Henkel has not fully passed higher costs on to consumers, and this year as well price increases will remain limited, Stefan Pichler says. The President Benelux believes that consumers will soon return to strong A-brands from private labels.
Clear choices
Since October last year, the Austrian has been President of Henkel in the Benelux region. He also heads the Henkel Consumer Brands division, which brings together all the group’s consumer activities. “Before that merger, we had three business units: Adhesive Technologies, Laundry & Home Care and Beauty Care. We merged the latter two last year, which made sense given the many similarities: we speak to the same customers and the same consumers. People wash with Persil and use Schwarzkopf shampoo. It is also more efficient for our retail partners, who now have one contact instead of two.”
Henkel is focusing more on categories such as hair, detergents and toilet care, where the multinational has leading positions. “We are clear making choices: we have dropped out of the toothcare category, for example. We are sharper, more focused on targets and categories where we believe we can win.”
Convenience and sustainability
Consumer behaviour currently shows very big differences by category, Pichler says. “In toilet care, we saw a huge boom during the pandemic. It was only logical: people were home more and therefore using their toilets more often. That normalised again after the pandemic. Currently, we are seeing a decline in the market as people are cutting back on luxury products. After all, this is not an essential product.”
Conversly, hair colouring is doing very well at the moment: people are going to the hairdresser a bit less often to save money, so they colour their hair at home. In detergents, there is a trend towards private labels because of inflation, but the trend towards convenience remains unchanged. For instance, pre-dosed detergents, such as capsules, are very successful. Sustainability also remains an important issue for consumers.
Henkel combines these trends in its latest innovations: “We recently launched the Persil Power Bars, small pre-dosed tabs with strong washing performance. The products are very compact and they come in cardboard packaging. As a result, we use 97 % less plastic. A nice combination of convenience and sustainability.”
No greedflation
However, what all sectors have in common is divergent consumer behaviour caused by high inflation, the cost -of-living crisis and reactions to it, with trends such as downtrading and growth for private labels. However, Henkel is not worried: “Yes, everyone is feeling the crisis, but the strongest brands will always remain in the market. That is why we are investing in our brands, in innovation and sustainability. When purchasing power improves again, people will return to their trusted brands. We will succeed in convincing consumers to buy our brands again by investing in communication and in innovation. These are two things that private brands do barely or not at all.”
Accusations about “greedflation” do not stick to the brand manufacturer: “That issue plays more in food than in our categories, I think. If you look at the evolution of commodity prices, energy prices and labour costs in 2020 versus where we are today, you can see that our price increases are far from enough to compensate fully for those cost increases. We have increased prices less than the increase in costs. Our profit margins are under pressure, that is no secret. We have not become richer in the past few years, you can see that in our annual report.”
Strong brands survive
After all, Henkel needs to safeguard its volumes and remain relevant to consumers. “How far can you go? We cannot charge more than what consumers are willing or able to pay. We see a mixed picture by category after the price increases: in luxury categories such as toilet blocks, there is a drop in volumes. In others, such as hair dyes, there is a rise. In a country like Belgium, innovation is still well accepted. Persil Power Bars, for example, are doing very well. Looking at our big flagship brands like Syoss and Schwarzkopf, we see growth despite inflation. Strong brands are surviving.”
Price negotiations always result in hefty discussions, but Pichler maintains Henkel has strong partnerships with all retailers: “It is part of the game, but we will always find each other in the end.” How will costs and prices continue to evolve this year? “I do not think there will be any further price increases this year, but we have to look at how raw materials will continue to evolve: some go down, some go up. Enzymes, which are very important in our detergents, are still rising in cost. Wage costs are also rising, especially in a country like Belgium where wages rise automatically with inflation. Energy prices are now stabilising, but still at a high level. We have to keep an eye on that. I cannot say anything about next year yet.”
Loyal customers
The evolutions in the Belgian retail market are not making things easier for brand manufacturers. “Yes, Belgian retailers are under pressure. The Dutch chains are expanding, the French ones too. And the big e-commerce players continue to grow. Still, I believe that local retail brands with a strong heritage will survive. Companies like Colruyt and Delhaize will find their way, even if they are under pressure now.”
Increased competition is causing increased promotional pressure, as well: “Retailers want to announce strong promotions to be competitive. We have to guard our interests, to keep our business profitable. It is true that promotional pressure has always been high in our categories, as they are commodities.” Detergent is, after all, a destination category and promotions draw people to the shop. “They come because they get a good deal on Persil, and then also buy other things.”
Fortunately for Henkel, its brands have quite loyal customers. “Many people who have always bought Persil, will continue to do so. But of course there are also promotion seekers: they buy whatever is on offer – sometimes powder, sometimes pre-dosed. In washing powder, the most traditional segment that still accounts for 15 to 20 % of the market, buyers are more loyal. In a younger category like pre-dosed, we see the least loyal customers. Brand loyalty is also higher in hair colouring, for example.”
Growth online
Meanwhile, the online channel is also growing – often with big volume discounts for laundry and cleaning products. “That is a different channel for a different customer. We need to be present where the consumers are. If they are buying more online, that is where we need to be. But it is a very different environment, with not only those volume discounts, but also free delivery, convenience, speed…” Henkel will not venture into direct sales, but the company is developing digital services. “On our hair colourings, for example, you will find a QR code that you can scan to simulate how a certain colour would look on you.”
Henkel does not differentiate its offering between offline and online. “We do see that products for sensitive skin sell a bit better online, like Le Chat or Persil Sensitive, which you use for baby clothes. If you have a baby, then you will order a bit more from home, as you have less time to go to the shop. Toilet blocks, on the other hand, do not sell as well online as it is more of an impulse product. You buy it when you come across it in the shop.”
Sustainability over profitability
Sustainability is very important in the categories in which Henkel operates. The company has been publishing a sustainability report since 1991. “We were already doing that when nobody expected companies to do so. It is in our culture, in everything we do. Every innovation, for example, has to be more sustainable than its predecessor in aspects such as energy consumption, water consumption, recyclability…” Pichler points to Henkel’s mission statement: ‘Pioneers at heart for the good of generations’.
“Henkel plans to remain in business for many generations to come. By 2030, all our production sites must be climate-positive. 100 % of our packaging must be recyclable. By 2025, 30 % of our packaging will already consist of recycled plastic. Although that is 30 % more expensive, we will not deviate a millimetre from these sustainability targets, even if it would improve our profitability. We put sustainability before profitability. That is an important message. This is still a family-owned business, with a long-term vision. We are proud of that.”
Case in point: the bottles of the natural care brand Nature Box are made of recycled plastic based on collected waste from collection centres in Haiti and Egypt, among others.
Family-owned business
Henkel employs around 600 people in the Benelux, including the three adhesive technology production sites in Drogenbos (near Brussels), Westerlo (Antwerp) and Scheemda (Groningen). Pichler points to the unique culture within the company.
“I have worked for Henkel in four countries, both in the East and the West, and I have noticed that we have the same values in every country: very inclusive, very respectful, performance-driven but never elbowed. We are competitive, but not against each other. We go for a common goal. People are very approachable and helpful, we are not hierarchical. An intern approaches me in the same way as a sales director. We are a listed global company with more than 50,000 employees, but we are also still a family-owned business, since 146 years, and you feel that.”
