Wella AG

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Wella AG

Berliner Allee 65
D-64274 Darmstadt
Germany
Telephone: (49) 6151 34 0
Fax: (49) 6151 34 27 48
Web site: http://www.wella.de

Public Company
Incorporated: 1880 as Franz Stroher-Rothenkirchen
Employees: 17,210
Sales: EUR 3.1 billion ($2.8 billion) (2001)
Stock Exchanges: Munich Berlin Frankfurt Hamburg Düsseldorf Hannover
Ticker Symbol: 776560
NAIC: 325620 Toilet Preparation Manufacturing; 325998 All Other Miscellaneous Chemical Product and Preparation Manufacturing

Wella AG operates as one of the world’s top cosmetic suppliers with brands found in over 150 countries. The company has three main divisions: Professional Hair Cosmetics, Consumer Hair Cosmetics, and Cosmetics and Fragrances. Its Professional unit accounts for nearly 50 percent of group sales and offers professional hairdressers hair care products under the brand names Wella, Sebastian, Graham Webb, Kadus, Londa, Welonda, Belvedere, and Tondeo. The Consumer division secures just over 30 percent of total sales and focuses on hair coloring products along with care and styling products. Holding company Cosmopolitan Cosmetics GmbH oversees the operations of the Cosmetics and Fragrances segment, which supplies fragrances in 120 countries through a network of 30 subsidiaries. This division accounts for 20 percent of Wella’s total sales. Wella’s logo remains one of the most familiar in Germany.

Early History: 1880s–Early 1900s

In 1880, at the age of 26, the hairdresser Franz Stroher, the grand- and great-grandfather of today’s generations of owners, founded a company for the production and distribution of artificial hair in the Saxon Vogtland. His company was registered on July 1 at the Auerbach district court. The region in which he chose to operate was a traditional stronghold of the textile industry, with a well-established local manufacturing base. Here, the people were skilled, diligent, and poor—an ideal workforce for the labor-intensive production of hairpieces and wigs, which were made out of natural and artificial hair. During his years spent traveling as an apprentice hairdresser in Germany, Holland, Switzerland, and France, Stroher learned about new hair fashions and acquired the necessary hairdressing techniques. In 1872, undulation waving was invented by the Frenchman Francis Marcel. This became a popular method for waving women’s hair and was supplemented with the addition of natural or artificial hairpieces. In 1880, Stroher set up his own private firm, Franz Stroher-Rothenkirchen, for the manufacture and distribution of artificial hair. After initial difficulties with the development of new production methods, he eventually found a material in England that, with the aid of a waterproof finish that he had developed himself, could be used to make wigs. This product, “Tullemoid waterproof,” became a considerable success at the turn of the century, and in 1904 a larger manufacturing plant was built in Rothenkirchen. This plant still exists, although it has been modified extensively.

In 1908, Stroher’s two older sons, Karl Stroher, a merchant, and Georg Stroher, a hairdresser, joined the business. They were to shape the company’s history over the following 60 years. As early as 1931, sales extended to the United States, and in Rothenkirchen a staff of 30 was employed in addition to family members. They manufactured many kinds of wigs and hairpieces. The permanent wave had not yet become widely popular. Promising experiments were carried out in the United Kingdom and their results impressed the Continent, but World War I broke out before the hot-wave technique for women could be offered at a reasonable price. The war had a significant impact in more than one respect upon the history of the family business. Franz Stroher’s three younger sons were killed, and Franz Stroher himself, almost broken by the events, left the management increasingly to his sons Karl and Georg, taking the less active role of senior partner until he died in 1936. To compound these problems, international hair fashions suddenly changed; the popularity of bobbed hair caused a rapid decline in the demand for hairpieces. This change led to a difficult period of readjustment for the company. There was a brief episode of production of wigs for dolls, clothing for workers, mannequins for hairdressers, and sales of hairbrushes, washing brushes, toothbrushes, face towels, and shaving towels. The war also cut contacts abroad that were difficult to reestablish.

However, one new development after the mid-1920s led to a phase of relative prosperity for Franz Stroher OHG, as the company had been called since 1918. The permanent waving process was at last proving successful and gave a much wider scope to the hairdressing trade. François Marcel’s waving technique was developed further in Germany by Karl Nessler and Josef Mayer. At this point, the Stroher brothers took the opportunity to acquire a license for the manufacture of a new generation of permanent wave machines that used 16 to 24 volts and were easy to operate.

