By and  on September 16, 1994

HAMBURG, Germany -- The Beiersdorf Group, a pioneer in skin care since 1911, is finally coming into its own.For 83 years, the company, based here, has been marketing round tins of Nivea skin cream at low prices -- a 6.7-oz. container costs around $4. Judging from recent sales figures, the inexpensive brand is now in tune with the parsimonious times.In 1993, Nivea had a volume of $1 billion (1.6 billion marks at current exchange rates), making it what Beiersdorf claims is the world's largest body care brand. And for the first six months of this year, sales are up 17.8 percent worldwide with a boost from a new ad campaign.Nivea Visage -- the company's premium-priced mass market facial skin care line and the centerpiece of Beiersdorf's growth strategy -- has been expanding its share in the increasingly tough German market, where prestige perfumeries and department stores are now locked in a fierce price-cutting war.At the end of June, Nivea Visage claimed 16 percent of Germany's mass facial care market, according to industry estimates. In comparison, the brand finished 1993 with 12.3 percent.Rolf Kunisch, Beiersdorf chairman and chief executive officer, maintains that the gains are not the result of any one initiative. It's just a case of getting the key elements right, he said, ticking off Beiersdorf's strengths: innovative formulas, steadily increasing advertising, a focus on the core business of skin care and Nivea, its bread-and-butter product that's now in step with the value-crazed Nineties."Nivea is a fairly basic, no-nonsense product," Kunisch said in an interview in his office here this year. "It offers high value at a reasonable cost."However, he insisted that the Nivea boom was not simply a case of recession-weary department store shoppers trading down. "I don't think it's a recessionary trend. It hinges on the quality," he said, pointing to the more expensive Nivea Visage products. "It's top class, and if you can buy that for 25 marks ($16), it's very appealing."Kunisch, who ran the group's cosmetics division for three years before stepping up to his present post in June, declined to disclose Beiersdorf's advertising expenditures. But it is clearly a key element.Euromarketing, the advertising newsletter, estimated that Beiersdorf last year increased its TV spending on Nivea in Europe by a dramatic 39 percent.Euromarketing calculated that Nivea advertising totaled $61 million last year, second only to L'Oréal's spending on its L'Oréal brand. That figure includes spending in the six largest markets and is based on rate-card costs with no allowance for the substantial discounts available in some markets.Kunisch asserted that Beiersdorf gets more mileage out of its Nivea advertising than other companies because an ad for one type of product boosts name recognition for the brand in other categories. Plus, he said, market research has shown that people in many countries consider Nivea to be a local brand."If you ask a Frenchman, he says it's a French brand," argued Kunisch. In fact, the name is derived from a Latin term meaning snow.In addition to its cosmetics business and its sales of $1.6 billion (2.5 billion marks) -- nearly 53 percent of the corporation's volume -- Beiersdorf also has an adhesives division and a health care division.In 1993, the group earned net profits of $116 million (179 million marks) on consolidated sales of $3 billion (4.76 billion marks).Meanwhile, corporate sales in the first half of this year rose by 10.4 percent, spurred mainly by 14.7 percent growth in the cosmetics division. Although Kunisch does not expect the division to sustain growth at that level through December, he is confident that the end of the year increases will be in double digits.In addition to Nivea, the company's assortment of brands includes Labello lip care, 8x4 deodorant, Gammon men's products and Basis pH and Atrix skin care.In the prestige market, the company has La Prairie skin care, acquired in 1991, and Juvena, a more moderately priced line sold in Europe.La Prairie, which was acquired in 1991, has annual sales of about $70 million and Juvena does $150 million. However, Kunisch intends to keep the company's focus on Nivea.He's also aiming to double cosmetics sales by the turn of the century. Here's how:l Expansion of the Nivea range with innovative products. This year the company has launched two alpha-hydroxy fruit acid products -- in the U.S., called Inner Beauty Daytime Renewal Treatment and Inner Beauty Nighttime Renewal Cream -- under the Nivea Visage brand.In Europe, retailers were braced for a fruit acid war in the hypermarket aisles between Plénitude's new product and Nivea's counterpart. But in Germany, Beiersdorf's first launch market where the new products were launched in July, retailers report that the verdict is still out."It has been in our assortment for only six weeks or so, and so it's much too soon to say how well it's been accepted," said a marketing executive at the 256-store Drospa drug chain, based in Hagen.l Taking advantage of the experience gained in Germany on issues like the environment, Beiersdorf is a leader among cosmetics companies in providing refills and developing preservative-free formulas. It's also counting on its experience in men's skin care as other markets catch up to Germany.l Steadily increasing spending on the company's "blue campaign," a series of blue-tinted TV and print ads. It was adopted worldwide in mid-1992.l Emphasis on key geographical markets, including Germany, France, Japan -- where Beiersdorf owns 60 percent of a joint venture with the toiletries giant Kao -- Italy and the U.S.Beiersdorf has managed to carve out an impressive market share in Germany. All Beiersdorf brands combined, Kunisch claims, have 41 percent of the skin and hand care category; 10 percent of the face skin care market; 70 percent of the lip care market, and 25 percent of the sun care market.Kunisch admits, however, that "we have a long way to go" when it comes to foreign markets. He is fond of measuring potential based on per-capita consumption of Beiersdorf products.For example, in Germany, the per capita consumption of Nivea is 11 marks ($7.14), while European per-capita consumption averages 6 marks ($3.89). But in the U.S., it's only 0.4 marks (25 cents), with ample room for growth, he said.As noted, Beiersdorf Inc. of Norwalk, Conn., has laid out ambitious plans for Nivea Visage to move from being one of the top-eight skin care mass players in the U.S. to one of the top five within only two years.Industry sources expect Nivea Visage volume to double to $25 million this year. Part of the plan is to triple Visage's advertising budget, to $20 million.More exposure might be a good thing. A buyer for a top-20 drugstore chain said that Nivea Visage sells well only when there is a cosmetician on duty to point out the line and explain its benefits. It often appeals to customers who ask for Lancôme or other prestige brands, the buyer said.Another mass market retailer, Paige Donald of Kerr Drug Stores Inc. in Raleigh, N.C., said Nivea is "doing great." But the store dropped the more advanced Nivea Visage a year ago. "Maybe [Visage] was before its time," she said.In Europe, Beiersdorf is concentrating on France and Italy, where Kunisch puts his market share at about 7 percent of the total mass skin care, including sun products, in each country.In 1992, Beiersdorf added new markets into its consolidated structure, including the U.K., when it reacquired its trademark in 15 countries from the British medical firm Smith & Nephew for $58 million (90 million marks).Beiersdorf trademarks were expropriated during World War II and have been reacquired in 30 major markets worldwide -- everywhere except Poland.On the environmental front, Kunisch ruefully acknowledges that the group is a leader. "We Germans are particularly good at that, and I'm almost saying it in a cynical sense because I've been suffering from it for a long time," he said. "It's a psychological thing. Germans feel bad, and that's why they [put up with] the inconvenience of refills," he continued, waving a cardboard spray can of 8x4 deodorant and a soft plastic refill pack for shower gel. Both were developed as a result of Germany's strict environmental rules.Some efforts, such as reducing packing weight and preservative-free product formulations, translate easily to other markets.But he's not sure the more exotic concepts, like cardboard instead of plastic for deodorant sprays, will fly abroad. "I think it's good to have experience," he noted. "I don't think we want to be a missionary."

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