The rumor of Procter&Gamble selling Sha Xuan has been confirmed. On February 1st, German consumer goods giant Henkel announced that it had signed an agreement with Procter&Gamble to acquire the Sassoon brand and its related hair care business in Greater China. On the same day, the relevant person in charge of Procter&Gamble confirmed this matter to a reporter from Nandouwan Financial News Agency, stating that the final completion of the transaction will depend on normal transaction conditions such as government approval.
Han Gao owns well-known brands such as Shihua Kou, Baoying, and Miaoli. In 2022, it also acquired Shiseido's professional hair salon business in the Asia Pacific region. A reporter from Nandouwan Finance Society noticed that in the first three quarters of 2023, hair care products were the fastest-growing organic sales segment in the consumer goods business of Henkel. However, Han Gao also pointed out that, especially in China, the hair salon business has been affected by market weakness, resulting in lower organic sales development in the Asia Pacific region compared to the same period last year. So, can Han Gao's plan to expand the Chinese market through the acquisition of Sha Xuan be as planned?
Procter&Gamble's "selling children" slimming down
Sha Xuan's sales revenue for the fiscal year 2022/2023 is approximately 1.6 billion yuan
According to previous reports from Nandu, the rumor of "Procter&Gamble selling Sassoon" was first announced by Bloomberg in October 2023, when it was reported that Procter&Gamble was considering selling Sassoon's China business at a valuation of $1 billion. At that time, the relevant person in charge of Procter&Gamble responded to a reporter from Nandouwan Financial News that they would not respond to such speculative information.
The announcement released by Henkel China confirms this rumor, although the specific transaction amount was not disclosed. However, Henkel China stated that as a well-known hair salon brand, Sha Xuan has a salon inspired image in the retail market. Sha Xuan's addition will supplement Henkel's consumer brand's business portfolio in China and fill the gap in the high-end retail market.
Han Gao stated that Sha Xuan's product portfolio focuses on the high-end hair care field, including shampoo and conditioner, while also providing styling and care products. This business occupies an important position in the Chinese market, achieving sales of over 200 million euros (approximately 1.57 billion yuan) in the fiscal year 2022-2023.
In 1954, Vida Sassoon, the founder of the Sassoon brand, founded the first salon in London, marking the beginning of Sassoon's brand journey. In 1985, Procter&Gamble acquired Sassoon, and in 1997, the Sassoon brand officially entered China, providing a full range of high-quality products for washing, care, and styling. Yiyang Qianxi, Xiao Zhan, Luo Yunxi and others are the spokesmen of Sassoon. If this acquisition is successfully completed, Sha Xuan will end nearly 40 years of development at Procter&Gamble.
On February 1st, Procter&Gamble responded to a reporter from Nandouwan Finance News that in order to better serve consumers, support category growth, and continuously create value for the company and shareholders, Procter&Gamble will continuously optimize its product line structure. "Based on this, we have decided to sell the Sha Xuan brand to Han Gao Company, and the final completion of the transaction will depend on normal transaction conditions such as government approval. Procter&Gamble has always been committed to serving Chinese consumers well. Through this adjustment, we will focus more on our core product line, optimize resources and investment, and promote the development of Procter&Gamble's hairdressing category business in Greater China."
The fastest growth in hair salon sales in the consumer goods business
The price increase in the consumer goods sector of Hankou is higher than that of Procter&Gamble
Han Gao was founded in 1876 and has brands such as Schwarzkopf, Persil, and Bref. Wen Yongshan, Yang Chaoyue, Song Qian, and others are brand spokespersons.
The reporter from Nandouwan Finance Society noticed that in recent years, Hanhigh has continuously increased its consumer goods business, which is closely related to the performance of this business. In October 2017, Henkel Group acquired Zotos, a North American professional hair salon under Shiseido, for $485 million. In February 2022, Henkel announced the acquisition of Shiseido's professional hair salon business in the Asia Pacific region, further expanding its business landscape in hairdressing.
Although Han Gao did not release its financial report for the fiscal year 2023, its sales in the first three quarters of 2023 decreased by 3.1% year-on-year to 16.366 billion euros. Excluding the impact of foreign exchange and other factors, its organic sales increased by 4.1% year-on-year. Han Gao stated that this was due to "double-digit growth in product pricing.". However, Henkel highlighted negative sales growth in the Asia Pacific region in its financial report, mainly due to the generally tense market environment in China.