The Wella Brand Is Launched: 1927

In the meantime, the brand name “Wella” had been registered at the German patent office as a hairdressing trademark. Since 1927, the production and distribution of perm machines, hair driers, hairdressers’ equipment, and salon furniture have been carried out under this name. Soon cosmetic hair products appeared as part of the production program alongside professional hairdressing equipment. These took into account the demands of hairdressers. A well-known product at this time was the hair treatment Kolestral, based on recent biological discoveries.

The year 1930 was the 50th anniversary of the company and marked the beginning of a new phase of expansion. The business adopted the legal status of a public limited company, Franz Stroher AG, with an original capital of 250,000 marks, and employed 150 staff members. From this time, the licensed Wella emblem, with a woman’s head and stylized waves of hair, became an international symbol. The Wella News, a new trade magazine, was published by the company. This journal had a widespread distribution and, combined with the regular training courses offered to hairdressers, helped to establish a strong connection between the company and the hairdressing trade. The factory at Rothenkirchen was by this time manufacturing hair driers, hydraulic chairs, and electric hair-cutting equipment. The program also incorporated the production of furnishings for hairdressing salons and cosmetic products. These were partly produced by the company itself and partly supplied by others.

In the years before 1938, the company established many subsidiaries, and a manufacturing plant was set up in Plauen, Vogtland. International branches and subsidiary companies all over the world promoted the growth of the family business. It was no longer restricted by the unfavorable location of the Saxon Vogtland. In the course of an allocation policy pursued in the Thuringen region, the head offices of the corporation, together with the manufacturing and export divisions, were transferred to the town of Apolda, although the production of hair cosmetics continued at the parent plant at Rothenkirchen. When the factory at Apolda was dismantled at the end of World War II, in 1945, the firm had well over 800 employees.

This period of expansion also brought about important welfare innovations within the company, such as subsidies for children of employees and allowances for marriage, childbirth, death, and accidents. Provision for the retirement of former staff and their dependents was secured by regular benefit payments, and advanced training within the establishment was extended. Typical of the family business was the strong, almost patriarchal relationship between management and staff. Documents from the Wella archive in Darmstadt demonstrate that employees at the end of the 1930s were on average fairly young. Many surnames occur several times, which points to the recruitment of employees’ relatives, and a major proportion of staff moved with the management from Sachsen to Thuringen.

As early as the 1930s, Wella laboratories were developing and constantly improving numerous hair cosmetic products that became best sellers, such as the bleaching compound Blondor, a non-alkaline washing agent concentrate called Wellapon, and the liquid foaming hair tint Wellaton, which came in an wide range of colors. Whereas bleaching and tinting agents were relatively well developed, it took longer to find an effective dyeing compound. Wella Percol Liquid was the best known product. Koleston, a gentle, conditioning cream dye available in a tube, had been developed but could not be produced during wartime, when the raw materials it required were unobtainable.

Postwar Reorganization

The economic policy of the National Socialists and wartime conditions were not favorable to Wella. The Stroher brothers were active Freemasons and were opposed to National Socialism. In the course of time, important products could no longer be manufactured due to restrictions on raw-material supplies. The factory in Apolda built new ventilation systems and equipment for submarines and could no longer make permanent wave machines and hair driers. At the end of World War II, the Stroher’s had to face the dismantling of the plant in Apolda and expropriation by the government of the plant in Rothenkirchen, still intact with more than 300 working staff, as communal state property.

Company Perspectives:

Create, experience, and scent are three terms with which all three group divisions—Professional, Consumer, and Cosmetics and Fragrances—identify. They are the embodiment of our activities, products, and services.

