Henkel to Expand Beauty Care Business in Smaller Chinese Cities

Henkel AG, the German maker of adhesives and Soft Scrub cleaners, plans to step up expansion in China as the company pushes to sell hair and skin care products in smaller cities outside Beijing and Shanghai.

The company will invest “heavily” to lift the proportion of China sales at its consumer business to 30 percent from the current 20 percent, Chief Executive Officer Kasper Rorsted said in an interview today. Adhesives account for 80 percent of the company’s China revenue, he said.

“Beauty care is where we are expanding,” Rorsted said at the World Economic Forum in Dalian, China. Henkel will expand its professional range of hair products, including colorants, which it’s mainly selling in the bigger cities, he said.

The Dusseldorf-based maker of Loctite glue and Persil detergent is diversifying operations as consumers in western Europe hold back spending. Henkel’s plan for China would allow the company to expand in a beauty and personal-care market that may grow 8.8 percent to $34.8 billion this year, according to estimates by London-based researcher Euromonitor.

“We are very convinced emerging markets will continue to drive growth over the next many years to come,” Rorsted said.

Henkel has a target of increasing revenue to 20 billion euros ($27 billion) in 2016 from 16.5 billion euros last year, with half its sales coming from markets including Latin America or the Asia-Pacific region.

Growth Market

Henkel has “double-digit growth rates” in China, which is the company’s largest market behind the U.S. and Germany and will become its “primary growth market,” Rosted said.

Henkel fell 0.3 percent to 73.50 euros in Frankfurt trading yesterday. The shares have gained 18 percent this year.

The company, which sells Schwarzkopf shampoos and Fa soap and deodorant in China, on Aug. 8 reported second-quarter earnings that beat analyst estimates, helped by demand for its laundry and home-care products in emerging markets. Earnings before interest and taxes excluding one-time gains or costs rose 8.2 percent to 660 million euros.

About half of Henkel’s global sales come from its adhesives. Laundry and household brands such as Purex and Dial make up another 28 percent, with the remaining 22 percent coming from cosmetics and toiletries.

To contact Bloomberg News staff for this story: Liza Lin in Shanghai at llin15@bloomberg.net

To contact the editor responsible for this story: Stephanie Wong at swong139@bloomberg.net

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