November 17, 2016 / 8:36 AM / 2 years ago

UPDATE 3-Under new CEO, Henkel looks to develop online business

* Digital sales to become more of a focus

* More consumer business moving online, start-ups challenge

* Capex for 2017-2020 to rise to up to 3 bln euros

* Top 10 brands to contribute 75 pct of sales by 2020 (Recasts throughout, adds detail on digital strategy, quotes, analyst comment)

By Tina Bellon

DUESSELDORF, Germany, Nov 17 (Reuters) - German consumer goods group Henkel wants to step up digital sales of its core brands, focusing on emerging markets and a younger generation which is increasingly shopping online, its chief executive said on Thursday.

Known for washing powder Persil, beauty line Schwarzkopf and adhesives business Loctite, the German company presented a strategy for the years to 2020 with a stronger focus on developing digital distribution.

CEO Hans van Bylen, who took charge in May, said the group understood the growing importance of ecommerce and new sales channels.

“China is an interesting example for us in that regard,” he said. “We entered the market with our beauty products relatively late but now generate half of our sales there digitally.”

Henkel launched a partnership with local ecommerce giant Alibaba in October 2015 to sell its Schwarzkopf hair care brand exclusively in Asia’s biggest economy, which van Bylen said was paying off.

The success of digital business in other countries, such as South Korea where 60 percent of Henkel’s revenues are generated online, underlines Henkel’s goal to double “digitally-driven” sales to more than 4 billion euros ($4.28 billion) by 2020.

Henkel also plans to develop new products, get them on to store shelves more quickly, enter new markets and consolidate manufacturing and logistics operations.

COOL RESPONSE

The company provided little detail on concrete initiatives and market reaction was cool, seeing shares initially dip to a four-month low of 107 euros, before regaining some ground. They traded 1.3 pecent lower at 107.8 euros at 1505 GMT.

Kepler Cheuvreux analyst Christian Faitz, who has a “buy” recommendation on Henkel’s stock, said the new strategy did not represent a revolution.

“Yet, the Henkel story has never been about revolution, but rather about evolution, developing the organisation to where it is today in terms of enhanced and sustainable profitability,” he said.

Henkel plans to invest as much as 3 billion euros in the next four years, up from around 2 billion for the 2013 to 2016 period. Finance chief Carsten Knobel said that figure did not include expenses for restructuring and acquisitions.

Henkel will also set up a 150 million euro venture capital fund to invest in promising start-ups that disrupt the global consumer business and challenge established players.

Henkel competitors such as L’Oreal and Unilever over the last year acquired successful TV-shopping and online businesses, such as IT Cosmetics and the Dollar Shave Club, giving them an advantage in the fight for market share.

Henkel said acquisitions would remain part of its strategy, after it spent $3.6 billion this year to buy North American laundry detergent maker Sun Products, known for its Snuggle brand.

The group aims for average organic sales growth of 2 to 4 percent per year through 2020, with most of growth coming from emerging markets. The share of sales generated by Henkel’s top 10 brands, which include Persil and Schwarzkopf, is to grow to 75 percent from 61 percent in 2015. ($1 = 0.9341 euros) (Editing by Maria Sheahan/Keith Weir)

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