Henkel: An HLL in the making? - Views on News from Equitymaster

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Henkel: An HLL in the making?

Aug 30, 2000

Henkel AG, the German consumer products majorsí efforts in India finally seem to be bearing fruit. Its 54% subsidiary Henkel Spic India has recorded profits for the first time in 2000. The companyís earnings were positive, both in the first quarter and the second quarter of FY2000 (the company financial year ends in December). Henkelís strategy was simple. Attain critical mass (read volumes) either by adding brands or acquiring existing ones. As part of this strategy it acquired 'Brisk' from Modern Home Care Products and later bought out Calcutta Chemicals and Detergents India. By virtue of the latter acquisitions, the company now owns Margo, Neem toothpaste, Lavander Dew soap, Moloy sandal soap (all from Calcutta Chemicals) and Chek and Regal brands (from Detergents India). Henkelís portfolio now includes detergent powders, detergent cakes, dishwater products, cleansers, soaps and toiletries.

As a result, the companyís turnover has clocked a compounded annual growth rate (CAGR) of 121% over the past three financial years. And this year, Henkel India has finally recorded the Ďall importantí profits. The company seems to be planning on the lines of the Unilever subsidiary in India, the FMCG giant, Hindustan Lever Limited (HLL). The company has shown HLLís knack of acquisitions. Like HLL it realises the importance distribution muscle. Henkelís distribution reach extends to around 300,000 retail outlets currently and the company plans to significantly add to these numbers. Its presence has been predominantly in south India, but now Henkel has shown signs to go national.

The going will not be easy. At the national level, it has to take on the might of HLL, which is by no means an easy task. Nirma and P&G India will also give it sleepless nights. But judging by its first half results, FY2000 will be a good year for this new kid on the FMCG block.

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