Annual Report 2013

Economic report

Marketing and distribution

We put our customers at the center of what we do. Hence we align our marketing and distribution activities in each of our business units to the requirements of each specific audience and target group.

In the Laundry & Home Care business unit, the new business model introduced in 2011 has proven itself. This model aligns our marketing activities even more closely to our markets and customers. Global management of our international brands plays an important role. It enables us to adopt more efficient decision-making processes, accelerate the market launch and further commercialization of our innovations, and further advance the use of new and important media. At the same time, close cooperation between our global marketing unit and local organizational units ensures that local market conditions and consumer habits are taken into account.

In engaging with consumers, we place increasing emphasis on digital marketing in addition to traditional advertising. Integrated digital campaigns, which include social media, are developed centrally and rolled out globally. We plan our distribution activities on a country-specific basis, while coordinating them internationally. At the same time, we have harmonized processes worldwide and improved the transfer of knowledge, experience and applications within the organization. Our relationships with retail customers were further strengthened in 2013 through our continuing development of shopper marketing. The latest results of customer satisfaction studies confirm our leading role in developing and leveraging category potential.

In the Beauty Care business unit, we develop marketing and sales strategies for both our Branded Consumer Goods and our Hair Salon businesses on a global scale, while implementing them locally. In the Branded Consumer Goods business, we aim for above-average growth with our top customers. In its first year since opening, the "Beauty Care Lighthouse" in Düsseldorf has evolved into a center of innovation and customer focus where customers can experience Beauty Care's expertise first-hand and interactively and digitally immerse themselves in the world of innovation. In addition to traditional advertising and point-of-sale activities, digital marketing is gaining greater significance in our interaction with consumers. We are focusing,in particular, on developing direct exchange through social media.

In the Hair Salon business, we also rely on strong partnerships with our customers. As an additional service, our globally established Schwarzkopf academies offer state-of-the-art specialist seminars and ongoing training programs with the focus increasingly on the hair salon as an enterprise. Engagement and ongoing dialog with our customers in the Hair Salon business is ensured through the activities of our sales force who support the salons at the local level with, for example, product demonstrations and technical advice.

Closeness to customers and consumers in both the Branded Consumer Goods and Hair Salon businesses ensures the continued ability of the Beauty Care business unit to successfully bring innovation to the market in the future.

Marketing in our consumer goods businesses is focused on the needs of the consumer. Our marketing organization initiates innovation processes and uses knowledge gained from market research and observation. Our marketing teams develop and execute media strategies and advertising formats that specifically address consumers. To support our strong brands and continue the successful marketing of our innovations, we manage our marketing activities and investments using clear priorities set according to category and region.

Our primary direct customer group is the grocery retail trade with distribution channels in the form of supermarkets, large-scale mass merchandisers/ hypermarkets and discount stores. In Europe, drug stores are also important. Wholesalers and distributors continue to account for a large proportion of our sales in markets outside Europe and North America. Our sales unit offers a full range of skills and services to support our trade customers.

The business unit Adhesive Technologies provides solutions worldwide for very different and specialized market sectors. Our broadly diversified portfolio serves industrial customers as well as consumers, craftsmen, and customers in the building industry. In the industrial sector, our businesses are Packaging and Consumer Goods Adhesives, Transport and Metal, General Industry, and Electronics.

With our 6,500 in-house specialists, we are able to maintain long-term contact with our customers 76 Group management report Henkel Annual Report 2013 Marketing and distribution and have developed an in-depth understanding of their various areas of application. This forms the basis for the tailor-made solutions we provide for the specific needs of around 130,000 customers. Through close, long-term partnerships with industrial customers and strategic cooperation with equipment manufacturers, we develop targeted new applications. We generally rely on our own sales personnel as the channel through which we address our customers. Our direct customers are industrial clients and retail companies. Our most important customers are served by our key account management teams.

Our global presence enables us to provide technical services to customers worldwide as well as a broad range of options for in-depth product training on site. At our recently opened research and development center in Pune, India, and our technology center in Shanghai, China, we are able to carry out tests under practical conditions covering the broad spectrum of potential applications for our technologies. Our technology center in Shanghai focuses on the needs of display manufacturers.

We develop our marketing strategy at both the global and regional level. The measures derived from our planning are implemented locally. In our brand strategy we consistently rely on Henkel as our manufacturer brand to further strengthen the five brands of the global technology clusters in the industrial markets and our four brand platforms in the consumer business.

The growing digitization of media channels presents numerous opportunities for Adhesive Technologies. In addition to expanding and further professionalizing the information we provide for products and applications, we use digital media for close interaction with our target groups. We are focusing particularly on eCommerce, where we are striving to integrate our online and offline activities, and to expand sales activities to promote our multi-channel strategy.

For Henkel, the importance of sustainability has grown significantly in our relationships with customers and consumers. Our customers increasingly expect their suppliers to ensure compliancecompliance
Acting in conformity with applicable regulations; adherence to laws, rules, regulations and in-house or corporate codes of conduct.
with global environmental, safety, and social standards. Our standards and management systems, our many years of experience in sustainability reporting, and excellent appraisals by external ratingrating
Assessment of the creditworthiness of a company as published by rating agencies.
agencies all help us to convince our audience of our credentials in this domain. Moreover, the credible implementation of our sustainability strategy strengthens both our brands and the reputation of our company in the marketplace. With our decades of experience in aligning our activities to sustainable development, we are able to position ourselves as a leader in the field and as a partner capable of offering our customers future-viable solutions. And we cooperate closely with our customers in trade and industry in the development and implementation of viable concepts.

In order to convey to our customers and consumers the added value of our innovations – best possible performance combined with responsibility toward people and the environment – we use direct product communication, as well as more detailed information provided in the new media, such as electronic newspapers and online platforms, and at events.

We intend to increase our involvement in the development of appropriate measurement and assessment methods in order to facilitate effective, credible communication of our contributions to sustainability. To this end, we have developed a variety of tools, which are integrated within our "Henkel Sustainability#Master®." This evaluation system centers around a matrix based on the individual steps in our value chains and on our six focal areas. It shows which areas are most relevant from a sustainability perspective, and allows a transparent and quantifiable comparison to be made between two products or processes.

We also participate in related projects and working groups, such as the Consumer Goods Forum, the Sustainability Consortium, the World Business Council for Sustainable Development, and, through the A.I.S.E. (the International Association for Soaps, Detergents and Maintenance Products), in the Environmental Footprint Pilot Project of the European Commission.

For further information on the products and brands of our three business units, please go to our website at www.henkel.com/brands-and-solutions