Wella Profile And Swot Analysis

Company Spotlight: Wella

Wella is to sponsor Red Nose Day in March this year, introducing a limited edition red hairspray to coincide with the event, which takes place in the UK on March 11. With each sale of the spray, Wella will donate 50p to Comic Relief, which raises money for projects in both the UK and Africa.

The company will no doubt be hoping the sponsorship will raise its profile as a charity-giving and fun-loving company, and follows a similar sponsorship in 2003, when Wella came on board as the official hair partner of Red Nose Day 2003. In that year, the company provided a free sachet of hair gel for customers who bought a red nose.

As well as the red hairspray for Comic Relief, Wellla has this month released three new products into the UK market containing the patented ingredient Creatine, which athletes have used as an energy supplement. The products - System Professional Volume Shampoo, conditioning Mousse and leave-in Volume Builder - claim to give hair increased volume.

Wella System Professional Volume Shampoo is a strengthening shampoo for fine hair, which the company says cleanses hair gently without overloading; Wella System Professional Volume Mousse strengthens fine hair, adding up to 50% more volume; while Wella System Professional Volume Builder is an intensive leave-in treatment, which gives hair long-term volume at the roots.

Business Description

Wella is one of the largest hair care companies in the world. The company comprises three business divisions: professional, consumer, and cosmetics and fragrances.

The professional division sells products for coloring, perming, styling and other hair care treatments exclusively to hairdressers. The division's brand portfolio includes not just the Wella brand but also the Londa brand for Eastern Europe; Kadus, a provider of hair care products exclusively for hairdressers; the US designer brand Sebastian; and Graham Webb International. The full-service range is completed by the brands Welonda and Belvedere for salon equipment and Tondeo, the market leader for cutting equipment. With 82,300 annual events reaching 1.5 million hairdressers, Wella's Friseur Service is the world's largest provider of hairdresser training.

The consumer division sells products aimed at retail consumers. These include hair color products as well as styling and care products. In addition to Wella, the division produces brands such as Londa; the Ultra Sheen and Gentle Treatment brands from the US; the designer brand Nicky Clarke from the UK and Decorй from Australia.

The cosmetics and fragrances division is organized by the holding company Cosmopolitan Cosmetics. Its prestige brands with selective distribution include Gucci, Rochas, Dunhill, Anna Sui and Bogner. The bridge segment, which has a wider coverage, includes further successful brands like Cindy Crawford, Mexx and 4711. Cosmopolitan Cosmetics is represented in 150 countries by about 35 subsidiaries and 2500 employees.

Products & Services Analysis

The company recorded revenues of E1550.0 million during the fiscal year ended June 2004 (six months), compared to revenues of E3311.6 million during the fiscal year 2003. For the fiscal year 2004, revenues from Europe (excluding Germany), the company's largest geographical market, accounted for 43.6% of the total revenues.

Wella generates revenues through its three business divisions: professional products (49.2% of total revenues during fiscal 2004), consumer products (26.5%), and cosmetics and fragrances (24.3%).

Revenues by Division

During the fiscal year 2004, the professional products division recorded revenues of E763.0 million, compared to revenues of E1536.5 million in fiscal 2003.

The consumer products division recorded revenues of E411.2 million in fiscal 2004, compared to E932.3 million in fiscal 2003.

The cosmetics and fragrances division recorded revenues of E375.8 million in fiscal 2004, compared to E842.8 million in fiscal 2003.

Revenues by Geography

Germany accounted for 19.6% of the total revenues in the fiscal year 2004. Revenues from Germany were E304.4 million in 2004, compared to E686.8 million in fiscal 2003.

Europe (excluding Germany), Wella's largest geographical market, accounted for 43.6% of the total revenues. Revenues from Europe (excluding Germany) were E676.4 million in fiscal 2004, compared to E1397.9 million in fiscal 2003.

Asia/Pacific accounted for 17.1% of the total revenues. Revenues from Asia/Pacific were E264.4 million in fiscal 2004, compared to E563.8 million in fiscal 2003.

North America accounted for 12.5% of the total revenues. Revenues from North America were E193.9 million in fiscal 2004, compared to E430.8 million in fiscal 2003.

Latin America accounted for 7.2% of the total revenues. Revenues from Latin America were E110.9 million in fiscal 2004, compared to E232.3 million in fiscal 2003.

SWOT Analysis

Wella is a global hair care product company that also sells cosmetics and fragrances. The company has a strong product development program. However, the growing demand for private label cosmetics and hair care products is threatening to eat into the company's market share.

Strengths

Product development

The company has a strong product development program which enables it to maintain a healthy pipeline of products. The company's product development initiatives saw some major product launches in 2004. Key product developments during 2004 included the revolutionary Magma product, which enables the hairdresser to lift and color in one step; the Head Games range of styling products; and Wellastrate Heat Straight Perm. The company's product development program has continuously has ensure that its product range is in step with market needs.

Global operations

Wella has operations in 150 countries. While the company is represented in stable and mature markets in Europe and North America, it also has an increasing presence in dynamic, emerging markets in Eastern Europe, Asia-Pacific and South Africa. Its presence across the globe insulates the company from regional demand fluctuations and enables it to address local needs that can then be leveraged in other parts of the world.

Growing e-business

In the e-business sector, the sales of the company's online shops logged