Henkel occupies leading positions in the global market by offering Adhesives, Beauty Care and Laundry & Homecare products and are constantly expanding. Ever since its inception in 1876 in Germany, Henkel has had a one-point agenda, which is to keep people at the center of what they do.
Henkel landed in the GCC in 1998 and has since grown rapidly in the market. The beauty care business of Henkel develops, produces and offers many high-quality products that include hair, body, and oral, which are available in countries across the world.
Henkel Beauty Care stands for consumer products in the fields of hair dye, hairdressing, hair care, body care, skin care and oral care. Beauty Care is active in consumer goods and professional affairs.
Henkel as a key player in its industry, aims to continue to extend the leadership in innovation and sustainability to further increase share.
So now, questions arise, what goes behind the scenes of the more than a century old market leader of beauty products?
What drives them to achieve such perfection in what they do?
Who is leading the show?
We had the opportunity to interact with the very inspiring Irina Eliseeva, General Manager of Henkel’s GCC Beauty Care Retail business. This mother of three believes in mutual inspiration, team work, discipline and balance for success. Irina steadily rose through the ranks at Henkel, from being the Regional Sales Manager in 2006, Divisional Sales Manager from 2006-2007, head of KA department from 2008-2017, and since 2015 Sales Director.
Irina solemnly believes in the atmosphere of trust. She said that it is key to leadership. Here are some of the highlights from the interview we had with her.
1: What is the current Beauty care retail business landscape in the GCC?
The GCC market for most expats, and I was not an exception, seems extremely attractive in terms of both sales and profitability – extremely premium and completely independent of promotional offers. In fact, and apparently due to its attractiveness, this market is highly indulged by the attention of large corporations – manufacturers, therefore the beauty market in the GCC is increasingly sophisticated with an unprecedented number of brands and offers in all price categories, targeting practically every need and it is oversaturated with promotional price offerings.
If we compare the market structure by channel and, in fact, the current Go-To-Market model, then two aspects should be noted:
— The actual structure is so far significantly different from the European market in a number of criteria, for example, market consolidation is much lower, the share of online sales in cosmetic categories is lower than most European countries, not to mention the USA, China or Korea, the share of traditional trade and VAN-selling is still high. While the share of digital sales is growing disproportionately, most consumers still shop in stores – mainly huge hypermarkets or pharmacies. For brands this means the need to be excellent across all channels, from more traditional to new ones.
— At the same time, under the influence of mature markets, the speed of change is striking – the growth of the modern format and online trade, the speed of implementation of digital technologies and artificial intelligence, the growth of the quality of service and convenience for customers in stores and beyond.
With such a speed of change, as well as with the desire of large corporations to invest in the market, the GCC cosmetic market will in the near future become a platform for introducing new approaches and technologies.
And yet, while speaking about the Go-To-Market model, it should be noted that the traditional approach of working with retail prevails – Although we continue to observe drastic changes due to the growing influence of modern format retail chains and online sales channel.
2: In your opinion, what are some disruptive trends that are reshaping the Consumer Goods Industry?
Three trends are shaping the consumer goods industry at large.
First, digital is the channel in which most consumer decisions are shaped now, a clear departure from the past, which has also been accelerated by Covid-19. Significantly growing online, digitalisation and e-commerce are by far the biggest disruptor – consumers now are more online than ever and expect more from brands than just maintaining online presence by being more informative, relatable, trendy, available and play an active role in their life by addressing their needs.
Secondly, millennials and Gen Z are becoming an important consumer group for the FMCG industry. Their appetite for brands that offer both, performance and sustainability, has a significant influence on the industry. We are seeing the rise of a new generation in the GCC that demand more from brands in the area of purpose be it environmental, social or lifestyle. Brands now are expected to play a bigger role in this area, while continue to consistently deliver on product performance promises.
The third trend is the sharp rise of ‘on demand’ from entertainment to services to products as consumers today want their needs to be addressed at the click of a button. This led to the rise of many ‘on demand’ delivery apps such as Talabat and Instashop in the region where any item from a grocery store near you can be delivered in less than 30 minutes, which created an opportunity for brands to engage, connect and offer their products to consumers in a different way.
3: Is shopper behavior becoming more predictable?
With more competition and consumers who are following more influencers, the dynamic in the market was never as intensive as it is right now. Therefore, shopper behavior could hardly be cold predictable. But, definitely, there are more tools out there to help us improve consumer experience by understanding what they want, when likely they will consider a product and make a purchase. Artificial Intelligence has enabled us to better understand and make these connections, but shoppers are human, and human behaviour evolves, changes and develops, and in its own sense, unpredictable. We can surely see patterns, connect them to make conclusions of what the consumers expect, what they aspire to, what are their biggest needs and use all that to develop solutions that fits with what they are looking for. There are also external factors that can completely change shopper behaviour and in no time at all. Take Covid-19 as an example, in a very short period of time it impacted how we choose, shop and even consume products, that a year and a half ago no one would have predicted, and such new behaviour has tested many companies’ processes, agility and speed to respond. The key here is to remain close to our shoppers and update our hypothesis on what we know about them to be able to respond quickly to any changes.
To summarize: trends change faster than ever. This is a huge advantage for companies like Henkel, in its Beauty Care business. We invested a lot of resources in digital leadership earlier than many other companies which allows us to identify trends early and react fast to our consumer needs.