Han Gao's business is divided into Adhesive Technologies and Consumer Brands, with the former targeting the B-end and the latter targeting the C-end. Specifically, the performance of Han Gao's two major businesses is on par (both exceeding 8 billion euros), but the growth of its consumer goods business is even stronger. In the third quarter, the organic sales revenue of adhesive technology increased by 0.8% year-on-year, but the consumer goods business increased by 6.2% year-on-year; In the first three quarters, the organic sales revenue of adhesive technology increased by 3.3% year-on-year, and the consumer goods business increased by 5.9% year-on-year.
Specifically, regarding the consumer goods business, Han Gao stated that the growth in sales of the consumer goods business is driven by "price push.". In other words, Han Gao's strategy is similar to that of Procter&Gamble, which is to profit by raising prices and sacrificing product sales appropriately. However, Han Gao's price increase is higher than that of Procter&Gamble. According to the financial report, in the first three quarters of 2023, the consumer goods sector of Henkel increased prices by 13.3% and sales decreased by 7.5%. However, Procter&Gamble's financial report for the fiscal year 2023 (July 2022- June 2023) showed a 9% increase in product prices and a 3% decrease in sales.
Taking a closer look at Han Gao's consumer goods business, although the hairdressing business is not the largest revenue segment, its growth rate is the fastest, and Han Gao has also confirmed this in its financial report. In the first three quarters of 2023, its laundry&home care organic sales increased by 5.5% year-on-year to 5.179 billion euros, and its hair business increased by 8.3% year-on-year to 2.347 billion euros.
By comparison, the performance of Procter&Gamble's hair care business has also been recognized. According to Procter&Gamble's latest Q2 financial report for the 2024 fiscal year, organic sales of its hair care products increased by a high single digit due to price increases, high-quality product combinations, and sales growth (mainly in North America). Procter&Gamble's products in this segment include Pantene, Haifei Silk, Piaorou, etc.
Hairdressing business affected by market weakness
The share of Sassoon was lower than P&G's sisters brands
Regarding the acquisition of Sassoon, Carsten Knobel, CEO of Henkel, stated that this transaction will drive the development of Henkel's Chinese consumer brand business to a new level. Wolfgang Knig, Executive Vice President of the Consumer Brand Business Department at Henkel, expressed his pleasure at the inclusion of the powerful brand Shaxuan in Henkel, expanding its presence in the hairdressing field. "Through this acquisition, we are able to provide Chinese consumers with a complete set of innovative hairdressing product combinations including Schwarzenegger, Schwarzenegger Professional, Shiseido Professional, and Shaxuan.".
Overall, the consumer goods business is becoming increasingly important for Henkel. As early as 2022, Henkel announced its intention to transform its consumer goods business into a multi category growth platform with sales of approximately 10 billion euros. In the first three quarters of 2023, the sales revenue of this business reached 8 billion euros. In its third quarter report for the 2023 fiscal year, Henkel stated that its first goal for this sector is to achieve a net savings of approximately 250 million euros by the end of 2024, and it is currently expected to achieve over 80% by the end of 2023.
However, despite Carsten Knobel's statement in the acquisition of Sassoon that "the Chinese market is highly attractive and constantly growing," Han Gao also pointed out in its financial report that due to the weak market development in the hairdressing business, especially in China, the organic sales development in the Asia Pacific region is lower than the same period last year.
According to a previous report by Nandu, according to statistics from Forward Industry Research Institute, high-end brands such as Procter&Gamble, Unilever, and Schwarzenegger currently occupy the top tier of the Chinese market. The Chinese shampoo and hair care market is still dominated by foreign investment, with Procter&Gamble holding the main market share of 34.2%; Next are Unilever and Guangzhou Adolf, with 11.4% and 9.1% respectively.
Compared with Head&Shoulders, Pantene and other sisters brands, Sassoon's market share is significantly lower. According to Oteo data, in the first half of 2023, Sassoon's online market share was 2.2%. Although sales increased by 5.28% year-on-year, sales decreased by 8.7% year-on-year. However, Pantene and Haifei Si both had higher market shares than Sassoon, at 4.83% and 4.45% respectively. The sales volume and sales of these two brands increased year-on-year.
Tang Min, founder of Wushi Chinese website, told Nandouwan Finance News that Procter&Gamble has been selling non core businesses, including previous transactions with Coty regarding these businesses. "In terms of hair care products, Procter&Gamble already has three very strong brands, and Sha Xuan mainly engages in professional businesses such as Salon, so it is reasonable for Procter&Gamble to sell Sha Xuan.". Tang Min said that for Han Gao, the company also needs to supplement its fast-moving consumer goods business and find some mature brands in the market. "Currently, Sha Xuan is still a good brand, both in terms of popularity and scale.".