Wepa CEO Martin Krengel notes increased sales amid pandemic are 'purely inflationary effect' as company has lifted prices to mitigate costs; Wepa has approved bonuses for workers to mitigate increased consumer prices, spread over 24 months

Sample article from our Tissue & Hygiene

January 27, 2023 (press release) –

Publication in the Lebensmittel Zeitung on January 27th, 2023 

Pandemic and war have shaken up the tissue industry. Martin Krengel, the head of the family at private label manufacturer Wepa, remains calm despite everything and reinvents himself again in the final years of his career.

Martin Krengel was once on the verge of becoming a professional soccer goalkeeper. Anyone who sees him today can well imagine that the Wepa chairman radiated great calm even at a young age and was a secure support for those in front of him. He just lacks the crazy, egocentric element that many goalies are said to have - or he's good at hiding it. When he talks about what is happening in retail with his confidence-inspiring voice and his unmistakable clarity at the same time, he demonstrates his understanding of the game. He may not have become a professional soccer player, but he is one of the most influential professionals in the world of sanitary paper. He masters the game of large and small roles like no other.

"King of Toilet Paper"

The Sauerland native, who was born in 1957, has been working in the Arnsberg company headquarters of the Westfälische Papierfabrik (Wepa) for 37 years, as he once did between the posts. In 1990 he became a member of the management board, and in 2001 the family appointed him chairman and spokesman for the management board. Since then, the family business has grown to become the largest tissue manufacturer in Germany and number three in Europe. 

Since 1985, when Krengel joined his father's company, he inevitably has to deal with many roles every day. This applies to him in two senses: in 2022, for example, Krengel is likely to have taken on the role of captain on the high seas. The costs rose rapidly, delivery problems and Corona repeatedly caused unpredictable waves. Sometimes so much that machines had to be shut down. With the start of the war in Ukraine and the inflation that followed, the storm was perfect. Krengel admits in an interview with the LZ: "We always followed the wave". It was important, also for his self-confidence, that "Wepa stood stable to bridge the bow waves" - the words of a captain.

For many years, the history of Wepa and thus also of the Krengels was a success story. The private label manufacturer has benefited from the expansion of German discounters since the 1990s. The group now has five factories in Germany and 13 across Europe. The high point, at least in the eyes of the outside world, was the beginning of the corona pandemic. The media described Martin Krengel as the “king of toilet paper”. As an important supplier of a commodity that became a symbol in spring 2020. Corona brought Wepa attention. And more than once in trouble. The challenges of the past three years are comparable to nothing else that he has experienced in the company in more than 30 years, says Krengel. Since the beginning of the pandemic, nothing but nothing in the entire tissue production chain is the same as it used to be. Everything that was previously planned, straightforward, predictable – over. In Krengel's words, "the worst" that could happen in retail happened with the hype surrounding toilet paper: the normally lavishly stocked shelves were empty. The onset of uncontrollable volatility on the commodity markets drove toilet paper prices to hitherto unknown heights.

Unwanted record sales

What Corona would bring with it was not foreseeable at the time. "Many of the effects are now only reaching us with a delay," he says. More so than in many other industries, efficiency and smooth processes have top priority in the tissue business. The individual product is of too little value for something to be given as a gift. At first glance, the tissue business is a simple one: pulp, energy and personnel are the three central and actually the only cost items in the production of toilet paper, kitchen rolls or handkerchiefs. However, disrupted supply chains led to a shortage of cellulose, Corona to staff shortages and the beginning of the war in Ukraine to exorbitant energy prices. The result: a multiplication of costs and sales prices as well as a sales record for Wepa SE, which caused a lot, but certainly not for leaps of joy. Proceeds of 1.6 billion euros. Almost 25 percent more sales than in the previous year, with slightly falling sales. For Krengel, "the increase is a purely inflationary effect". The result has not improved – “quite the opposite”. The industry has experienced "cost explosions" and Wepa, like the competition, has only been able to implement price increases with a time lag.

