Mumbai: When the Dusseldorf, Germany-headquar-tered Henkel AG and Co. KGaA sold its 50.97% stake in loss-making Henkel India Ltd, better known for its Pril detergents, to Jyothy Laboratories Ltd in May, many thought the German company had given up on India.
On the contrary, the decision to exit from Henkel India was to focus on its bigger and stronger businesses of cosmetics and toiletries, Jeremy Hunter, president of Henkel Adhesives Technologies India Pvt. Ltd, said in an interview.
Hunter, who was president of Henkel in Australia and New Zealand before this assignment, relocated to Mumbai in July to take up the post that the company created after consolidating its cosmetics, toileteries and adhesives business.
For the €15 billion (Rs 96,750 crore) Henkel AG, adhesives account for nearly half of total sales, while detergents, home care, cosmetics and toiletries constitute the rest. Edited excerpts:
Why did you exit from detergents and home care?
It’s a tailored approach. In the market that I came from (Australia), we did not have adhesives at all. In this market, we have decided that the future is adhesives. Besides, there is an opportunity in the professional haircare segment.
Henkel has been in India since 1987, but nobody has heard about us. Our customers know us, but the general public doesn’t. With the sale of Henkel India Ltd, the detergents and home care business, people thought Henkel is giving up on India, but it’s actually the exact opposite.
We are focusing on our core competencies and businesses where we can really make a difference in this market. Our adhesive business is historically bigger and stronger than our consumer business in India, and we are growing very fast and continue to have ambitious plans.
Tell us about the ongoing consolidation.
The consolidation is part of a plan to drive the business to another level.
The business in India had four entities—two joint ventures (JVs) and two wholly owned subsidiaries. We have now trimmed down to three legal entities—with two JVs and one wholly owned subsidiary.
Schwarzkopf (haircare) is part of the adhesives technologies business, but it is based out of Chennai.
What we do globally is we share our resources—human resources, finances, supply chain, purchases, IT (information technology)—among the business units. In India, we had been operating to a large extent as stand-alone units; what we are now trying to do is combine that and use a shared services system.
Isn’t it rather late to focus on the Indian market?
We have a very strong and growing business in India.
Henkel is globally focusing a lot more on emerging markets, and in order to take our business to the next level, we have to do the consolidation. There is a greater strength if we combine rather than grow and develop separately.
The focus on the emerging markets has been happening for the last five years. We are very strong in Europe and North America. If we want to fuel future growth, we have to invest in emerging markets, which account for 40% of the overall business. We have got strong positions in all of the Bric (Brazil, Russia, India and China) countries, and India is to a large extent the last piece of Bric. We now thought that if we put some attention on India, then we can even grow faster.
We are a bit cagey about disclosing individual business revenues, but the range of the business in India is in between €150 million and €300 million.
What do you expect from India?
It’s still very early days. It has just been two months for me here, but there are some very promising signs. India should become a very strong No. 2, behind China in Asia-Pacific, in the next two years. The current ranking is: China, Japan and India. This will be possible as we grow at 20% per annum and develop this business.
What are the challenges?
The short-term challenge is raw material prices, which are putting huge pressure on us not only in terms of input costs, but also in terms of supply. The costs have been up by 5-50%. There is a global shortage of several materials at the moment.
The short-term challenge is trying to recoup costs through price increases and raw material substitution.
The longer-term challenge for our business will be in terms of ensuring that we have appropriate production capacity to meet the requirements of the future. We need to plan production capacities three-five years in advance.
How much do you want to investment in India?
It’s a little bit early to say. But as an analogy, we have just broken ground on the world’s biggest adhesives factory in China. It gives you a signal on what’s possible here.
We currently have 10 manufacturing plants here. We have made significant investments this year and will do so next year as well.
Any plan to have a research and development (R&D) centre here?
Historically, our research and development is largely done from Germany and partly in Japan and the US. There is a reasonably large investment in China at the moment, and this will happen in India as well.
This will be a two-pronged process. The R&D will address immediate Indian issues like the requirements for Tata Nano will be different from say the Hummer in the US. However, in the future, whatever problems we solve here for our customers, they may be exportable and the research and development will have a lot more spin-off.
Will you get into new businesses here?
We don’t have a concrete plan for that at this stage. One of the exciting things of our business is that it’s changing all the time. We have an automotive business, packaging business, and so on. There are segments emerging that were not there three-four years ago, like hand-held devices, consumer electronics, alternative energy. The business is shifting all the time, and we have to react to whatever trends are developing.