Beiersdorf CEO: Firm “On Track” For Growth In 2013
This article was originally published in The Rose Sheet
Executive Summary
Increased market share among its Nivea, Eucerin and La Prairie brands helped drive Beiersdorf to a 6.5% increase in sales during the first half of 2013.
Hamburg, Germany-based Beiersdorf AG reported consumer group organic sales growth of 6.5% during the first half of 2013, which it attributed to strong market share gains from its Nivea, Eucerin and La Prairie skin-care brands.
The firm notes that consumer sales advanced 3.1% on a reported basis to €2.6 billion ($3.4 billion at June 28 exchange rates), and earnings were up 7.3% to €351 million ($457.5 million).
“We are becoming increasingly better at translating the potential of our brands and our company into economic success,” CEO Stefan Heidenreich says in an Aug. 7 release.
During a same-day call with analysts, the exec lauded the success of the firm’s skin-care business.
Nivea was Beiersdorf’s “bread and butter” for the half, while strong launches propelled Eucerin. And with new products slated to debut in the second half for La Prairie, all three brands are “at full blast,” he said.
On an organic basis, excluding the impact of currency and various charges, Nivea sales were up 6.8% during the first half, and Eucerin and La Prairie increased 12% and 5.3%, respectively.
Nivea’s increase reflected results of a renewed branding effort that “sharpened” its profile, according to the firm. The rebranding included a refreshed logo to help products stand out on store shelves (Also see "Beiersdorf Updates NIVEA Design; Sales Drive Guidance Upgrade" - HBW Insight, 21 Jan, 2013.).
According to CFO Ulrich Schmidt, the new design is paying off and there’s “a much bigger presence” of Nivea products in stores than before the rebranding. He added: “My dream of blue walls is coming more and more true,” referring to the brand’s iconic color.
Heidenreich added that the changes and new targeted advertising campaigns have resulted in increased market share and consumer awareness for the brand.
Americas Drive Growth
Beiersdorf reported sales in the Americas of €464 million ($604.8 million), up 13.8% on an organic basis from the first half of 2012.
Sales in Latin America advanced 20% like-for-like in the first half compared with the same period last year, while North America – an area where the firm has struggled – saw a sales increase of 4.3%.
Eucerin propelled North America sales while Latin America was driven by Nivea deodorant, face and body product sales and an overall increase in sales in Brazil.
The firm’s Africa/Asia/Australia region saw 19% growth to €709 million ($924.2 million), attributed to sales in China where Nivea performed well and gained share against competitors, Schmidt said.
Consumer sales in Europe were flat for the first half at €1.5 billion ($1.95 billion).
Heidenreich was pleased with the firm’s overall results.
“These figures show that Beiersdorf is on a good track,” he said, noting that implementation of his plan to bring the firm to strong growth “has given our company a clear boost.”
For the year, the firm projects like-for-like growth of 5% to 6%, at a time when the overall market is expected to increase 3% to 4%.
While Heidenreich acknowledged the firm is presently on track to exceed the growth estimates, he said the figures are conservative due to the potential for sluggish markets and risks in emerging markets.
“So, at the moment, there is no rain literally on the horizon, but I think we should remain cautious and see how that goes,” the CEO said during the call.
Schmidt said that with a strong innovation pipeline, the firm will likely invest more in advertising and promotions to help drive market share the rest of the year.
However, that investment could weigh negatively on earnings in the short term, according to analyst Andrew Wood of Sanford Bernstein.
“Beiersdorf is not going to quickly deliver the very strong margin growth that investors expected” when Heidenreich was appointed in 2011, he said in an Aug. 9 note.
Analysts from Societe Generale agreed in an Aug. 8 investor note.
“Successful delivery of a 2014 pipeline that the CEO considers stronger than in 2013 could also boost sales and share,” they write. “The flipside is that these actions will require material [advertising and promotional] support, which could well restrain margin progression.”
Cell Rejuvenation “Masterpiece”
In May, Beiersdorf launched its new Nivea Cellular Anti-Age range in select European markets, and during the call execs noted they plan to gradually roll it out to other locales.
“So far we are very pleased [with sales], but it's early,” Heidenreich said
The line comprises day cream, night cream, serum and eye cream, and features what the firm calls “breakthrough anti-aging research.”
In a July 29 release, Beiersdorf says the products represent a milestone in that more than 8,500 consumers were actively involved during the formulation process “in order to ensure that the finished product responds to the expectations women have toward high quality anti-aging face care.”
According to Sven Fey, head of product development for Nivea Face Care, Cellular Anti-Age “induces cells to behave like younger ones.”
The products help to offset signs of aging with ingredients magnolia extract to increase cell resistance to stress, hyaluronic acid to improve water retention and creatine to increase cell energy, Fey says.
In addition, Heidenreich said during the call that Beiersdorf’s overall product pipeline is strong, with “great products coming up.”