Beiersdorf Cosmed Sales Up

BERLIN — With sales growth of 7.2 percent and an earnings before interest and taxes margin of 13 percent, 2002 was another record year for the Beiersdorf Group’s Cosmed division, according to Uwe Wölfer, the Beiersdorf executive board...

BERLIN — With sales growth of 7.2 percent and an earnings before interest and taxes margin of 13 percent, 2002 was another record year for the Beiersdorf Group’s Cosmed division, according to Uwe Wölfer, the Beiersdorf executive board member responsible for the Cosmed division.

Confirming a preliminary release in mid-January, 2002 sales reached $3.45 billion, up from $3.21 billion in the previous year. At constant exchange rates, the division’s sales rose 10.3 percent.

Florena Cosmetic GmbH, which Beiersdorf acquired in 2002, contributed $54.9 million to Cosmed sales. Skin care products from Beiersdorf’s medical division, primarily under the Eucerin and Hydrofugal brands, generated an additional $236.2 million to Beiersdorf’s total skin and personal care business.

While Beiersdorf did not specify earnings figures, a 13 percent EBIT margin would amount to earnings of about $448.5 million, Wölfer acknowledged.

Nivea, the main motor behind Beiersdorf’s beauty business, increased sales by 6.9 percent to $2.86 billion .

At Beiersdorf’s annual Cosmed financial press conference here Wednesday, Wölfer once again emphasized Beiersdorf’s focus on qualitative growth. “That means as many leading, and thus profitable market positions as possible in each product category and in every country,” he said.

Nivea holds 160 leading market positions in the 54 countries where the brand is actively merchandised, up from 140 number-one slots last year. Five years ago, Nivea held 50 number-one positions, and by 2006, Beiersdorf plans to increase that amount to 250, Wölfer said.

International sales accounted for 73 percent of total Cosmed sales, reaching $2.53 billion, a gain of 7.6 percent. Currency effects had a serious effect, however, on sales in many regions. In North and South America, sales declined 9.9 percent to $448 million, but at constant exchange rates increased by 2.2 percent. In the U.S., for example, sales were barely up 0.3 percent to $194 million, but at constant exchange rates would have grown 6.8 percent.

Argentina was by far the hardest hit by currency and economic problems, with sales down 66 percent to $12 million, compared with $36 million in 2001.

Conversely, Asia/Africa/Australia grew sales by 12.9 percent, or 19.7 percent at constant exchange rates. Japanese sales remained at low levels, the company said, though sales grew 5.5 percent in local currency. But in China, sales jumped 25.8 percent, South Africa 56 percent, South Korea 19 percent, Australia 19.7 percent and Indonesia 31.8 percent on a euro basis.

This story first appeared in the February 7, 2003 issue of WWD.  Subscribe Today.

Sales in Europe, excluding Germany, were up 12.2 percent to $1.7 billion. Domestically, sales grew 6.1 percent to $922 million, compared with overall German market growth of 0.3 percent, he pointed out. However, Wölfer acknowledged that without Florena’s contribution, German sales would have been flat for the year. Moreover, he sees “no grounds for optimism this year either” in the German market, given the country’s continuing economic, political and consumer doldrums.

Beiersdorf’s prestige division, the Zurich-based Juvena/La Prairie Group, generated sales of $193.8 million, up from $184 million. La Prairie brand sales rose 9.5 percent (10.4 percent at constant exchange rates) to $140.4 million.

Beiersdorf has been buffeted by 18 months of takeover rumors. “It’s not particularly beneficial, but we’ve learned to live with it,” Wölfer commented. However, he had nothing new to report on that front, noting the rumors had quieted down lately.

Munich-based financial services conglomerate Allianz is still presumably shopping around its 43.6 percent Beiersdorf stake, and Procter & Gamble, L’Oréal and Johnson & Johnson are among those who have all been “unofficially” interested in making a deal. However, Tchibo, the German coffee company and diversified retailer that currently has a 30 percent “blocking minority” and would like a larger stake in Beiersdorf, seems to remain an unsurmountable obstacle to any takeover candidate.

In spite of all the uncertainties concerning both economic and political developments worldwide, Wölfer said he expects Beiersdorf to continue its growth trend in both sales and earnings in 2003. He anticipates Cosmed sales growth of around 6 percent, and the EBIT margin to remain at the company’s long-term target of between 12 and 13 percent.

“In Germany, there’s very little to point to market growth in the coming year, but we will try to improve market share through innovation, not lowering our prices,” Wölfer said. Mass market knockoff of Nivea is a serious problem that has grown in Germany of late. “It’s really bad when private labels try to imitate the market leader, and we will fight such attempts with all our might through legal channels. Our company lives from the good reputation of our brand,” he stated.