OPI: Arno (Alberty), in your role as director of international key account management, you probably know best what’s been going on internationally at Henkel Consumer Adhesives (HCA) over the past few months. What is the latest in new trends as far as your main brands are concerned?
AA: Well, the new Power Pritt range is a huge success for Henkel on an international basis. And fortunately, it isn’t a substitution for the traditional Pritt Stick range which for us means additional revenues for this new category. This clearly underlines that only real innovation results in added growth and profit for manufacturers as well as for the trade. Listening to consumers’ preferences will always guarantee that their needs are being met.
Recently at Paperworld, we also presented several new developments for correction rollers and tapes. Essentially, HCA aims to make people’s life easier and improve their efficiency in the office.
OPI: And what about HCA on the other side of the pond, Jim (Hawley)? You are in charge of all North American brands and always keep a close eye on developments.
JH: Absolutely. In North America, Duck is our flagship brand which has always represented innovation and value of tape products. Loctite is the flagship brand for adhesives. Both will continue to receive promotional support to drive our customers’ sales and profits.
In Canada meanwhile, and globally for that matter, the Pritt brand is the flagship for glue sticks. Despite heavy price pressures from Asia, the Pritt quality keeps this brand growing in basic categories, and innovation in adhesive technologies from HCA means that products continue to be launched in the market. Much like Arno said, there is no substitute for innovation and quality. A college professor of mine once told me: "Geniuses build brands, fools cut prices."
OPI: Are there any common denominators that apply across the board? You already mentioned Pritt as a global brand.
JH: Yes, Pritt is the brand in Europe that we have just begun supporting more and more in North America. It already has a stronghold in Canada and is now moving more into the US. We plan to support this with strong ad and promo programmess. Duck meanwhile is primarily a North American brand which anchors our tape strategy.
AA: Generally speaking, I think that the overall trends in this industry are about the improvement of efficiencies of office products. HCA is working hard towards creating better applications, improved handling and ergonomics, and towards improving efficiencies around the desk.
And this is the case wherever we are in the world. Our new Comfort correction roller and new tape applications underline our approach and competitive advantage on a worldwide basis.
OPI: How can Henkel make sure that it stays at the forefront of innovation and technology and offers better value than its competitors?
AA: Our first goal is to speed up new innovations and combine this with a high technical entrance barrier. This will allow us to always be one step ahead of plagiarists. Naturally, innovation is key for us. But the entire Henkel experience and the knowledge of being a world market leader for consumer and industrial adhesives, and of course our technology advantage in detergents and cosmetics will all help us keep up the good work.
Henkel also invests heavily in the professional development of its people and that guarantees additional value for the company and its customers.
JH: I agree with Arno. HCA is the largest adhesives company in the world, and while size alone of course is no guarantee for success, some of our competitive advantages are a result of the vast resources that drive quality and innovation above that of the competition. Just look at history: Henkel invented the glue stick in 1969 and recreated the way people used adhesives. This passion for innovation remains as strong as ever.
And now, the Power Pritt Stick and Power Pritt Gel, for example, have once again reinvented the way people glue, by being able to use a stick to glue just about anything to anything.
On the tape side, the new Duck brand Tape Shark product has broken through the hum drum clutter of the boring tape dispenser market. We love the challenge of reinvigorating tired old categories like tape guns with game-changing innovations. Tape Shark is the type of brand position where we have created emotion and memorability in a category which usually isn’t associated with that type of feeling.
OPI: How worried are you about the Asia factor and the abundance of cheap products coming out of the region?
JH: Asia is a topic which is hugely important for just about everyone in just about every industry. Certainly we have felt the pressure of low prices coming out of Asia. But with low pricing come risks. Asia is a developing economy. Growth in the region has been in double-digit figures for many years and the sustainability of such growth is questionable.
Add to this, the fact that the yuan is supported and not floated on global currency markets, creates a potential instability problem. There is more and more pressure to float the yuan which some economists feel is undervalued by as much as 40 per cent. When this happens, and I believe it will, prices in Asia will rise dramatically, growth will slow and the economy will most likely grow at normal levels, which for the long term is a much healthier position to be in.
OPI: Any other thoughts on this Arno?
AA: Well, from a manufacturing point of view new markets like China are a challenge for HCA, of course, but we are also looking for further expansion, revenue and profit growth. Our affiliated companies all over the world enable us to achieve fast market development on a regional and even local basis. Our competitive advantage here is an international multicultural organisation with a worldwide buying power for raw materials.
OPI: Moving on from that, private label is another emotive subject that a company as brand-conscious as Henkel is surely concerned about. What are your views on this Arno?
AA: You are right, own label is one of the biggest challenges for our branded business. It spans all geographical regions and all channels. HCA will keep on investing heavily in new product developments and reduce time to market to meet consumers’ needs. Again, innovation is key for us to keep the competition – especially those producing private label products – at bay.
I’m talking about real innovation with a clear and unique selling proposition. Private label products can never be innovative, because volume is the most interesting issue rather than value. In the end, it always leads to a downgrading of categories, with lower revenues and of course lower profits for all concerned. Private label jeopardises entire categories and could even be a category killer.
Having said all that, we are not neglecting the importance of private label in commodity goods and in line with a pragmatic category management approach, it could also be an alternative for brand manufactures to play an important role in the entire category.
OPI: So private label does work, as far as HCA is concerned, but depends on the positioning?
JH: Something like that. The Duck brand for example has stood the test of private label and occupies a value position between private label and premium brands. Consumers want trusted brands and private label is still often perceived as offering inferior quality for the price. In our product range of tape adhesives, consumers want products that work. Ask anyone who has used a cheap roll of tape. They get completely frustrated and this obviously affects the brand’s image. Private label purveyors need to consider this in their brand strategies.
The other issue for private label brand companies is: can they become experts in multiple, disparate product categories?
As Arno said, our strategy overall embraces private label as part of a category management service, and our goal is to objectively maximise sales of all brands based on consumer behaviour, demographic and psychographic information. We do produce select private label products where our branded strategies are supported.
OPI: In your main markets of North America and Europe, budget cuts in corporate purchasing have also put a lot of pressure on price. How are you dealing with this and how different is the consumer market from the commercial channel in that respect?
AA: Indeed, this trend is another big challenge, particularly in the B2B and tender business. The answer again is innovation, but private label commodity products here are a major threat. We are reducing dependency on this part of the business and are exploring additional avenues in various commercial target groups with selected B2B marketing activities.
Household, kindergarten and the education sector are also very attractive markets for our adhesive and correction products in the future. Our best quality approach will remain unchanged for HCA as a main argument for consumers to buy our products.
OPI: What other factors, not already mentioned, differentiate HCA from its competitors?
JH: As contrived as it may sound, the major difference is our people and our spirit. This company has an incredible talent pool. Someone once said that "you can have my products, take my factories and buildings, but leave me my people and we will continue to thrive". The talent and spirit of this company is our greatest differentiator. Our CEO John Kahl says that "people do business with people" and that sums it up – people like doing business with HCA because of our commitment and passion for innovation and excellence.
OPI: Thank you to both of you for your time.