to innovate on the technological front, but I challenge the television industry to drive innovation beyond pure technology. Manufacturers – and I include ourselves in this statement – need to push the boundaries of television design further. When I visit an electrical store I’m confronted by rows of near-identical TVs. If you removed the brand badges from these sets, could you tell the difference? Yes, performance and picture quality can make that difference, but we must accept that is not the only thing the consumer is looking for, Imagine if today’s car dealerships resembled those of the 1950s – rows of somewhat identical cars with little to distinguish from each other. Like cars, televisions – and especially large-screen sets – are, for many consumers, capital purchases. People do not buy them very often. When they do, they want something which represents them, their needs and their lifestyle. Differentiation is essential to the car industry: just as one of many examples, look at the great job FIAT has done in recent years, returning to simple, meaningful and therefore beautiful cars. The new Cinquecento is a perfect example: a modern car with a ‘retro’ feel and a clear reference to the original 500. Design has brought about a renaissance in the FIAT brand, creating an emotion perhaps lacking in the family car market. I speak, of course, as a proud Italian, but to those who genuinely love cars, you can see, here, how design can dramatically make a difference. Can we say the same of TV? True, perhaps consumers are just looking for a television screen, but surely that’s like buying a car simply to get you from A-to-B.
Pushing the boundaries of TV design
Philips has pushed the boundaries of TV design with the acclaimed Aurea. It reinvented television, a medium once famously described as a “window on the world”. Aurea allowed the viewer to step through that window and into a world of seductive light, color and sound. This is a different language to that normally associated with TV. But such is the different experience Aurea delivers, it’s hard not to be inspired.
Next month we will inspire even further, by launching a second-generation Aurea here in Europe, combining a sleeker design and a new lighting solution virtually rendering the frame invisible. We have plenty more here at IFA in our television range, including the introduction of LED backlighting and Essence, which takes picture quality to a stunning level of clarity, contrast and richness while combined with a minimalist, ultra-thin design. Beyond television, we’re also making a bold design statement with Cinema 1, our new all-in-one entertainment system designed for consumers with limited space. The importance of design does not mean, of course, we no longer pay attention to the rational benefits of our products. Having the best technology remains ‘a must’ for us. It’s what we consider an “hygiene factor” in our business development, the starting point for differentiation to happen in new products. I am extremely proud that we have won two EISA awards this year, including the prize for high-end LCD TV. This is the tenth consecutive year we have won a major EISA award for television, which is a tremendous achievement. I am sure we will continue to collect many more awards for our television range in the years to come. Taking lifestyle further
We merged our former CE and DAP divisions into the Lifestyle sector because together, they present a strong proposition. That has prompted people to question how our portfolio is constructed. How, for example, can portable audio products sit within the same sector as shavers? For a start, these are both examples of our strength. We are the global No.2 in portable audio-video, while in electric shaving and male grooming we enjoy global No.1 status. With 70 years’ experience in the electric shaving business, and having sold over 500 million shavers, we are still able to innovate, to offer consumers attractive, differentiated propositions - innovations like Arcitec, for example. Mature categories can continue to be exciting if you combine insight, innovation and design. Look at household appliances: it may not sound a glamorous term, but the presence of names like Alessi, Armani, Ralph Lauren, Porsche, Phillipe Starck and even Peugeot in the interiors and kitchens business, speaks volumes about this segment’s place in lifestyle. More money is being spent in the kitchen than ever before, while celebrity chefs like Jamie Oliver and Gordon Ramsay have turned cooking into a lifestyle experience, not just a way of putting food on the table. Lifestyle TV shows have not only driven a boom in kitchenware sales, but transformed kitchens into important social venues, a place for families and friends to gather. Consumers are even redesigning their homes around their kitchens, returning, to an older era when the kitchen was the living room, and the living room was somewhere visited only on special occasions. Riding this trend has allowed us to grow our Kitchen Appliances business. Up until 2005 this category was experiencing contraction, but we have been able to grow it by more than 40% in the last three years, and with healthy and expanding