Wella AG reorganizing, adding hairdresser and retail marketing divisions.

WELLA AG REORGANIZATION WILL EMPHASIZE HAIR CARE MARKETING, according to the Darmstadt, Germany-based hair care and cosmetics firm. As part of the company's plan to "strengthen...international competitiveness" by separating strategic elements from operating functions, Wella is adding two new divisions -- Hairdresser Marketing and Marketing Retail Hair Care -- to its existing management board, Chairman Jorg von Craushaar stated in an Oct. 26 release.

In a move to step up the marketing strategy for its core hair care business, Wella has created the two new divisions to oversee marketing of its professional and consumer products globally, "ensuring a uniform international approach for each division," the company said.

The existing hair care divisions -- Retail Hair Care and Salon -- will be able to "concentrate on the full operational regional responsibility," the firm added. The retail business is responsible for operations in America/Asia and the Salon Business oversees operations in Europe.

Peter Blom, the head of America/Asia, will manage the Marketing Retail Hair Care division until permanent appointments are made. Fritz Kuhn, who is at the helm of European operations, will direct the Hairdresser Marketing division in the interim. The Cosmetics and Scents business will continue to be headed by Heiner Gurtler.

The reorganization of the management board is the first major change at Wella following the appointment of the new chairman in late September. Von Craushaar replaced former Chairman and CEO Peter Zuhlsdorff, who left because of differing opinions with Stoeher family shareholders regarding the firm's strategic direction, the firm said. It was speculated within the company that Zuhlsdorff, a 19-year Wella veteran, was moving too quickly in the retail market for Stoeher family members, who hold 66.8% of the company's main shares. Von Craushaar was formerly managing director, Wella Italia.

With the changes, von Craushaar appears to be focusing on consolidation of the company rather than expansion, which was the strategy his predecessor had pursued over the past two years. In 1994, Wella acquired over 90% of the assets of Cologne-based Muelhens KG, thus increasing its presence in the fragrance and cosmetic arenas ("The Rose Sheet" June 27, 1994, In Brief). The German hair care giant also purchased the Silvikrin, Vosene and Bristows hair care brands from SmithKline Beecham in June 1994 ("The Rose Sheet" Aug. 8, 1994, p. 11) and bought a majority stake in Sebastian/U.S.A. in October 1993 ("The Rose Sheet" Oct. 4, 1993, p. 5).

Wella said it expects lower U.S. sales in 1995 because it has had to change distributors in the U.S. due to "structural changes in the market and mergers by competitors." The firm does not expect to recover lost revenues that occurred during the "changeover phase" in the remaining months of 1995, and predicted that "profits will be well down" as a result.

Based on third-quarter results, Wella anticipates consolidated sales growth of "only 5-6%" for 1995, with "profits well below those of the previous year." Wella pointed to "unpredictable developments in various countries," in particular China, Russia, Great Britain and the U.S., as well as "a generally unsatisfactory course of sales" due to weaker market conditions.

According to preliminary results, sales increased 5% in the nine months, representing a slowdown from the 11% growth recorded in the first half. Reasons for the slower growth include the "significant downturn" in the hairdressing market -- a heavily weighted sales sector for Wella -- which resulted in "significant budget shortfalls" despite an increase in market share, the firm said. Wella also pointed to currency fluctuations, temporarily higher production costs related to the centralization of production in Europe and the lack of a market breakthrough in China as contributing factors. Wella is anticipating "positive results" in sales and profits in 1996 with the reorganization.