The Stroher’s, supported by a few tireless colleagues, began to look for a new sphere of influence and orientation. In September 1945, at the Hotel Krone, the reconstruction of the business began on a very small scale in Huenfeld, Osthessen, under the new name of Ondal GmbH. The brothers stayed for the time being in Rothenkirchen. It was only in 1946 that the production of cosmetic products resumed there, followed by the production of hairdressing equipment in May of that year. At the same time, Wella Hairdressing Requirements GmbH was founded in Berlin. After the expropriation of Rothenkirchen, a large-scale manufacturing plant was set up in Huenfeld, which has since been extended several times and represents the center of the company’s production. After the division of Germany, Wella’s former plant in Rothenkirchen continued to operate. As VEB Londa it became part of a larger chemical concern, which had very limited development potential due to the strict principles of East German economic planning. Nevertheless, it came to hold a significant position in the market before the reunification of Germany and had established a considerable number of outlets for the export of goods, mainly to Eastern Europe. However, the profile of the enterprise and the quality of its products were not compatible with western standards. In February 1990, political changes in East Germany brought about the reintegration of the Rothenkirchen plant into Wella in the form of a joint venture which was to produce and market hairdressing products and equipment in Germany and other European markets. Without the strong bond resulting from their shared origins in the family business the reintegration of the factory at Rothenkirchen with Wella would not have been possible.

From 1950, the business was registered as Wella AG. The central management of the company operated from Darmstadt, Hessen, where the head offices were based. The reintroduction of the successful Wella logo proved highly advantageous. Wella, having had a modest turnover of DM10 million in 1950, then attempted to retrieve international rights for trademarks which had been expropriated and business connections which had been lost after 1945.

Wella’s international reputation grew due to its early and aggressive penetration of international markets. As early as the 1950s, Wella had included Third World countries in its trading policies and had met with strong opposition. Production started in 1952 in Chile, Italy, and the Netherlands, in 1953 in Africa, and in 1954 in Australia and Brazil. In the 1960s, the Asian and Pacific territories were entered in stages. An international distribution network was set up and larger manufacturing plants all over the world helped protect the firm from world trade friction and set the prototype for Germany’s international business relations after World War II.

In 1950, Koleston, the first hair-conditioning cream tint, was introduced, initiating a new generation of hair products that conquered the markets. Koleston continued to be produced into the new century. During the 1980s, Wella’s high research-and-development costs were reflected in a high price for both hairdressers and consumers. Wella also had a large range of successful products by this time, including such well-known brands as Wella Balsam, Shock Waves, Bellady, and System Professional. A change in consumer attitudes and a stronger awareness of the environment caused increasing recourse to natural ingredients, the abolition or reduction of propellant gas in sprays, and the increasing use of biodegradable packaging made of raw materials that break down naturally. In most cases, it was costly to develop new environmentally friendly products, as well as to market them effectively, since there was often a discrepancy between ecological requirements and consumer demand.

Growth as a Public Company: 1980s–1990s

As late as the 1980s, Wella continued to tout itself as an independent family business in which the founder’s influence could still be felt, and members of the Stroher family’s third generation had been brought into the management of the company since the early 1950s. However, Wella’s considerable growth and diversification were indicative of a company far beyond the scope of a family business. In 1973, the day-to-day running of the group was entrusted to directors who were not members of the founding family. The actual family members themselves functioned in strictly supervisory and advisory roles. It was due to these changes that in 1978 Wella’s worldwide sales passed DM1 billion for the first time and have continued to rise ever since. In 1983, Wella turned to the stock market in a move to adjust its capital structure to cope with its rapid growth.

As part of this growth strategy, Wella entered the fragrance market with the 1987 purchase of Parfum Rochas S.A., a French luxury goods manufacturer. It continued to beef up holdings in this segment with the 1994 purchase of Muehlens KG, the fragrance manufacturer of the 4711 product line. The deal was the largest in Wella history. Along with its fragrance business, Wella also began to aggressively pursue expansion in the retail hair care market. In 1993, it acquired United States-based Sebastian International.

During 1995, Wella’s chairman, Peter Zuhlsdorff, resigned suddenly after disagreeing with family shareholders about Wella’s future direction. Jorg von Craushaar took the helm and immediately set out to position the firm as a leader in both the hair care and fragrance markets. With new leadership in place, the group made a number of divestitures that included the Payot skin care and cosmetics brand, the Restoria line, the company’s Chilean Laboratorio Arensburg S.A.I.C., Rene Garraud SA, and Anton Hubner KG.

As part of its realignment, Wella consolidated all of its cosmetics and fragrances businesses under holding company Cosmopolitan Cosmetics GmbH in 1997. While the group had been unable to secure the number one position overall in the industry, its financial results moved in a positive direction despite challenging economies in many of its major markets, including Asia and Latin America.

