Henkel Launches Strategic Framework for Growth
SYDNEY, Australia - Henkel has introduced its new strategic framework for the future. The main elements of this framework are its portfolio, a competitive edge in the areas of innovation, sustainability, digital and future-ready operating models, and a collaborative culture and empowered people.
"At Henkel, we are building on a strong foundation for the future: strong brands and innovative technologies, attractive businesses with many leading market positions around the world, a highly dedicated team as well as an excellent balance sheet with high cash generation capabilities," said Carsten Knobel, Chief Executive Officer of Henkel.
A key element of the future direction is active portfolio management. Henkel has identified brands and categories with a total sales volume of more than one billion euros, predominantly in its consumer businesses, of which around 50% are marked to be divested or discontinued by 2021.
The company announced that mergers and acquisitions would remain an integral part of its strategy. The key criteria for acquisitions are availability, strategic fit and financial attractiveness of potential targets. Henkel will utilize its strong balance sheet to pursue high-impact acquisitions. While the company aims to expand its technology leadership in adhesive technologies with acquisitions, Henkel will focus in its consumer businesses on leading country and category positions as well as on "white spots" and new business models.
In order to further strengthen its competitive edge, Henkel will focus on accelerating impactful innovations, boosting sustainability as a differentiating factor, and transforming digital into a customer and consumer value creator. Henkel aims to accelerate innovations, supported by increased investments. This will include an enhanced innovation approach, for example by expanding the use of digital tools and data for faster and better insights.
While it will also push decision making in the organization closer to the market and leverage the potential of open innovation and idea crowdsourcing, Henkel will also scale its agile approaches and continue to invest in incubators and innovation centers. This will allow the development of innovations in all three business units.
Innovations and brands will be supported with consistent investments in core categories and regions. Therefore, Henkel is committed to further step up growth investments in advertising, digital and IT by €350 million compared to 2018.
Building on its track record and further progress towards its targets for 2020 and beyond, Henkel also aims to strengthen sustainability as a competitive differentiator.
The company has defined the next milestones for three key topics.
On the way to becoming climate-positive by 2040, the company plans to reduce the carbon footprint of its production by 65 percent and save 100 million tons CO2 together with its consumers, customers and suppliers by 2025.
Working towards a circular economy and zero plastic waste in the environment, Henkel has defined ambitious packaging targets for 2025: 100 percent of Henkel's packaging will be recyclable or reusable, and the company aims to reduce fossil-based virgin plastics in its consumer product packaging by 50 percent.
Henkel also wants to enhance its positive social impact on communities — through 100 percent responsible sourcing, by leveraging its more than 50,000 employees and by helping to improve 20 million lives globally by 2025.
Sustainability will be firmly anchored in all activities. By establishing sustainability as a central pillar in their innovation strategies, the consumer businesses Beauty Care and Laundry & Home Care will advance their product portfolios with a particular focus on sustainable packaging solutions and the further rollout of brands with purpose.
Going forward, Henkel aims to transform Digital into a customer and consumer value creator. Henkel wants to boost 1:1 engagement and digital sales in the consumer businesses by expanding existing and establishing new digital platforms for direct consumer relationships. The end-to-end customer-centric digitalization in the industrial businesses will be driven to generate new business and to further digitalize customer experience across all touch points.
In addition, Henkel will further pursue its end-to-end data integration. This shall enable the company, for instance, to create AI-driven innovative and customized solutions. Henkel will also invest in digital talent, especially data scientists and engineers with future capabilities and deep technological industry expertise.
Finally, Henkel wants to enable digital business focus and efficiency. Henkel will completely reorganize its digital setup, establishing a new digital structure called Digital Business. Henkel has established a new CDIO (Chief Digital and Information Officer) position at the end of last year. Digital and IT teams across Henkel will now be combined under the leadership of the CDIO who will directly report to the CEO.
Henkel's new Digital Business is built on two pillars: Business Technology, which is a vehicle to drive efficiency across the value chain through continuously optimizing business processes and IT systems; and Henkel Digital, a new dedicated unit for market-oriented incubation and innovation. Under this roof, Henkel is planning to establish digital innovation hubs in Berlin, Silicon Valley and Asia.
Henkel is reshaping its operating models across the entire company to be lean, fast and simple and to continuously improve the competitiveness of its processes and structures. The company aspires to intensify its efforts to enable new business models, to step up customer and consumer proximity with faster decision-making and continuously increase efficiency.
A strong culture, shared values and a clear framework for collaborating as one team are key for Henkel's future success. As a first step, Henkel introduced new Leadership Commitments to all employees globally in 2019. Henkel plans to accelerate this cultural journey with these commitments at the core and will foster a culture of collaboration and empowerment, upskill its employees on future capabilities and enable its people to grow and develop.