Why some companies are building refrigeration systems for homes
The new refrigeration market has emerged in recent years and has attracted some of the world’s largest manufacturers, including Siemens AG, which has built refrigeration units for more than 200 million homes.
While some of those units are made for homes, many of the smaller companies are developing refrigeration devices for a broader clientele, including businesses.
That’s because the systems aren’t typically designed to handle large volumes of air, and some require smaller refrigeration pumps to pump out air as well.
It also has allowed some smaller companies to focus on lower-cost refrigeration products, which is a trend that will continue, said Richard L. Brown, an analyst at Forrester Research.
In some cases, he said, the smaller-scale units are already on the market.
“It’s kind of like the ’90s,” he said.
“You can build anything that’s in your backyard.”
Some companies have already made significant investments in this space, such as Nest and IBM, said Mike Rizzo, an executive vice president at The Rizzos Group, a market research firm.
For example, the company that makes the Rizzoscopes, the Nest Protect and Protect 3 refrigerators, has invested $6 billion in its research arm.
Forreter has estimated that about 1.5 million homes are using the refrigeration technology and that the average size of a refrigeration unit in the U.S. has gone from 1.3 cubic feet to 2.5 cubic feet.
“If you take the unit that was sold last year and you put it in your house today, that is almost 5,000 square feet,” Brown said.
That number includes the space taken up by the air conditioner, air compressor and fan.
That makes it possible for some companies to get out into the market and build systems that are much more efficient and economical than their larger-scale counterparts.
One of the reasons that smaller companies have focused on refrigeration is that it’s not as difficult to build as large ones, Rizzolos said.
For the most part, the equipment is relatively inexpensive.
There are some costs associated with manufacturing it, including the cost of a cooling system, but for the most parts, the system is much cheaper, said Joe McDaniel, an energy analyst with Forrecer.
“In the small business segment, the average cost is just $200,” McDaniel said.
Some of the largest companies have gone after other segments, including food and beverage, which includes a number of specialty products such as yogurt and milk.
For those markets, the trend of building larger units is a way for the larger companies to gain an edge over smaller ones, said Chris Mancuso, a senior vice president for research at Forrst.
That strategy also is helping smaller companies make money, which could also help their bottom line, Mancoso said.
A large part of the reason that some companies have decided to build systems for businesses is because it allows them to be cheaper, McDaniel noted.
“They are selling for less than they would be selling for their competitors,” he added.
“That allows them, if they want to, to build something smaller and cost less.”
But, for some small businesses, that’s not a viable option.
“The system is expensive,” said Rizzow, the Rizoscopes’ vice president of research.
“We are not doing that, because we are making more than $100 per unit, and there is no upside to it.”
And that’s because there is a market for those smaller refrigerating units, he added, which might not be the case in other segments.
“When you go to a smaller company and you say, ‘I want a $100 unit,’ they say, `No, I want a unit that’s $2,000, $3,000,'” Rizzowski said.
To some, it’s a matter of economics.
“I’m a little bit disappointed in the small businesses,” said Mark C. Smith, the chief executive of Green Machine International.
“There is a lot of money to be made by these larger companies.”
And, he noted, for the smaller businesses, the new equipment is often the only thing they can afford.
“Even for a home, you can’t get more expensive,” Smith said.