Key Dates:

1880:: Franz Stroher establishes his private firm, Franz Stroher-Rothenkirchen, for the production and distribution of artificial hair in the Saxon Vogtland.
1918:: The company is renamed Franz Stroher OHG.
1927:: The Wella brand name is launched.
1931:: The firm’s sales extend into the United States.
1945:: The company restructures as a result of World War II.
1950:: The business is registered as Wella AG; hair conditioning cream tint Koleston is introduced.
1973:: Day-to-day operations are entrusted to non-family directors for the first time.
1983:: Wella goes public.
1987:: The company expands into fragrances with the purchase of Parfum Rochas S.A.
1994:: Fragrance manufacturer Muehlens KG is acquired.
2000:: Vivality, a global hair care product, is launched.

Success in the New Millennium

By the time Wella entered the new millennium, the company stood as the largest German cosmetics supplier. During 2000, the company formed three distinct divisions—Professional, Consumer, and Cosmetics and Fragrances. In order to strengthen its Consumer segment, Wella focused on positioning it in the higher-priced segment of the market and also made several strategic acquisitions, including United States-based Johnson Products and Graham Webb International, the hair care line of Nicky Clarke, the brand rights to Yardley of London U.S. LLC, and the Daniel Galvin brand. Wella also launched Vivality, its first-ever globally marketed hair care product in 2000.

That year Wella achieved record results—the best it had seen in 30 years. Sales increased from EUR 2.3 billion recorded in 1999, to EUR 2.8 billion in 2000. The upward climb continued into 2001, as sales jumped to EUR 3.1 billion. Net profit also increased from EUR 80.2 million in 1999 and EUR 100.9 million in 2000 to EUR 123.6 million in 2001.

Wella’s long-term goals continue to revolve around building each business segment into a market leader through acquisition and development of high-value, high-profile brands. In early 2002, Wella acquired Escada Beaute Group SA and formed a licensing agreement with Escada AG in which Wella would develop the Escada brand of perfumes. Heiner Gurtler, who took over for von Craushaar upon his retirement, commented on how the purchase related to the group’s strategy in a March 2002 Cosmetics International article. “With the acquisition and the integration of the business into Cosmopolitan Cosmetics, two strategical targets of our cosmetics and fragrances business will be achieved: extending the brand portfolio and at the same time focusing on the segment of higher priced international prestige fragrances.” Gurtler also claimed that “the strong position of Cosmopolitan Cosmetics in the global fragrance market will be expanded.”

From its earliest days in the 1880s, Wella has preserved its character as an successful family business, and nearly 80 percent of company shares are still owned by members of the Stroher family. With its longstanding history of success, Wella’s position among industry leaders would no doubt continue well into the future.

Principal Subsidiaries

Ondal Industrietechnik GmbH; Cosmopolitan Cosmetics GmbH; Percol Beteiligungen GmbH; Kadabell GmbH & Co.KG; Emil Kiessling GmbH; Londa Rothenkirchen Produktions GmbH; Londa GmbH; Tondeo-Werk GmbH; Muelhens GmbH & Co. KG; Intercosmetic S.A., Groot-Bijgaarden (Belgium); Ondal-France E.u.r.l.; Wella France S.A.; Parfums Rochas S.A. (France); Wella (United Kingdom) Holdings Ltd.; Wella Italia Labocos s.p.a. (Italy); N.V. Handelsmaatschappij van Ravensberg (Netherlands); Wella International Finance B.V. (Netherlands); Herman Lepsøe A/S (Norway); Interkosmetik Ges.m.b.H. (Austria); Wella AB (Sweden); Wella Beteiligungen AG (Switzerland); Productos Cosméticos S.A. (Spain); Wella Polska sp.z.o.o. (Poland); Wella Magyaroszág Kft.(Wella Hungary Ltd.); Ondabel S.A. (Argentina); Cosmetic Products Pty. Ltd. (Australia); Belcosa Distribuidora de Cosméticos Ltda. (Brazil); Wella Cosmetics China Ltd.; Wella Japan Co. Ltd.(83.9%); Productora de Cosmeticos S.A.de C.V. (Mexico); Sonata Laboratories Ltd. (New Zealand); Wella Korea Co.Ltd.; The Wella Corporation (U.S.); Graham Webb International (U.S.).