Going to Market

How has Henkel adapted to the needs and demands specific to the Iranian market?

We have done a great deal of work in this regard. A lack of insight regarding Iranian consumers was one of the key challenges we had at the beginning. What is clear is that Iranian consumers’ demands are extremely specific and quite advanced. It took a couple of years to get the right information and put a consumer profile description in place. Iranian consumers have high expectations because they have been accustomed to high-quality products at accessible prices for decades. This means there is demand, which is good to know for the companies that really mean business.

How does Henkel support the government’s vision of reducing imports and increasing local production to export to the region?

Henkel is probably one of the best examples of support for this vision. We have invested a great deal in local production. Even before and during the sanctions, we managed to produce locally pretty much everything we sell here. Our ratio of imported goods and raw materials for production was less than 10% per annum; almost everything we invested was for local production. We also have an active export business in the traditional Iranian export markets of neighboring countries. In fact, we could have had an even better export business over the last few years; however, due to certain limitations in our production capacity we could not serve all the existing demand. We are fixing this by increasing the capacity of our factories and enhancing our exports. We consider the government’s vision when conducting our business and try to support our local partners with similar goals.

What would be your advice to foreign companies looking to enter the Iranian market?

It is important for prospective companies not to make the assumption that because Iran is part of the Middle East, whatever works in other parts of the region will work here as well. I would not recommend starting a business until companies do their homework properly. That requires time and money, and for companies that expect to have a successful business quickly, they should know that this is not an easy market to conquer. There is also is another reality for most foreign investors coming to Iran; they might think there is little or no competition here. Although local manufacturers may not be experienced in regional or global markets, they are extremely good at producing top quality products at good prices. They are also quite aggressive in local distribution and marketing campaigns. Competition here is different, but nevertheless strong. This is one of the reasons why some large companies are still not present in the Iranian market, despite the lifting of sanctions. They have probably realized this is not an easy nut to crack.

Is 2016 a turning point for Henkel’s operations in Iran?

For the last five years or so, every year has been a turning point for us here. One of the challenging aspects of working in Iran is that everything can change quite dramatically. I expect to see an increase in investments. Demand will start to recapture some of the losses from the last two or three years, which were quite significant in terms of volume. However, that will probably take another year or more. I look forward to increased competition because it will help educate consumers more about product quality and differentiation. I am optimistic; in general, I try to promote the Iranian economy and opportunities because it is an amazing country. Iran’s economy has a strong foundation, and I admire the fact that even the harsh sanctions were unable to shake the fundamentals of the country’s economy and industry. There is a large, highly qualified workforce here, the industry is diversified, and there is great potential in the domestic market. These are powerful incentives for companies that come here for long-term business, not just for short-term gains.