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This platform plan awakens the new Henkel imagination

There was no longer room for Bruno Piacenza on the board stage in the new Henkel research center on Tuesday: the outgoing head of the Persil division was no longer invited to the detailed presentation of the new strategy to capital market experts on Tuesday.

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This platform plan awakens the new Henkel imagination

There was no longer room for Bruno Piacenza on the board stage in the new Henkel research center on Tuesday: the outgoing head of the Persil division was no longer invited to the detailed presentation of the new strategy to capital market experts on Tuesday.

Wolfgang König was all the more present. In addition to the cosmetics division, the 50-year-old will also take over the management of the detergents department from next month. Piacenza's post becomes redundant.

König left no doubt: For the manager, who came to Henkel from the US group Kellogg a year ago, the merger of the two divisions is a matter of course.

Two division heads, two global research and production networks, two sales organizations for products that ultimately ended up in the same supermarket: "You will hardly find any other consumer goods manufacturer that affords such a luxury as Henkel has done so far," König fumed - just like that, as if his CEO Carsten Knobel hasn't been with the group for 27 years, including a decade on the board.

Former CFO Knobel has been at the top since the beginning of 2020. He is supposed to solve a problem for the Henkel family: the group has been steadily losing profitability since 2019.

As the main shareholder of the Düsseldorf Dax group, the family is used to steadily increasing dividends. If this is to remain the case, something has to change as soon as possible.

The smallest of the three divisions in particular depresses the result. While Henkel sees itself as the clear world market leader in industrial adhesives and can keep up quite well in detergents, the cosmetics division around the hair care brand Schwarzkopf is apparently too small for big profits on a global scale.

Some analysts have therefore long advised the group to leave the business area. In the logic of the stockbrokers, Henkel could focus on the successful adhesives business, which contributes around half to sales of a good 20 billion euros.

But Knobel and the head of the supervisory board, Simone Bagel-Trah, from the founding family, could not bring themselves to take such a radical step. Instead, it should direct the merger of the two consumer divisions.

Knobel's division reorganizer König wants to proceed in two steps: First, he cuts 2,000 jobs worldwide - especially in the offices and in the field service. From the end of 2023, if two Henkel salespeople who advertise Persil and Schwarzkopf separately should no longer meet in the hallways of Walmart or Edeka, he imagined an efficient future with joint sales.

In addition, purchasing should be bundled and a single invoice should go to the customer. That should save half a billion euros a year. In a second step, König also wants to jointly use the 45 factories and 139 logistics locations that have been strictly separate up to now.

There are also similarities in research - for example in the laboratories for wool fibers at Perwoll and for hair at Schwarzkopf. At the same time, König wants to give up sales of up to one billion euros with less profitable products to maintain margins.

As soon as the manager has implemented this corporate restructuring, the spin-off of the cosmetics division, which has been discussed for years, will probably be off the table for good. Ultimately, König will closely interweave the previously independent Schwarzkopf organization with detergents and cleaning agents.

For the shareholders, however, transparency is lost: In the future, the cosmetics result will be lost in a joint consumer division. König could shrink hair care quite inconspicuously – or do without marginal areas of cosmetics such as the toothpaste brand Theramed or the skin cream Diadermine.

In return, König tries to inspire new fantasies. When the conversion work was completed in a few years, the Henkel employees would no longer think in terms of product groups, he promised. Then the Henkel consumer division would be a platform that could also sell completely new product groups.

In this way, the group could also make acquisitions outside of its traditional business areas, König promised. At the beginning of the year, however, Henkel had struck in the old field of hair care: with the hairdressing business of the Japanese brand Shiseido, Schwarzkopf should remain relevant worldwide.

However, the analysts were particularly interested in business in the highly competitive US market, which has been weakening for some time despite the acquisition of brands such as Dial soap and Snuggle fabric softener. "We have to prove in America in the coming years that the merger is the right decision," Knobel demanded from König.

There were also critical questions about the announcement that the company wanted to grow faster than the competition. "How is that supposed to succeed as a market leader in restructuring?" asked Bernstein analyst Bruno Monteyne.

And Deutsche Bank expert Tom Sykes was also skeptical: Spending on research and development is already quite low for the Dax group's proclaimed claim to be a technology leader, he warned against too much savings.

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