Henkel: Discounts are not necessarily reflected in profit and can bring consumption rise

Henkel’s Romanian subsidiary ranked 7th last year among the group’s companies, posting the biggest EBIT in Central and Eastern Europe, where the German producer operates on 32 markets.

Liviu Sfrija, chairman of Henkel Romania, is betting on a market share and consumption increase in order to bring the group big profits over the next few years.

In Romania, the company recorded an over 10% EBIT margin, according to the Henkel manager. The producer of Persil and Pur detergents reported a 571 million-RON (135 million-euro) turnover last year, down 3% against 2008, with the adhesives division (Loctite, Moment) accounting for half the turnover. The other divisions of Henkel Romania are the detergent and the cosmetics division (Taft, Palette).

“It’s a lottery whether we will preserve our position in 2010 or not. If no economic disasters occur, we may achieve it,” Sfrija says.

But how will the company deal with the pressure on low prices? In the food industry, for instance, it caused small producers to become insolvent.”

“The price is close to becoming the only criterion when choosing a product. Producers’ response is to cut prices, but this is not necessarily reflected in the profit. There are market segments where, if you come up with cheaper products, you can boost consumption, which saves the profit,” says the Henkel manager.