Henkel AG, the German manufacturer of Schwarzkopf, Dial and Diadermine products, has reassessed its business model, but it remains difficult to fix, especially in its beauty retail activities.
The Düsseldorf-based company holds the top global ranking in the professional hair care category, but underperforms cohorts of large and dynamic beauty spaces such as L’Oréal, Unilever and Procter & Gamble. .
Henkel is ranked 16th in WWD Beauty Inc’s 2021 Top 100 Global Beauty Manufacturers ranking. The ranking puts the group’s beauty sales down 1.9% against his 2020 and 5.2% against 2019, in which he is estimated to have reached €3.49 billion.
Over the past five years, Henkel’s organic topline beauty has grown by -0.7%. Eva Quiroga, managing director of European consumer staples at Bank of America, said he was up 2.5% in the five years before that, and up 4.8% in the five years before that.
So why does this perpetual downward trajectory continue? And what can be done to reverse the slide?
Henkel is a rare breed — the only top 20 beauty company that does beauty as a minor activity. Of Henkel’s total sales of €20.07 billion in 2021, this category represented only 18%, compared to 48% for adhesives technology and 33% for laundry and home care combined.
Looking back 10 to 15 years ago, Quiroga shed light on the heyday of Henkel’s beauty. Hans Van Bylen was Executive Vice President of Beauty Care when Tina Muller (now Douglas’ CEO) ran the company’s hair care business.
“They were basically innovating, but in a focused way,” says Van Bylen, who has a table in his office, and everything Henkel is launching has to fit on that table. Quiroga said, explaining that he hadn’t.
“This meant that there was a greater focus on bigger ideas,” she said. “He also gave the view that a product doesn’t work if it doesn’t work right away. They were also very smart about marketing. made a big difference.”
Müller launched the Syoss hair care brand in 2008 and 2009, shortly after the financial crisis.
“Syoss resonated incredibly well with German consumers because it was perceived as a professional brand with big bottles and affordable prices. “It was our most successful hair care launch in years. But momentum has slowed since then.”
This is due to increased competition from other players who saw Henkel as a threat, especially in hair care. Muller also left the group.
Henkel has made acquisitions in the professional hair care sector, especially in the US, and has become stronger in this sector. In 2014, he acquired Sexy Hair, Alterna and Kenra, and three years later he acquired Nattura Laboratorios and the North American Hair Professional business from Shiseido.
According to Kline & Co.’s Salon Hair Care Global Series, Henkel ranked second in this category in North America last year, behind L’Oreal, and third globally, behind L’Oreal and Wella.
In February of this year, Henkel announced that it would acquire Shiseido’s professional hair business in the Asia Pacific region. At the time, CEO Carsten Knobel called the deal a “step change” in the company’s professional activities. This is to significantly enhance the Group’s market position in Japan and China, the world’s top two and three professional hair markets and major centers of trends and innovation. In addition, it has the potential to push Henkel to number two in the world in this sector.
Last year, about 70% of Henkel’s beauty sales came from hair care, one-third of which went to professionals and the rest to retail, which includes care, color and styling. About a quarter came from body care such as deodorants, shower gels and soaps, followed by about 5% from oral care.
Geographically, most of Henkel’s business is concentrated in developed markets such as Europe and North America.
According to Klein data, Henkel is ranked 11th in the US market for overall beauty, which includes fragrances, hair care, makeup, skin care and toiletries categories.
Carrie Melage, Klein’s head of beauty and personal care, said, referring to hair care and toiletries, “They play with just two.” Participation in the important beauty space, which most leaders do, etc. They’re not that diverse.”
She pointed out that the top five beauty players are trading in all or nearly all product classes. But even in these two, Henkel leads neither. According to Klein’s rankings, Henkel is her number five in the US hair care and US toiletry markets, and Dial is a force in the personal her cleansing arena.
“But they really struggled with brands last year,” Melage said. and Olay were more skincare-oriented, and Bath & Body Works was another key player that did very well in that space, more fragrant body care. None.”
In contrast, Henkel’s professional hair care business performed well and outperformed the US market. But that was not the case with beauty activism. According to Kline’s Cosmetics and Toiletries USA 2021 program, the country’s overall beauty market grew his 9.5%, while Henkel’s beauty sales, which integrated consumer purchases only, fell his 5.4%.
“While the professional business has performed very well over the last few years, retail has struggled and has consistently underperformed its peers for many years,” Quiroga said.
In late January, Henkel announced plans to combine its laundry, home care and beauty care divisions to form a new consumer brands business, making acquisitions in the consumer goods sector while maintaining non-core brands and activities. will be sold or discontinued.
The company said the new organization, designed to generate more scale, capture synergies and grant greater agility, should be operational by early 2023 at the latest. The group expects leaner structures, faster decision-making, and attractive opportunities.
However, some industry experts believe that merging two underperforming businesses may not be the best solution. Nor will we sell Henkel-owned skin care products such as Diadermine, which is strong in countries such as Germany and France.
“Skincare is clearly structurally the most attractive part of the beauty industry long-term,” said Quiroga.
Mellage agrees, stating:
Skincare is the largest product class, and Henkel doesn’t trade it in.
“There are a lot of opportunities out there,” she said.
