CEO Carsten Knobel should sell the cosmetics business

Carsten Knobel

The Henkel boss is reorganizing the company.

(Photo: Henkel)

What were those times. For years, Henkel has achieved stable EBIT margins of 15 percent and more with its cosmetics brands such as Schwarzkopf and Fa. But they have been falling for years and, at 9.5 percent, are no longer in double digits in the latest annual report.

CEO Carsten Knobel explains this with rising raw material costs. But competitors like L’Oréal and Unilever are also suffering from this – and their cosmetics are significantly more profitable.

Henkel’s mass brands in the body care sector obviously no longer have any expansion potential, despite increasing marketing funds. The company has failed to buy or develop its own high-growth luxury brands or high-end skin creams. Such products reach a clientele that also buys during the crisis.

With the hair care brand Wella, a substantial acquisition could have been made in 2020, but Knobel got out of the bidding race. Analysts have long recommended selling the entire cosmetics business. But the family, which still owns large shares, wants to hold on to the traditional business.

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At least Knobel sells individual poorly performing brands. Still, for a corporate connoisseur, the area is “too big to die but too small to grow.”

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Knobel now wants to merge the ailing cosmetics with the more successful cleaning and detergent business and its strong brands Persil and Pril into one large unit. He hopes for synergies, easier-to-implement acquisitions and increasing profitability.

Analysts are skeptical, some even believe that cosmetics will disappear under the guise of the new “Consumer Brands” division. “By no means” is this the case, says Knobel.

However, the cosmetics margin will no longer be clearly visible in the next balance sheet. Only the weak 9.5 percent can be seen in the history books of the group.

More: Own online shops are rarely profitable – why the cosmetics giants still rely on them

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