Recently, according to multiple media reports, Henkel has commenced the second phase of its restructuring plan, which involves closing some production facilities, optimizing production, procurement, logistics, and warehousing operations, and further reducing its workforce.
It is worth mentioning that as early as 2022, Henkel initiated the first phase of its restructuring plan, during which the group globally eliminated approximately 2,000 positions. This restructuring plan, dubbed by the media as the “largest restructuring plan in Henkel’s history,” is expected to conclude by the end of 2026. Judging from Henkel’s recent performance, the outcomes of its restructuring efforts are already beginning to show.
Henkel launches its largest-ever restructuring plan, layoffs to continue
Recently, Henkel’s CEO, Carsten Knobel, stated in an interview with foreign media that Henkel is entering the second phase of its restructuring plan. “We aim to optimize production, procurement, logistics, and storage,” said Carsten Knobel. “Warehouses and production facilities will definitely be phased out, leading to job cuts.” However, Carsten Knobel did not disclose how many jobs would be cut in the second phase of the restructuring plan or which factories would be affected by closures. He emphasized, “No factories will be closed in Germany.”
It is reported that as early as 2022, Henkel initiated this restructuring plan. In May of that year, Henkel globally laid off around 2,000 employees, including approximately 300 in Germany. Henkel had previously stated that the 1,000 job cuts as part of the first phase of the restructuring would save the company €275 million annually.
Public information reveals that Henkel, founded in 1876, has two main business pillars: adhesives and consumer goods. In the consumer goods sector, Henkel particularly focuses on detergents, cleaning products, and hair care products, owning well-known brands such as Persil, Schwarzkopf, and Fa.
Henkel stated that this restructuring involves merging the original detergents and home care business with the struggling cosmetics/toiletries business into the Consumer Brands division. The aim is to reduce costs while making the business stronger. Reports indicate that “since the implementation of this restructuring plan, Henkel has discontinued or sold brands worth €650 million, with these brands either having slim profits or poor growth prospects.” Some media outlets have described this restructuring plan as the largest in Henkel’s history.
“The second phase of the restructuring plan is now underway,” Carsten Knobel recently stated in an interview with the media. “Our restructuring is still ongoing, and if likened to a football match, we are currently in the 37th minute of the game.”
Henkel stated, “The company aims to save €525 million through the integration of the two phases of restructuring, and all restructuring plans will be fully implemented by the end of 2026.”
Progress evident, Henkel raises full-year performance expectations
In fact, the above-mentioned restructuring strategy that Henkel has been implementing for over 2 years is now showing initial results. This can be seen from the group’s recent performance in recent years.
Firstly, looking at the financial report for 2023, Henkel achieved sales of €21.514 billion, a nominal decrease of 3.9% compared to the previous year; adjusted operating profit was €2.011 billion, an increase of 11.1% year-on-year; and net profit was €1.34 billion, a 6.9% increase year-on-year.
Henkel stated that the nominal decrease in sales was mainly due to foreign exchange factors and the divestment of business activities in Russia. “Despite a slight decline in volume, prices increased by a high single-digit percentage. This drove strong organic sales growth of 4.2% for the full year.” Previously, when announcing the 2022 financial report, Henkel had forecast organic sales growth for 2023 to be between 1% and 3%. Therefore, the organic sales growth exceeded expectations.
Looking at the first half of this year, according to Henkel’s recently released 2024 half-year report, the group achieved an organic sales growth of 2.9%, reaching around €10.8 billion. Henkel particularly highlighted that after the negative impact of the divestment of Russian business activities on nominal sales in the previous quarters, the company achieved nominal sales growth again in the second quarter of 2024, with sales of €5.496 billion, a 3.4% increase year-on-year.
Specifically, in the first half of this year, both of Henkel’s two major business divisions saw growth. The Adhesive Technologies business unit achieved a 2% organic sales growth, driven by the mobile and electronic business, as well as the craftsman, construction, and professional business sectors. The Consumer Brands division achieved an impressive 4.3% organic sales growth, with all business areas contributing to this growth.
Regionally, in the first half of this year, apart from a 1.6% decline in organic sales in North America, all other regions saw sales growth or stability. The Asia-Pacific region, including China, achieved a 5.5% organic sales growth in the first half of the year (7.5% growth in the second quarter), the highest growth rate among all regions.
Carsten Knobel also stated in the half-year report, “In the first half of this year, driven by both business units, the group achieved organic sales growth and improved profitability. We successfully merged the consumer goods business, and the implementation of related strategic measures and plans had a very positive impact on sales, gross margins, and profit growth.”
Based on the strong performance in the first half of this year, Henkel raised its profit expectations for the 2024 fiscal year in mid-July. The full-year organic sales growth for the group is expected to be between 2.5% and 4.5% (unchanged), with the Adhesive Technologies business unit expected to see organic sales growth of 2% to 4% and the Consumer Brands division expected to see organic sales growth of 3% to 5%.
Based on the €21.514 billion in sales recorded by Henkel in 2023, the group’s sales for the full year this year are expected to reach between €22.052 billion and €22.452 billion.
Layoffs, Divestments: Global Beauty Industry Undergoes Major Transformation
Of note, Henkel has not only been implementing a large-scale restructuring strategy globally but has also been active in the Chinese market in the first half of this year.
For instance, in January this year, Henkel launched the largest consumer product research and development center in Asia in Shanghai. The center, with a total investment of approximately 100 million RMB, covers an area of over 2,500 square meters. It will continue to enhance Henkel’s local research and development capabilities in the hair care, detergents, and home care categories, laying the foundation for further expanding its research and development capabilities in the future. Following this, in February, Henkel officially announced the acquisition of the Sassoon brand and related hair care business in the Greater China region, continuously driving the development of Henkel China in the consumer brand business. This acquisition was completed in May this year.
Indeed, not only Henkel is constantly seeking change, amidst the backdrop of intense competition and external instability, international beauty giants are all resorting to measures such as layoffs, streamlining organizational structures, and brand adjustments.
For example, recent reports from foreign media indicate that Unilever is working with consulting firms to sell its high-end skincare brands Kate Somerville and REN. Both these brands are high-end skincare brands under the Unilever umbrella and have a presence on platforms like Tmall International and Xiaohongshu.
It is well known that since the appointment of Unilever’s new CEO Alan Jope last October, the group has launched a “Growth Action Plan.” Subsequently, based on this strategy, Unilever has undertaken a series of divestments and layoff measures. Not long ago, Sephora, the cosmetics retailer under the LVMH group, also announced externally that it would lay off around 3% of its 4,000 employees in China, approximately 120 people, with a focus on streamlining headquarters positions. It is understood that this year, giants in the beauty industry’s upstream and downstream sectors such as Estée Lauder, Shiseido, Kenvue, BASF, and Wanhua have all implemented a series of adjustments including layoffs, brand/business restructuring.
However, layoffs and brand adjustments do not necessarily indicate poor company performance. For instance, as mentioned earlier, Henkel has achieved organic sales growth in recent years; and Unilever also recorded a revenue of 31.1 billion euros in the first half of this year, a 2.3% year-on-year increase, with a basic operating profit of 6.1 billion euros, a significant increase of 17.1% year-on-year.
Ultimately, the reason why beauty giants are undergoing transformation is that, against the backdrop of a general global economic downturn, they often have a more sensitive instinct and are therefore quicker to act. Through these transformations, they are taking control of the initiative in their business development, continuously strengthening their competitiveness.
