Juiced up

New technology has pushed consumer demand for diversity in power sources. The battery industry has responded in a big - and tiny - way.

February 29, 2004|By LORRAINE MIRABELLA

Life was once simple behind the counter at the Battery Warehouse. There were batteries for cars, boats, motorcycles and flashlights. That was about it.

But that was before the advent of the laptop and the cellular telephone and before consumers relied on batteries to power pagers and camcorders and cordless phones and way before they bought batteries for MP3 music players and PDAs.

Today, the stores stock 83 batteries for cell phones alone, 55 varieties for cordless phones, and an assortment of rechargeable and disposable types for alarm system backups, portable DVDS, digital cameras and countless other electronic toys.

"It's become a lot more complicated," said Michael Spear, controller of Battery Warehouse, a Baltimore-based retailer with eight Maryland stores.

Americans are spending more than ever on more types of batteries to power everything from watches to hybrid cars - and there's no end in sight. The average U.S. household uses 28 battery-powered devices, according to maker Duracell. And that number is growing.

"Everyone wants electricity without a cord," said Norm England, president and chief executive officer of the Portable Rechargeable Battery Association, a trade group representing the rechargeable battery industry and companies that make products powered by those batteries. "So many things have gone cordless in the last 10 years that weren't that way before."

Battery sales are growing at a rate of 5 percent to 6 percent a year, with worldwide sales in 2003 totaling $5.17 billion for the top three battery makers - Energizer Holdings Inc., Duracell, a division of the Gillette Co., and Rayovac Corp.

Market research firm Euromonitor International projects U.S. battery sales will be $2.9 billion this year.

Even though the battery market is dominated by a few manufacturers, competitive pressures are intense, experts said.

"We do see continued growth per unit because of more gadgets being developed every year; it's a consistent growth category," said Bill Steele, a household products analyst for Banc of America Securities in Ashland, Ore. "But because of the competitive nature, the dollar growth hasn't been nearly as strong as the unit volume. For the most part, margins have been under pressure for the better part of three or four years."

Within categories of batteries, rechargeables are growing fastest, driven by sales of cordless vacuums, power drills, walk phones and notebook computers. Since the early 1990s, sales of rechargeable batteries have averaged nearly double-digit annual growth, the battery association says.

Take the popular AA batteries. Consumers are still spending more on disposables - $604 million worth sold last year in grocery stores, drugstores and mass merchants - compared with rechargeables, which had sales of $11.6 million for the year, according to A.C. Neilson. But sales of the disposable AAs fell 8.21 percent, compared with a 20 percent rise in sales of AA rechargeables, made of nickel metal hydride.

"What's driving the market right now happens to be the proliferation of portable digital electronics for today's consumers," said Christine Denning, a marketing specialist at Panasonic. "This has made it very important for battery manufacturers to ensure they are delivering the highest capacity power in the products to meet the demands of these gas-guzzling products."

Rechargeable batteries keep getting more powerful and are being used more and more - in compact disc and MP3 players, remote control toys, voice recorders, PDAs and other devices that require consistent, heavy power. One of the biggest areas of growth has been in digital still cameras, as manufacturers make them more compact and increasingly design them for use with rechargeable batteries.

"As these cameras become more affordable, you see a greater number of people being able to purchase them, and they are learning that the cameras eat up batteries due to all of the features," Denning said.

Rechargables, she said, "are really here to stay."

They're also expected to play a big part in one of the hottest new automobile technologies - hybrid cars. Hybrids, such as the Toyota Prius, combine a gas engine with an electric motor that is charged by a stack of nickel metal hydride batteries.

But overall, rechargeable batteries are getting smaller as cameras, cell phones and other products become more and more compact. And as the batteries get smaller and lighter, they've also become more powerful, England said. That's thanks in part to a movement toward lithium ion and lithium polymer batteries, two similar technologies that decrease battery size but increase power and run times.

"Batteries are becoming smaller because the product manufacturers are making the products smaller," he said. "In the late '80s, cell phones ... were as big as the cordless phones in your house. When they originally came out they had lead acid batteries so they were big. Now the phones are so small you lose them in your purse."

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