Wepa is going through the most challenging times in the company's history. That demands a lot from the experienced manager. Suddenly he has to take on completely new roles, both within his own company and externally. For many years, Krengel refrained from making clear statements in public, maintained good connections to politics through the former chairman of the supervisory board Friedrich Merz, but primarily looked after his employees. In the meantime he has become the mouthpiece. "The time since Corona has done a lot to all of us," he explains. For him, “us” means the trade, the employees and himself.

trade demands

When price discussions took place almost weekly, he called for sliding prices in retail. According to LZ information, there were a few unpopular price escalation clauses, but the demand could not be enforced across the board. That's why he continues to demand them and says, "given the current high level of volatility, joint solutions are needed". The special economic challenges, the energy crisis, the corona pandemic, supply chain disruptions and inflation have led to changes in cooperation with retailers. Wepa has maintained a “trusting relationship” with him for many years, as the Wepa CEO never tires of emphasizing. "Hard talks" are part of this partnership. And there have been many such discussions in recent years. But: "Personally, I think that there is more understanding for each other today.” Anyone who knows Krengel knows that he is a diplomat. That's why he says: "Cooperation between politics and business is important. Regulation alone does not create solutions. They have to be worked out together.”

Politicians must also continue to support companies. The Hakle insolvency shows what else could happen. "Common framework conditions and solutions should be found in order to maintain the attractiveness of Germany as an industrial location". Shortly before Christmas, the lawyer openly called for improvements to be made to the energy price brake, which is still the subject of heated debate in the industry.

Despite all the hustle and bustle, he is aware that the past few years have also demanded a lot from his own 4,000 or so employees. "Love and kind words alone are not enough," says Krengel in his role as chairman of the collective bargaining committee of the "die Papierindustrie" association. In his opinion, in a recently concluded collective bargaining round, the parties "found a good collective bargaining agreement in this challenging situation". Spread over 24 months, the employees will therefore receive 3,000 euros free of tax and social security contributions. A total of EUR 1,200 was agreed for trainees to mitigate the increase in consumer prices. In addition, the fees were increased by a fixed amount of EUR 150 gross as of January 1, 2023 and by an additional EUR 50 gross from April 1, 2024. This is an important sign of appreciation:

In addition to all the crisis and manager roles, Krengel also has another, very central role - right from the start. As a family entrepreneur, he bears the responsibility that his brothers and their families gave him many years ago. "Our goal is to be and remain a multi-generation family business," he explains. Wepa attaches great importance to "achieving a good balance between family entrepreneurship and professionalism over generations". In other words, a good mix of external expertise and family members in leading roles. In the mid-60s, successorship is an increasingly important topic at Krengel. The topic, says Krengel, could "cause tension". "That's why I'm glad we tackled it early on." His brothers asked his son Andreas

Succession is settled

Andreas Krengel has been with the company since 2018, on the Management Board since 2021 and has been in charge of the Professional and New Business Areas divisions since August 2022. "This structures the succession process," says Martin Krengel. However, he does not want to reveal exactly when the change will take place. In the succession process, he emphasizes, it's not about his family line remaining at the top, "but about the long-term future of the company and the change that goes with it." Until the handover, Wepa will strictly pursue its own goals, "especially in terms of sustainability, we want to develop concepts for the end consumer together with our customers".

Even in Martin Krengel's final years, Wepa continued to develop, but remained true to its own principles. The recycling paper specialist recently presented the first paper made from old packaging boxes. Packaging board is available in large quantities with the significant increase in online orders. In addition, for Wepa it is "another technical advance to use a fiber that has been in the packaging cycle many times," he explains. With the new waste paper processing process, “the footprint is significantly better again”. While competitors are pulling out of the recycled paper business, the company is clearly committed to recycling - perhaps also because it has to stick to it given the many plants and the lack of pulp production.

As CEO of the largest German manufacturer of toilet paper, kitchen rolls and handkerchiefs, Krengel has held many roles over the past 37 years. He was a goalkeeper, captain, politician, diplomat, speaker and crisis manager. Despite all these challenges, he remained calm. A virtue that has made Wepa one of the biggest in the industry. And with the confidence and down-to-earthness of the Sauerland he says: "It won't be the day after tomorrow, but there will be normal times again."

 

Source: Lebensmittel Zeitung from 01/27/2023

Author: Philip Brandlein

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