After a lackluster sales year encumbered by an unwieldy product assortment and operational structure, Beiersdorf AGhas implemented a strategy to streamline its business for maximum profitability.

The Hamburg, Germany-based firm spent the better part of 2011 analyzing its business and resolved to realign for “a leaner and more efficient structure,” CEO Thomas-B. Quaas explained during a March 1 earnings call.

In addition to pruning its product assortment to make the business less “complex,” Beiersdorf has narrowed its focus on skin care, the category on which “the company was born and raised,” Quaas said.

Over the past few months, thousands of products have been removed from shelves, with priority given to skin care, according to the exec. In Europe, 19% of SKUs, including hair-care products, will be discontinued by the end of 2012, Quaas said.

Company executives have taken on regional responsibilities to nurture the firm’s business in emerging markets with strong appetites for skin care, with Latin America and Southeast Asia of primary importance. The goal is to understand market dynamics in each region, Quaas explained.

In China, where Beiersdorf has struggled to capitalize on the growing middle class, the firm eliminated 4,000 jobs in its C-Bons hair-care subsidiary under a restructuring initiative designed to separate lagging hair-care efforts from a potentially more profitable skin-care platform. Beiersdorf purchased an 85% stake in C-Bons in late 2007 for €269.45 million, hailing the company as “one of the leading players in the Chinese hair-care market.” The move has been questioned by analysts convinced that skin care should be Beiersdorf’s priority.

With the company’s recent strategic changes, Beiersdorf is “well-prepared to capture opportunities in the future,” according to Quaas.

Beiersdorf reported a 1.1% increase in consumer sales to €4.7 billion ($6.2 billion) for fiscal 2011, driven by growth in Latin American markets as well as in the U.K. and Russia Also see "Sales & Earnings In Brief" - HBW Insight, 30 January, 2012..

NIVEA Investment Paying Off

In reemphasizing skin care, Beiersdorf is throwing its resources behind NIVEA.

To raise brand awareness worldwide, the firm poured €1 billion into traditional print, outdoor and digital advertising last year as part of a “Skincare for Life” global campaign Also see "NIVEA Ramps Up Global Awareness Campaign With Digital Outreach" - HBW Insight, 8 August, 2011..

To celebrate NIVEA’s 100th anniversary, the firm sponsored brand ambassador Rihanna’s LOUD tour and used the sassy singer’s song “California King Bed” as the soundtrack for branded commercials. The partnership with Rihanna reflects Beiersdorf’s desire to appeal to a younger demographic.

“We want to make an impression that [skews] not upscale, not downscale, but for very normal people,” Quaas said.

The firm’s investments have helped strengthen NIVEA’s U.S. position. For the second quarter (ended June 30, 2011), the campaign helped boost Beiersdorf’s total U.S. sales 5.9% to €233 million ($330 million). For full year 2011, NIVEA achieved organic growth of 2.1% worldwide.

In Europe, the 2011 rollout of NIVEA Invisible For Black & White deodorant registered as the “biggest success of any launch” in the firm’s history, Quaas said. The antiperspirant is designed so as not to stain clothing, “to keep your black clothes black and your white clothes white for longer,” according to the brand’s U.K. website.

Nivea Invisible For Black & White is available in roll-on and spray versions.

Quaas explained that the product’s “mega-success story” stems from “real product innovation well understood by customers” worldwide.

The firm also is finding success with “pure and natural” skin-care offerings in NIVEA face care, he said.

Eucerin Outpacing Market

While NIVEA is the focus for Beiersdorf in mass, Eucerin holds a “very clear position” in the dermatological skin-care sector, according to the firm.

The 112-year old brand is typically sold through pharmacies in regions of the world where that channel exists because “there is lower or less competition” than in mass, Quaas said.

Since 1995, Eucerin has grown an average of more than 12% annually, which is “extremely strong” and ahead of market, Quaas noted.

The firm aims to realize a comparable level of success in developing Asian markets and in Thailand in particular. The firm also is building brand awareness in North America. For full-year 2011, the Eucerin brand posted global growth of 4.8%, according to a March 1 earnings release.

At the prestige level, La Prairie is “one of the best-growing, best-developing, high-end, selective skin-care brands in the world,” said Quaas, calling it a “truly global business.” The brand recorded a 3.4% increase in sales for 2011.

La Prairie recently introduced the White Caviar Illuminating Système, which brightens the skin with an “innovative approach to controlling the appearance of discoloration with the legendary firming benefits of caviar,” according to a product description.

Products target age spots and uneven skin tone “before, during and after they appear.” The collection includes an Illuminating Serum ($450) for hydration and antioxidant protection and an Illuminating Cream ($450) to “control age spots,” as well as a spot treatment ($150), eye serum ($250), eye cream ($350) and SPF 15 hand cream ($150).

Products are sold online and at high-end retailers including Bloomingdale’s, Bergdorf Goodman and Saks Fifth Avenue.

Showing Promise In 2012

This year marks an important step into the future for Beiersdorf as Stefan F. Heidenreich, currently chief executive of Hero Group (a global manufacturer of baby foods and jams), becomes CEO of the company, effective April 26, 2012. Quaas, who has been CEO of Beiersdorf since 2005, will move to the firm’s Supervisory Board, according to an October 2011 release.

Heidenreich worked previously at Procter & Gamble Co., where he managed such brands as Pampers, Ariel and Crest, and later at Reckitt Benckiser Group PLC, where he oversaw an aggressive expansion of the firm’s laundry and cleaning business into Eastern Europe. He joined Beiersdorf in 1996 as a member of the Executive Board.

Heidenreich’s appointment could help mend the firm’s relationship with investors, after a period in which the company struggled to deliver significant gains, according to analyst Andrew Wood of Bernstein Research Also see "Analyst: Outsider Heidenreich Brings Fresh Perspective As Beiersdorf CEO" - HBW Insight, 10 October, 2011..

Under Heidenreich’s wing, the firm will work to generate annual cost savings of approximately €90 million ($121.3 million) before taxes, starting in fiscal 2014 Also see "Beiersdorf Realignment Aims For €90 Million In Annual Savings" - HBW Insight, 5 December, 2011..

Analysts are optimistic about the future. In a March 2 report, Deutsche Bank research analyst Harold Thompson states: “We look forward to the middle of 2012 as a better guide of how the operational recovery takes hold, and this under the helm of a new CEO.”

“Sales growth, margins and brand equity are all set to improve,” he asserted.

Societe Generale expects Beiersdorf’s “[fiscal 2012] margins to surprise positively,” according to a March 2 note from analysts Chas Manso, Emmanuel Bruley des Varannes and Warren Ackerman.

For full-year 2011, Beiersdorf’s overall sales – including contributions from subsidiary tesa SE, a manufacturer of self-adhesive products – rose 2.1% on an organic basis to €5.6 billion ($7.4 billion).

Post-2011, A Slimmer, Skin-Care-Focused Beiersdorf Emerges

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