Beiersdorf Expects Boost From Women Lingering in Shower
Beiersdorf AG (BEI) wants you to spend more time in the shower.
Beiersdorf (BEI) is introducing a lotion to be applied while showering and then rinsed off, like hair conditioner, the first product of its kind in Europe. Beiersdorf expects the cream to convert some of the 43 percent of women it says don’t use a moisturizer daily.
Since (BEI) becoming Beiersdorf chief executive officer a year ago, Stefan Heidenreich has vowed to boost performance by focusing research on skincare and repositioning Nivea to reverse its declining share in the 78 billion-euro ($102 billion) Western Europe personal-care market. One of his first moves: ditching singer Rihanna as Nivea pitchwoman, deeming her too steamy for the staid brand that’s been a mainstay of European bathrooms for more than a century. Now he’s focused on bolstering Nivea with extensions.
“In the past we were jumping from innovation to innovation very quickly,” Ralph Gusko, a member of the company’s management board, said while demonstrating new products at Beiersdorf’s Hamburg headquarters earlier this year. “We’d rather focus on a few activities but make them big.”
Beiersdorf isn’t alone in getting pickier about its innovation bets. Dove maker Unilever has whittled its product pipeline to 600 projects last year from 5,000 in 2005, and CEO Paul Polman says he won’t even look at a new idea unless it has the potential to generate at least 50 million euros in annual sales.
Still, to guarantee a successful revival of the brand and sustain a share price trading at a higher multiple than both Procter & Gamble Co., maker of the Olay skincare products, and Unilever, “they will need one or two more mega-hit products,” said Sebastian Frericks, an analyst at Bankhaus Metzler. The latest addition to the 102-year-old Nivea brand is “not enough, but it’s a step in the right direction.”
Nivea’s new lotions, six years in development, are called “In-Shower Skin Conditioner.” The idea came about from research that showed many women don’t have time in their daily routine to use a moisturizer. Another finding: Women like to prolong their morning showers.
“The shower is a very pleasurable place, a place you like to be, a place of transformation,” Beiersdorf spokeswoman Daniela Zastrow said. After testing the lotion, some women found they “cannot live without the product,” she said.
European women are living without P&G’s rival lotion. The American company introduced a similar product under its Olay brand in the U.S. in 2004 but doesn’t sell it elsewhere.
Indeed, Beiersdorf’s offering, priced at around 4 euros for a 250 milliliter bottle, has received mixed reviews. The Western European skin-care market is “very saturated” and dominated by L’Oreal, with its share of nearly 20 percent, according to researcher Euromonitor International.
“I am quite skeptical,” said Euromonitor analyst Oru Mohiuddin. “Using a moisturizer while you shower doesn’t really save time. If they’re banking on this particular range, that’s not enough.”
Gauthier Boche, a director at branding consultancy CBA in Paris, says that if Beiersdorf can convince people that Nivea offers an easy way to moisturize, the company can gain new customers.
“If they manage to implement a new usage, that’s the big jackpot,” Boche said. Still, the product will only work if “it’s a mass success,” he said.
The company has its work cut out for it in winning over customers like Floriane Murcia, a 22-year-old sales assistant in Toulon, France. While conceding that the product does “save a bit of time,” she wouldn’t yet trade it for her daily moisturizer.
“I moisturize in the evening anyway, so I don’t necessarily need a product to save those extra five minutes in the morning,” she said.
In a May 2 call with analysts, Heidenreich said “we’re very pleased” with the in-shower lotion, which is now moving from Italy to a global release. The company says it has grabbed about 5 percent of Italy’s body-cream market, which researcher Nielsen Co. says was valued at about 100 million euros last year.
Beiersdorf’s share of the western European beauty and personal-care market fell to 5.9 percent last year from 6.2 percent in 2007, data from Euromonitor show. L’Oreal SA (OR), the world’s biggest cosmetics maker, and Unilever both gained ground during the period.
In the first quarter of 2013, Beiersdorf says, its sales in western Europe excluding Germany declined 0.7 percent on a like-for-like basis. That was “much weaker than expected,” said Sanford C. Bernstein analyst Andrew Wood. Beiersdorf has also lost share in Germany, where the body-cream market contracted 24 percent to 130 million euros last year, data from researcher Symphony IRI Group show.
Amid the sales declines, Heidenreich remained buoyant on last month’s earnings call, saying his lineup of new products for 2014 “looks splendid.”
When Heidenreich joined, “the innovation pipeline was not as strong as it should have been,” Zuniga said. “It’s clear that there is much more to come.”
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