4: How’s Beauty Care at Henkel addressing the new ‘conscious’ and ‘sustainable’ ways of living?
The past year has not been easy in many different areas of life. The pandemic has done its part – environmental, health and safety issues have come to the fore.
Is the business concerned about this issue? Yes … for us at Henkel, this means that we need to make even more efforts to our already implemented sustainable development strategy. This strategy has been adopted and is regularly revised depending on the achievement of the objectives. However, the time has come to cut emissions more intensively, improve energy efficiency and use renewable energy sources.
This is core to our current and future way of doing business. We are pioneers at heart for the good of generations, which is centred around delivering initiatives that will improve the future of our generations. We continuously look at ways and set targets in our product development to reduce or eliminate the environmental impact. One example is the removal of microplastics from our Fa and Pert products which is known to degrade and is eliminated the chance of being deposited into the oceans where it harms marine life. Another example is on our flagship brand, Fa which we have just relaunched with 30% less plastic in our deo sprays, and 14% less plastic on our Fa shower gel bottles with over 94% naturally derived ingredients. We have also recently introduced a new shampoo and conditioner brand to the GCC market called Nature Box that delivers amazing performance with a great element of responsibility. 98% of the content is of natural origin and the body bottle is made of 98% ‘social plastic’ as certified by the plasticbank.com. One other element we are exploring is partnering with our key customers in the region where together develop and support local sustainability and community initiatives that brings benefits directly to local communities. We aim to continue to push in this direction to deliver on our corporate vision.
5: Empowered by digitization, how are small brands and private labels affecting Henkel’s market strategy?
Henkel has always been focused on offering consumers the best possible solutions and experiences. We do this with a multitude of brands and offerings in different segments and addressing different needs. In other words, Henkel’s market strategy is shaped by offering the best possible solutions for consumers. This requires a joint effort of marketing, sales, R&D, and production, to be faster and nimbler than the competition and offer products and innovations that our consumers love. And small brands and private labels help us to change faster, because they can help us be closer to consumers, be more flexible and more efficient in the speed of adaptation to new realities. We often learn from them the speed of decision-making, catch interesting trends and creative ideas.
6: What are the top trends in the Beauty Care retail business today?
When it comes to beauty, consumers expect products to perform. The times where consumers were satisfied with sheer promises are long over. Products need to work and delight the consumers.
7: Are there any noticeable changes in the way beauty care products are purchased and consumed? Is there an increase in the care for beauty?
There are 3 noticeable changes. 1) People engage more these days with brands via reviews and content creators before making a final purchase decision, it’s been suggested that 8 out of 10 shoppers today look for reviews on Google or Amazon before making a purchase decision 2) People are more and more buying products that they can relate to at a higher level than just basic functional need, emotional is important too! 3) People are looking for new, small and unique brands v. big names. These 3 factors have big implications on major brands, where they need to ensure they are constantly delivering satisfactory results, so they are ranked high. In addition, brands need to ensure that their communication is impassioned and delivers a higher benefit order than just functional. Finally, big brands need to ensure maintaining their global status while introducing new and exciting concepts to the market to keep their target audience excited and engaged.
One latest example – during the pandemic, consumers have refocused on self-care and quality of life. This affects all areas of beauty, from how people expect products to feel to the way they shop. Care, especially self-care, is one of the biggest emerging trends.
8: How do you see the future of beauty care?
I think that the future of the cosmetic market will be shaped by several trends: 1) a new generation – young consumers, who’s main demand is personalization. An important challenge for the brand will be to meet these specific needs. A very dramatic change in the reasons why the consumer chooses “his brand”. If earlier the consumer wanted to see an ideal model with luxurious hair, skin, makeup, shape, etc. in the role of a brand ambassador, now an important motivator is the focus on inner beauty, trust in ambassadors “from your environment” – bloggers 2) With younger consumers entering the market, the demand for sustainable beauty and for brands that are exciting and provide a high desirability will increase. Both are areas in which Henkel has particular expertise. My ten-year-old daughter checks cosmetics jars for the absence of animal tests (with Henkel products also 😊), does not go to the circus and zoo because the animals live in captivity and turns off the water while brushing her teeth or washing her hair. Following this trend is no longer a marketing advantage, it is a prerequisite, without which the brand is danger 3) digitalization. If a few years ago we could talk about when to start a digitalization strategy, what percentage of the budget should be in traditional media, and what percentage should be in digital, then the answer to this question now is obvious – it was necessary to start yesterday. Today you are not relevant as a brand to your consumer if you are not on social networks, if you are not online, if you are not sustainable and if you do not meet the needs of the new generation. And for this you need to know what they want – your constantly changing consumer, what are they like? And that’s why tools like big data and artificial intelligence are so important to the manufacturer of products. At Henkel, we actively cooperate in this matter with our retail chains, also actively use such advanced technologies as digital merchandizing and crowdsourcing e.g.
9: Are there going to be more collaborations between companies from the same industry to solve big problems addressing sustainable solutions (be it in packaging, educating, supply chain, or efficiency)?
There is a need to address sustainability further across industries. Every breakthrough on the way is an important step. We are already working closely with our suppliers and customers on developing even more sustainable solutions. Additionally, especially in the beauty industry, it is important to educate consumers. When you look at the total carbon emissions in the lifecycle of a shampoo, the use phase creates the highest outcome. If we can educate consumers to save just a little water every day washing the hair, the combined effect is significant.