Iriel has been selling electrical fixtures such as light switches and wall sockets from its base near the southern city of Porto Alegre for 40 years. Jeffrey Matthews reports the ways in which the company, now a part of Siemens AG, enhances its high-quality products through its constant innovation.
Iriel is celebrating its 40th anniversary of providing Brazil with well designed, eye-pleasing switches and sockets this year while preparing to launch a new line of products that will keep it a step ahead of its competitors.
The unit of Germany’s Siemens expects to introduce the first members of the new line before the end of this year. The launch will mark the move of high-end products that automate some household equipment from the hotel and shopping centers markets into people’s homes, said Marcio Hernandes, Iriel’s national sales manager.
“Automation is something that’s going to be used more and more,” he said. “By the end of the year we’ll introduce more simple automation products that will be used in homes, and over the next few years we’ll introduce more and more products in this line.”
The plan is to start small, with a series of switches and wall sockets that can work together to switch lights and other simple household appliances on and off. More sophisticated systems will eventually be introduced that can raise or lower household temperatures using air conditioners, and even open and close curtains, all based on a programs that can include “night time” or “home theater,” for example.
“Let’s say you’re at home at 3 pm. and it’s sunny and you want to watch a film,” Hernandes explained. “It might be hot outside. So you switch on a predefined program, which would be ‘home theater,’ and then the curtains close, the lights dim, the air conditioner changes the temperature to whatever you set it on, etc. etc.”
The competition in this market is fierce because switches and plugs are essentially commodities, and to stay ahead of rivals a company has to constantly update its products and offer new colors, designs and other elements to catch customers’ eyes. Iriel introduces a new line about every two years, based on market conditions, Hernandes said.
The most recent launch was in 2007, with the Delta Mondo line sold under the Siemens brand name. Since 2004, when Siemens bought the Canoas-based company, the high-end product line has been sold to Brazilians under the Siemens name, while the intermediate part of the market has been targeted with Iriel-branded offerings.
The Delta line was designed with firm, straight lines to lend the product an innovative and sophisticated look, while offering a wide-ranging and exclusive color palette, all covered with a protective layer of varnish. The surfaces are smooth to make them easier to clean, and all are fabricated with materials to make them strong, resistant and durable.
“Builders demand constant innovation in terms of design and materials,” said Hernandes. “People who are renovating their homes want new designs to go along with their walls, with their furniture, so there’s a constant and natural evolution in this market. If you don’t evolve the competition will kill you.”
Home renovations represent 65 percent of the market for electrical fixtures in Brazil, so reputation and brand names can count a lot when people decide which switches they’re planning to buy.
Iriel benefits both from its own name, which is best known in the South and center-west parts of the country, and from the Siemens name, which is known around the world.
Iriel makes sure that it uses only the best, and safest, materials in its products, while at the same time keeping an eye on the latest color trends. The company’s switches and sockets also meet all the country’s safety regulations. A recent updating of those regulations prompted a complete overhaul of all products to make sure they’re compliant.
“Quality is one of the pillars of the company,” Hernandes said. “Siemens doesn’t sell products that haven’t been tested and proven to meet or surpass all the safety rules. We test constantly, and any problems we detect, we immediately figure out why it’s happening and take actions to fix it. All our suppliers are also high quality, trustworthy companies.”
Iriel’s factory, which employs about 500 people, is in Canoas in the state of Rio Grande do Sul. The plant can produce more than one million pieces per month and makes most of the switches and wall sockets the company sells in Brazil, with a small amount imported from nearby Uruguay. The plant also makes circuit breaker boxes, and the company sells circuit breakers and some other wiring equipment made at Siemens’ plant in Manaus.
The company’s focus on innovation and design means it has to constantly invest in new equipment to make new product lines and train people. Iriel will invest more than one million reais this year, mostly on new equipment, as it gears up to launch its next new line.
Home developers represent about 35 percent of Iriel’s market, and the company maintains excellent relations with builders. The fixtures builders use in their model homes can have a big influence on the choices people make for their own homes, and Iriel works hard to get developers to select its products.
The company has more than 100 salespeople spread throughout Brazil who work closely with builders, and also has a technical group of about 12 people who collaborate with the developers to provide them with all the information they need to be sure they’re making the right choice when they opt for Iriel’s products.
“The technical guys are in contact with the builders; they go to them and help them by making sure they get the materials that they need, at a price that’s attractive,” Hernandes said. “When builders launch a development, they can already know how much they’ll pay for the plugs and switches.”
Iriel makes most of its sales through home centers and construction supply stores, which in Brazil is a much atomized market, with few national chains and many local or regional groups. In this environment, Iriel’s relationship with builders pay dividends over the years, as people start to renovate their homes and go looking for fixtures similar to the ones they already have.
Brazilian customers are particularly picky and conservative like this, and want stores to stock lines of fixtures for a longer time than is necessary in other countries, Hernandes said. This creates additional demand for their products, and has also helped the company open up new sales channels and boost revenue.
“We just have to reach new customers, and through our marketing, through the builders, we created greater demand for our products, and entered into new stores,” said Hernandes. “The consumers asked for us and we got into more stores that way.”
Iriel had a banner year for sales in 2008, with revenue up 30 percent from the previous year. As the economy boomed, the company expanded its distribution around Brazil and gained market share. Iriel is best known in the region around its plant and in the capital region, and has spent recent years moving into new parts of the country.
Sales have been uneven so far this year as the effects of economic turmoil around the world are felt in Brazil. Sales dropped in January and February, partly because of seasonal effects, and have slowly picked up since then, with a return to growth in May. The company is already seeing signs of accelerating sales in the second half of the year, as the economy recovers and people seek out the high-quality products that Iriel is known for, Hernandes said.
“Builders are now signaling that they’re seeing sales returning towards levels from last year,” he said. “They’re selling well again. That’s good news for people like us, who make products for them. It means that in a few months the builders will need to buy more of those products, so we’re expecting a better second half.”