margins too. This is not a commodity business. Within this category, coffee drinking is another important ‘lifestyle application’. A few years ago you wouldn’t have given a second thought about drinking a cup of coffee, but the phenomenal global popularity of ‘gourmet’ coffee restaurant chains has made coffee drinking a lifestyle experience in its own right. Coffee drinking at home, too, has become a lifestyle experience, and the source of one of our most successful partnerships - our collaboration with SaraLee and its Douwe-Egberts brand to introduce – in 2001 - a new way for consumers to enjoy coffee: the Senseo Coffee Pod System. Towards the end of the 1990s Philips and Douwe Egberts discovered that home coffee consumption was changing. Smaller households were drinking coffee by the cup, not by the pot. But they still wanted the taste of freshly-brewed coffee, produced with Simplicity. Senseo addressed this insight perfectly. Seven years since we launched it, over 20 million Senseo systems have been sold worldwide, with Douwe Egberts offers well over 15 Senseo coffee varieties. In Europe, it has changed coffee-drinking habits - around half of all Dutch and Belgian households alone own a Senseo system. We are growing our Senseo family further with the launch, here at IFA, of the Senseo Latte Select. Delicious cappuccinos, lattes or machiatos made at the touch of a button. Simple, convenient and indulgent and, like the original Senseo, using speciality Douwe Egberts coffee pods to get the perfect drink every time. Here lies the essential benefit of what we offer our partners, and what they offer us. Our coffee makers have always required someone else’s coffee. With Senseo, Philips and Douwe-Egberts have created the perfect combination of ease of use and a rich, authentic restaurant coffee drinking experience at home. Senseo’s outstanding success also led us last year last to make a further advance in lifestyle coffee, with the launch of our Espresso makers. Here we entered a segment with the highest growth rate – 13% – within the small appliances segment. Our One-Touch Espresso maker went to the Number 1 position in the German premium appliance market within weeks of launch. It’s said that too many chefs in the kitchen can be a bad thing. But for us, working with partners in the kitchen business has contributed tremendously, in the case of Senseo, bringing together two powerful equities: Philips’ expertise in appliances, Douwe-Egberts’ credibility in coffee. We have grown the market presence of our Domestic Appliances business through dynamic partnerships with retailers, such as our healthy living campaign, which applied a variety of innovative marketing activities to promoted the lifestyle benefits of fruit juicers and other kitchen appliances. Efforts like this helped grow our market share amongst the top 10 international retailers in Western Europe by 75%. Making A Difference – a partner of choice
Our decades-long experience in consumer electronics and domestic appliances has enabled us to forge committed partnerships with the world’s major retailing organizations – as well as some non-traditional retailers. With Swarovski we created a truly unique concept in fashion - Swarovski crystal jewelry containing memory sticks or headphones that can be worn as much for decorative effect as for listening to music. This opened up a new distribution channel for us, with the Active Crystals range available via Swarovski’s jewelry shops. We will take this approach further as we travel further down new avenues of lifestyle and broaden out from traditional categories. There are many retailers in the world who wouldn’t think of selling an electrical device but do operate in complementary markets to us – fashion, nutrition, wellbeing, home décor. The fact that our Active-Crystals range is available in Swarovski stores demonstrates the many still unopened doors for us. Some of these doors will not be opened by us alone. Innovation isn’t just about new technologies or applications. In many cases, it’s about taking a new approach to an existing category, and that means working with the right partners. Our ground-breaking partnerships with Douwe Egberts, Swarovski, Nivea and InBev have enabled these true consumer brands to launch new lifestyle propositions with us providing the hardware. Ever since our Alessi partnership a few years ago, working with other lifestyle brands has been a valuable way to grow existing categories. The kitchen is, perhaps, a logical place for this approach: how many consumer brands populate your kitchen – from food and drink to utensils and appliances? Food and beverage preparation requires a combination of ingredients, and so we’ve applied that thinking to the business side of it. These partnerships also represent a shift in traditional thinking: to launch CD and DVD players, we needed the content industry to provide music and movies. Now, it’s the other way around – we are looking to enable our partners to introduce new lifestyle experiences of their own. Beyond the tradition
