Background
Nivea (Beiersdorf’s key brand) is the biggest skin-related brand in the world. While, in the past, the brand was primarily Europe-focused, it is now becoming more and more “global”, adapted to several “semi-local” settings worldwide. Beiersdorf holds the world leader position in a diverse array of product categories, including sun protection and men’s shaving products.
The majority of the ownership of the company is in private hands, and the Herz family is the largest shareholder block. In addition, a significant portion of the company’s shares are traded on the Frankfurt stock exchange, thus making the company a mix between public and private ownership. The younger of the two Herz brothers is now on Beiersdorf’s board.
Changing consumer preferences
The pandemic has caused a significant shift in consumer preferences and shopping behavior. For example, pre-covid, there used to be a significant preference for the skin care dimension. However now there has been a significant shift towards more focus on soaps and disinfection products. Also, there has been a significant de-emphasis on skin care products as a result of “working from home” (rather than showing up in an office!). And, shopping patterns have changed too, now with a clear trend towards one-stop shopping, such as in supermarkets and away from shopping in specialty stores for cosmetics. The smelling of many products used to be key in the process of product selection – and this is much less of a case now, partially due to retailer’s restrictions on self-shop, product examination, product trialing in store, etc. in order to reduce infection spread risk. Many women, especially, tend to like spending time in stores for cosmetics, say, to stay on top of new product introductions. This is no longer a typical factor. Many skin care luxury goods have traditionally been sold at airport terminals. With the significant drop in air travel as a result of the pandemic, much of the sales from this channel have disappeared. In general, people tend to live longer. Use of skin care products tends to increase with age! This has a positive effect on the consumption of skin care products.
In total, however, the pandemic has had a massive impact on the mix of product categories, with skin care products having become significantly less prominent. And, the distribution channels have shifted too! Channel changes are becoming much more volatile than before. In summary, one might perhaps say that skin care manufacturers are facing the deepest crisis since World War II.
Geographic shifts and competitors’ positions
The biggest markets are found in domestic China as well as in the US. L’Oréal seems to be relatively solid given its relative strength in these two markets. More predominant skin care producers, such as Estée Lauder and Beiersdorf seem to be “suffering” a lot. Producers with primary emphasis on personal care (soaps, disinfection, …) such as Unilever, seem to do relatively better, however.
Long-term outlook for skin care
Emphasis on health is indeed increasing. Thus, skin care products with protective and/or healing characteristics are expected to become relatively prominent. As noted, also, the demographic shift in the population – aging – is expected to lead to higher skin care product use. Increasingly sever sun-related dysfunctional effects on us humans are further, in all likelihood, going to lead to higher consumption of skin care products.
Innovations and R&D
Innovation is seen as key, and R&D appears to be playing a particularly important role here. Two new factors seem to have emerged:
R&D is now done with a global focus in mind. This is in contrast to the traditionally predominantly European focus. R&D is becoming more localized!
Greater speed is increasingly becoming a reality. The way R&D is done now might lead to results, say, in 1.5 years, instead of the traditional 10 – 11! New digitalization driven processes are important when it comes to this!
Beiersdorf has a unique set of know-hows when it comes to skin care. Above all, Beiersdorf seems to be able to come up with skin friendly products. With the current more rapid changes than ever in consumer preferences, speedy innovations through successful R&D seem more critical than ever.
One example of this is to introduce effective treatment of co-called “dark skin spots” that tend to increase with aging. Beiersdorf has successfully come up with a new skin care product to ameliorate this skin issue.
A critical concept when it comes to all of this is to focus more on so-called ‘open innovations’, i.e. cooperating with others when appropriate, and to adopt knowledge developed by others with pride. This implies an additional shift, which has perhaps been particularly hard for many German companies to internalize. Many German firms seem to be pursuing a “do it all oneself” approach when it comes to R&D – and this tends to require more time!
Sustainability
This is a major commitment for Beiersdorf, and the emphasis seems to be in three areas, in particular:
Packaging – this should be “green”. Plastic is used extensively. However, the dilemma is that many types of plastics have inferior quality grades relative to what Beiersdorf products typically might require. More expensive packaging might be called for, but, are the customers willing to pay for this? Clear targets regarding recyclability of “quality” plastics have however been set. By 2025 this milestone shall have been reached, in all likelihood.
Formulation of products – clean!
Emissions – CO2 neutral. This applies to all of Beiersdorf’s facilities.
Also, sustainability is increasingly being seen as a driver for innovation. Employees, especially the younger ones, show strong commitment. Significant progress is being made when it comes to coming up with more sustainable products and packaging. Perhaps most remarkable: the delivery of sustainable innovations is becoming much faster.
Role of family ownership
As already noted, the Herz family holds a majority ownership stake in Beiersdorf. This is seen as a competitive advantage, as follows:
More of an entrepreneurial perspective, above all by going for more long-term approaches.
Allowing for more transparency.
Go for changes now that might be likely to take fuller effect only much later – “work for the next generation”.
Micro-management – NO!
Beiersdorf is aiming to allowing its people to grow, through “freedom” i.e. not to focus on micro-management. This sets the company aside from many of its competitors, seven of which are much larger!
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