Many people complain about offshoring and outsourcing, but not Henkel, the German maker of well-known household products such as Persil detergents and Dial soap. A booming Bangalore is good news for Henkel, because it's an example of how fast-rising incomes in India, China, and other developing regions are creating new markets and helping to offset slow growth in Europe.
Henkel bought Dial Corp. of the U.S. for $2.9 billion last year in part because Henkel CEO Ulrich Lehner sees Dial's product lineup as being well-suited to developing markets. Recently Lehner spoke with BusinessWeek European Regional Editor Jack Ewing about how the company plans to keep on growing. Edited excerpts of their conversation follow:
Q: How are you growing even when Europe isn't?
A: Over the years, we have globalized our company. So while Europe traditionally has been our core market, we have strongly expanded in Eastern Europe and other regions to become less dependent on the West European market.
Now, via the Dial acquisition, 25% of our sales are in the U.S. We do believe that especially due to political change in Germany we will get better growth, but at the same time we are focusing on other growing regions.
Q: How much of a role does Dial play in building sales in developing regions?
A: The Dial acquisition is successful. We have a new CEO, the integration is going well. Dial especially addresses the value-for-money segment. We have recently introduced Dial products [such as bath soaps and laundry detergent] in China and Russia, and so far they are doing well.
Q: In Europe, the growth of private labels and hard discounters has hurt sales of brand-name goods. How are you dealing with that?
A: We have a strong focus on strong brands, and we know innovation based on customer insights is a success formula. We see a slowing growth rate in the private-label business, so we assume based on innovation we will at least be able to keep our market share.
The price difference [between store brands and Henkel brands, which include Persil detergents and Fa bath products in Europe] has to be reasonable, of course. We rely very much on a strong company brand as well. We have brought all products under the identity of Henkel brand. We're very unique in this sense. We started very early, and we really benefit from this.
Q: How optimistic are you that Germany will grow faster if, as expected, a center-right government takes over at the end of the year?
A: The German population is ready for reforms. I am quite optimistic.