Lighting companies have a negative incentive to sell compact fluorescents

Wal-Mart recently announced a marketing push to encourage consumers to install energy-saving compact fluorescent bulbs ("CFs") to replace old-fashioned incandescents. Wal-Mart's sales target for 2007 is 100 million bulbs, compared to 40 million sold in the twelve months through August 2006. And we're gonna need the help, because the profit incentive for the lighting companies is to keep CFs a niche product and continue to sell large volumes of incandescents.

Why? Despite their overwhelming environmental benefits (CFs use 75% less electricity), each compact fluorescent sold costs the lighting company $0.29 of profit compared to selling incandescents. CFs have a higher sale price, but last eight times as long as an incandescent. Wal-Mart reaching its goal of 100 million CFs sold could cost General Electric, the largest lighting manufacturer, $10.5 million in lost profit--and that doesn't anticipate the further cost reductions in CF's that Wal-Mart will ask for. Please download my analysis and make your own assessment. You're welcome to point out errors, suggest changes or replace assumptions with data.

So, we'll have to see if the lighting manufacturers are a willing participant in this experiment--or a reluctant one--and if that has any bearing on Wal-Mart reaching its goal.

(Picture from ievaG via stock.xchng)

environment, marketing, lighting, innovation