Whirlpool, Struggling to Sell Large Appliances, Bets on $2,000 Espresso Maker

(Bloomberg) -- Whirlpool Corp. is struggling to sell large appliances so it’s hoping you’ll pay big appliance prices for a high-end espresso machine.

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The company launched new KitchenAid automatic espresso makers this month in the US that cost as much as $2,000. The goal is to hook Starbucks Corp. customers who are used to shelling out $5 for fancy coffee drinks and now find themselves working from home more often.

It’s a high-stakes gamble for Whirlpool as US economic growth slows and inflationary pressures persist. While small domestic appliances are still selling, the high-end discretionary category is a weak one in a cautious consumer environment, said Bloomberg Intelligence analyst Drew Reading.

“It doesn’t really get more discretionary than a $2,000 espresso maker,” he said.

Whirlpool’s revenue has stagnated with fewer US home sales and budget-conscious shoppers putting off upgrading their dishwashers or refrigerators. In Whirlpool’s latest quarter, sales fell from the year prior, with the North American major-appliance business reporting a steeper decline than analysts had anticipated.

The new KitchenAid machines are sold online and at Crate & Barrel locations now, and they’ll make their way into more retailers including Best Buy, Macy’s and Bloomingdale’s this year. They face tough competition among pricey coffee makers, many which don’t reach the $2,000 mark.

Whirlpool began selling semi-automatic espresso makers during the summer of 2022 to grab some of the pandemic sales wave, including machines priced at $400 and $700. The cheaper models in the new fully automatic collection cost $1,200 and $1,700.

“It makes sense that they’re putting investment into their small domestic appliances,” Reading said. “That’s where the growth is.”

It’s also a higher margin category for Whirlpool. The company expects operating margin for its small domestic appliance segment, which includes coffee makers, to be more than 15% this year. The measure of profitability companywide will only be about 6.8%.

Sales of coffee makers boomed during the pandemic years as locked-down consumers tried making fancy drinks in their own homes. That spending has continued its upward climb — albeit at a slower pace — with Americans shelling out $2.96 billion last year, 3.6% more than the year before, according to data from Euromonitor.

The new line of KitchenAid espresso machines is meant to make the luxury coffee category “very approachable” to consumers as opposed to some high-end brands that seem like they are only for the rich and famous, Ludovic Beaufils, executive vice president of KitchenAid small appliances, said in an interview.

“Think about the Brad Pitts, the George Clooneys, the Roger Federers that you see in all those ads, and the Tuscany pictures: It doesn’t feel really close to home,” said Beaufils. “It’s still a very intimidating category for a lot of people.”

While there’s only been about two weeks of sales, Beaufils said the new espresso makers are selling slightly above the company’s expectations for the second quarter, which ends June 30.

Two-thirds of US adults say they drank coffee in the past day — the highest rate in more than two decades, according to the National Coffee Association. Coffee consumption on a past-day basis has jumped 37% since 2004, with the latest increase coming from people older than age 25.

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