Chief executive Kasper Rorsted is running out of patience.
While business is thriving in Germany, Henkel, a family-owned company and maker of chemicals and cosmetics including brands like Loctite glue and Dial soap, is struggling in the North American market.
Now, armed with a new plan involving new people and old brands, Mr. Rorsted is ready for the United States.
With some of Germany’s biggest household names – from Schwarzkopf shampoo to Persil laundry detergent – he plans to take on Tide and Pantene, high-end brands from the United States made by competitor Procter & Gamble.
So far, only hairdressing salons in the United States and Canada have sold Schwarzkopf, a shampoo which has generated €2 billion in sales worldwide.
Now, regular retailers will also sell the shampoos along with new products, like Schwarzkopf Essence Ultime. An ad campaign featuring model Claudia Schiffer will help.
Her help is needed. In 2014, Henkel sales in Canada and the United States fell by almost 3 percent to €2.9 billion, excluding one-time effects for acquisition and exchange rates. Henkel’s operating profits shrank by 15 percent. The company’s profit margin fell to 14.6 percent from 17 percent.
North America, which contributes 18 percent to overall sales at the company, was the only region in the 75 countries where Henkel operates to lose money.
In the United States, Henkel faces stiff competition and a former manager said problems were developing in the business. In 2013, profits fell by 3.2 percent compared to the previous year.
Henkel’s biggest challenges are price, plus products such as P&G’s Mr. Proper and Head & Shoulders, or Unilever’s Dove soap. Reckitt Benickser, a British company and maker of consumer goods, raised the pressure on price with promotional sales and coupon deals.
There is tough competition among laundry detergents too: P&G has a market share of almost 60 percent with Tide, Gain and Dreft.
Henkel's North America sales have already improved, thanks to its acquisitions of Bergquist, which makes adhesives, and Sexy Hair.
Although experts have called the North American market challenging, Mr. Rorsted is confident.
Since taking up the post of chief executive, he has increased the company’s profit margin from 10 percent to 16 percent, at a similar level to French cosmetics company L’Oréal and the British-Dutch multinational Unilver.
For the United States, Mr. Rorsted’s answer is innovation and a new pricing policy.
New managers will help implement this strategy and changes have been made right at the top.
In December 2014, the former head of North America, Norbert Koll, left the company to take early retirement. His successor is Jens-Martin Schärzler, a manager who has worked at Henkel for the past 25 years. There are other new marketing and sales positions too.
Mr. Rorsted is also keen to hire more managers from the United States as they know the market better than expats – though Henkel’s new head of North America comes from Germany. But as an employer too, Henkel’s reputation and visibility in North America has been lower than competitors such as P&G or Unilever which dominate in best workplace rankings and job market exposure.
To gain market share in the United States market for detergents, Henkel has launched its premium brand Persil exclusively in over 4,000 Walmart retail markets. The move aims to take on P&G’s Tide products, which presently have a market share of 40 percent.
Henkel is also launching innovative products like its Purey Power Shot, a liquid soap with a smart dosage cap.
Henkel’s North America sales have already improved, thanks to its acquisitions of Bergquist, which makes adhesives, and Sexy Hair, Kenra and Alterna, all hair care companies. These purchases helped Henkel raise its first-quarter sales to €885 million from €670 million, in 2015.
The company has also achieved organic growth of 2.4 percent. Now, Mr. Rorsted wants to raise Henkel’s operating profit margin in the United States to 16 percent, the same level as the company as a whole.
Henkel’s competitors are not about to give up without a fight.
P&G has decided to drop 100 of its brands, to focus on the 60 strongest – including Pantene and Head & Shoulders.
There is more to be done, Mr. Rorsted said. “We’ve seen some success during the first quarter. We know there’s hard work ahead.”
This story first appeared in Wirtschaftswoche. To contact the author: Mario.firstname.lastname@example.org