Panasonic puts its energy into Europe

Succeeding in Europe means you can succeed globally, the head of the Japanese firm’s European arm tells IAN CAMPBELL

WHEN LAURENT Abadie took over as chairman and chief executive of Panasonic Europe in 2009, he became the first non-Japanese director to take up the role in the company’s history.

For the Frenchman, it was recognition of his achievements in his home country but also an acknowledgement that the Japanese company needed someone with a local mindset to navigate the increasingly tricky business of selling consumer electronics.

“The headquarters was open to change. My role is to make a bridge between what the customer needs and what we developed in Japan,” he says. “There is a perception that if we succeed in Europe we can succeed globally because Europe is so diverse.”

So far so good. Panasonic is ranked third among consumer electronics companies in Europe and its market share has risen from 7 to 10 per cent in three years, the last two of which have been under Abadie’s stewardship.

But it has not all been plain sailing.

Heading up a Japanese company, Abadie was caught up in the human tragedy of the March earthquake. The business ramifications are still being felt and it took until last month for Panasonic to get back to full production – four of its factories were in the region hit by the quake. But the cost to the company has been much smaller than first feared.

“The biggest issue was around the supply chain and keeping the power on. The demand for energy was greater than the supply, but overall the impact has not been as bad as we thought it would be,” says Abadie.

Operating profits fell by 10 per cent, much less than feared.

Other challenges are less likely to go away. The disruptive effect of the internet on the film and music industries, along with Apple’s impact on the way people access content, means consumer electronics companies like Panasonic are no longer the sole gatekeepers of home entertainment.

Blu-ray players are a case in point. Sales are growing slowly but the DVD replacement is still to achieve must-have status in the minds of consumers, despite having been around for five years and delivering the best playback picture that money can buy.

Has it suffered at the hands of streaming digital media, which has done away with the need for physical discs? “Blu-ray is the most effective media for high-capacity storage. Not everything can be streamed and you need very fast broadband, which is not always possible,” says Abadie.

Abadie is similarly enthused about the prospects for 3DTV despite recent reports that 3D cinema blockbusters such as the latest Pirates of the Caribbean film are not attracting the audiences that were expected.

“It’s true that, since the success of Avatar, there hasn’t been as much strong film content, but there are still strong drivers such as gaming and sporting events,” says Abadie. “3DTV sales have met our expectations because consumers are looking ahead and want to get the best technologies. If you want to future-proof your set for the next seven years, then 3D is necessary.”

More than half of all new Panasonic TVs are 3D-enabled, with screen sizes starting at 37in. As happened with HD (high-definition) TV, 3D is bundled with more sets at less of a premium. Consumers end up buying the technology whether they use it or not.

Panasonic is also playing its part in the new wave of internet-enabled TV, where an ethernet connection allows access to web content. Like most manufacturers, it offers a “walled garden” with its Viera Cast range, which features pre-installed links to websites such as YouTube and Facebook. Skype is also available, allowing people to use their TVs to make video calls – after they shell out for the webcam.

Abadie says there are no plans to open up access to the entire web. “A TV is not a PC, it’s a larger screen in your living room where the picture is expected to be better . . . Other manufacturers have tried open services and it hasn’t worked out yet.

A spectacular success for Panasonic has been its compact digital cameras, a market it only entered a decade ago and which it now leads in Europe, where its Lumix range is a consistent best-seller.

Building on this success, the company developed a compact camera system with Olympus in 2008, having identified a gap in the market.

“A few years ago, there was the compact and the digital SLR, two totally separate worlds with very different type of products,” says Abadie. “Our consumer research showed consumers would like to take high-quality pictures but weren’t prepared to carry around heavyweight cameras with large lenses.”

The compact camera system was born, a hybrid that combines portability with the option of changing lenses. The technology created a new market segment that Panasonic leads with a 38 per cent share.

Smartphones packing 12-megapixel cameras have had little impact on the compact market, according to Abadie. “We still saw a 2 per cent increase in compact camera sales in Europe where consumers like high optical zooms, something smartphones can’t compete with.”

Success in digital photography has not, however, persuaded Panasonic to step into the realm of heavyweight DSLRs dominated by Nikon and Canon. “We have no plans to pursue the high end. We want to cultivate and grow this new market,” he says.

In terms of opportunities, Panasonic is banking on green technology. “Our target is homes with zero CO2 emissions,” says Abadie.

From fuel cells and solar-power generators to storage batteries and energy management gateways, the plan is to create autonomous, sustainable homes. A radical new direction for a consumer electronics company, it is also central to how Panasonic sees its future.

“By 2018, when Panasonic will be celebrating its 100th birthday, we want green technology to account for 30 per cent of our business. At the moment it is 1 to 2 per cent,” says Abadie. “We are entering an era where energy solutions are becoming more and more important. Our products will fit very well with this change.”