I said before our ambitions in the consumer wellbeing space lay beyond traditional product categories. Let me show you, via some less obvious products, what I mean. Firstly, the Philips Wake-up Light. Another great example of insight, design and innovation combined with existing technology competencies to create something totally unique. At first glance, it’s a bedside lamp with a clock radio - but one to which we’ve applied 100 years of understanding of light and its effect on the human body. We know light has a profound effect on wellbeing, so by simulating the effect of the rising sun, the Wake-up Light helps people waking up gradually and gently, feeling naturally refreshed, positive and ready for the day ahead. My second example is our Water & Air category. Here in Europe, we take for granted the ability to drink clean water from a kitchen tap. In other parts of the world, that reassurance doesn’t exist. In many Asian homes, drinking water contains almost 90 types of bacteria and viruses, presenting a major risk to family health and wellbeing. Our solution is the Pure Water Dispenser. It uses ultra-violet light technology to remove the bacteria, viruses and chemicals other purifiers leave behind. On top of this, the Pure Water Dispenser has been designed to to fit into the lives and homes of our Asian consumers with an attractive, sleek and elegant design. Easy to install, easy to use and easy to maintain. My third example is from here in Europe: over half the population today lives in cities, and by 2050, that percentage will exceed three-quarters. The effect of city air pollution is well known, but little attention is given to indoor air. Europeans take it for granted and many think their home air quality is good. However, growing scientific and medical concern about indoor air quality has made possible links to a variety of health problems. I mention this not to be alarmist, but to illustrate our understanding of real consumer needs. Next month we will be launching our Clean Air Systems to European householders to address the need I’ve just outlined, adding to our health and wellbeing portfolio a product that will provide as much of a healthy home living benefit as our Fruit Juicers deliver vitamins, or the Aurea FlatTV aids relaxation. Design for Lifestyle
I spoke earlier of the role of design in the TV domain, but good design is important for all our products. Design differentiates, it inspires. It informs what a product looks like, how it is used, and the impact it makes. Our approach to design is to enrich people’s lives by expanding and enriching the interaction between products and their environment. Our design team works closely with our businesses to ensure a structurally consistent design approach across the Lifestyle sector, enabling us to break through a crowded marketplace with compelling and unique propositions that delight and excite. In this regard, the Design team is also an important guardian of our brand promise and our commitment to Sense and Simplicity, helping create products that are easy to experience, advanced and designed around the customer. We have long been recognized by the world’s leading design institutes as a leader in consumer product design and is a consistently regular recipient of major international design awards. This year alone, the influential iF Design institute – based here in Germany - presented us with 20 awards for Consumer Lifestyle products alone, something I am immensely proud of. Making a difference to the future
Consumer Lifestyle has a very exciting future. We’re growing stronger in the things we’re good at. We’re applying our strengths to offer unique products based on validated insights, underpinned by innovative technologies and applications, and supported by pioneering approaches to doing business. We’re reinventing existing value spaces, capturing value in emerging markets and converging technologies, and applying revolutionary thinking, marketing and partnering to creating new value spaces. We’re applying innovation in marketing, such as end-to-end category management with leading retailers. And we’re creating growth through our programme of focused acquisitions, such as Avent, Digital Lifestyle Outfitters and PowerSentry.
Shaped by Sense and Simplicity, the Philips Consumer Lifestyle sector is driven by a single strategy devoted to serving consumers’ lifestyles. Our strong presence in consumer retailing makes an important contribution to the overall brand strength of Philips itself, not only in Europe – the company’s ‘home ground’ but in strengthening the brand further in markets like Brazil, Russia, India and China. I am extremely excited by the Consumer Lifestyle opportunity. Together with our partners, we will build upon a solid platform of excellence, to open up new value spaces, creating sustainable, profitable growth. There is much more this industry, represented here at IFA, can do to make a difference to consumers’ lifestyles. Philips will be playing a big part in that. We will build on our unique combination of insightful innovation, differentiated design and strong capabilities in marketing and customer intimacy. And we will make the Consumer Lifestyle sector’s future successful, exciting and, most importantly, incredibly relevant to our consumers all over the world. Thank you. |