InterviewFeedstock increases tough to pass on to customers - Henkel

07 October 2010 10:54  [Source: ICIS news]

MONTREUX, Switzerland (ICIS)--Detergent companies are having difficulties passing on raw material price increases to consumers, an official from Germany-based Henkel said on Thursday in an interview with ICIS.

“There is current hyper-competition when it comes to product pricing, which makes it difficult for consumer goods companies such as Henkel to transfer raw material price increases to end customers,” said Thomas Muller-Kirschbaum, senior vice president for Research & Development, Technology and Supply Chain at Henkel’s laundry and home care business, on the sidelines of the World Detergents Conference in Montreux, Switzerland.

Major detergent raw materials include surfactants, fatty alcohols and caustic soda

Consumer goods companies are experiencing the same feedstock pricing situation in the first half of 2010 that was experienced in the first half of 2009, said Muller-Kirschbaum.

“The first half of 2010 was tougher in terms of market growth compared to the same period last year,” he added.

Henkel ties up its contracts with retailers/customers once a year, usually during the second half. With fast-rising feedstock prices, the company is not usually able to adjust quickly when contracts are already set, Muller-Kirschbaum noted.

“A very extreme example happened in 2008 when feedstock prices moved up so quickly and strongly that even our forecast couldn’t follow that fast. Of course the 2010 situation is different from 2008, but volatility is increasing. And in some regions some materials might get short due to high volume demand together with bottlenecks,” he added.

To ease the pressure of strong product price competition and high feedstock costs, Henkel is taking costs out of the value chain through several programme initiatives that started two years ago, such as reworking networks and distribution as well as focusing on affordable product innovation.

“Henkel has clear target to deliver 14% of margin in 2012 for all three business divisions - cosmetics and personal care, laundry and home care, and adhesives. We are on track in doing that,” said Muller-Kirschbaum.

The detergent conference ends on Thursday.

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By: Doris de Guzman
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