Corporate Interview: 'It's not over yet': Beiersdorf executive

What have been among your company's key management initiatives to cope with the current crisis?

We came to the conclusion that our strategy introduced in 2005, which focuses on four cornerstones: superior brand, superior supply chain, clear geographical focus and superior talents in a lean organisation, are valid even in a time of crisis.

We have also introduced a brand portfolio, which allocates different positions to our brands in terms of aggressive growth, profitable growth, or profit making. We have also introduced a country portfolio. We have clustered the regions according to their strategic significance.

We have a very strong balance sheet. We basically have no loans, which at a time like this is an extremely strong and comfortable position. We did, however, start very early [in] 2008 to reallocate our liquid assets. We managed to safeguard the assets of [our] companies by starting very early, with reallocation; with questioning is this the right way of investing, with changing many things.

We started a major restructuring programme for our supply chain in Europe more than three years ago, and this decision, for many employees, was hard to understand. Everybody said: "When everything's fine, why do you shut down factories? Why do you close down warehouses?" We had completely restructured [our] European [operations] before the crisis started. We completely outsourced all [our] logistics operations. So you may say we were lucky. But we had the courage to take these difficult decisions in good times.

Our consumer business grew last year by more than 8 per cent, [and] that was about three times [the rate of] market growth. This year we will still grow faster than the market, but at a very different kind of level; so, much slower growth, but still faster than the market, which is our prime objective.

I'm confident, because apart from our organisation, apart from our people, we have one tremendous asset, first and foremost, the Nivea brand. We hold, at last count, 138 No-1 positions in different categories [and] in different countries.

We have just been voted the most trusted brand in Europe for the ninth consecutive time. So many consumers trust Nivea - just as many Thai people trust Nivea - because our positioning has always been "value for money". At the moment, when people are being much more careful about how they spend their money, it's really a good positioning.

Is it true that during an economic downturn, as some researches say, strong brands will prevail because consumers don't want to risk using less-known brands?

Consumers may do two things: First, because I don't want to lose my money here, I can't risk my money. Or they may "trade down". So in many countries we've seen the strong development of private labels. But market researchers also say that in many countries, [the sentiment goes] "I may buy cheaper whiskey, cheaper beer, and cheaper television or maybe no television at all, but when it comes to skincare, and in particular facial care, I want my own brands". We're not [charging] premium prices. The "value for money" positioning gives us a very strong footprint.

Because of our financial strength, we put more emphasis on fixed-cost development than we [would] normally do. But we do not stop our investments. We continue to invest in research and development, and in our brands.

The latest numbers from Euromonitor show that we have a growing market share.

What are you doing differently now, compared to before the crisis?

What we're doing differently is predominantly advertising. We go more for the essential messages. We strengthen the fact of our No 1 position. We have not cut the [advertising] budget.

For example, what we're just doing in Thailand: the complete relaunch of Nivea Body, which we started on July 1st, is a perfect example [of our] strengthening of the core of the businesses; the basic products. We're [conducting] a lot of activities to make this stronger at the moment, because I think this is also a time when consumers may not want to spend on the high-end side for products. But they want the "essentials", [and these can be] your deodorant, shampoo, or moisturiser. You may not be able to buy all the extras - at least for the time being.

We have also changed some geographical focus. Like I said, we have our countries portfolio, and for the time being we have made tactical changes - where we invest over-proportionally and where we...sort of put this on hold.

In which group does Thailand stand?

Grow, grow, and grow. No change for Thailand. I'm absolutely confident [in the] potential we have in this market.

How about initiatives in leadership?

We have encouraged our executives to display even stronger leadership, because any employee - just by reading the newspapers or watching television - is getting a little bit irritated. [We are] not hiding problems. But it does require strong leadership, open communications, clear information about why the numbers are different.

Don't you believe some forecasts that the economy has bottomed out?

Personally, I'm an optimist. But I don't think anyone has ever experienced an economic crisis of these dimensions. This is the first truly worldwide crisis, so all of these people who tell me it's going to be over in the first quarter of 2010 or fourth quarter of 2009, they know - with all respect - as little as I do. I'm very cautious when it comes to listening to these predictions. We don't know. It's still sort of in a fog bank. I see some signs from China and from other countries that the economies are picking up. [However] this morning, again, there was some negative news from US [job markets data]. So, it's not over, I don't think it's over.

We're also taking more precautions when it comes to planning for our 2010 [budget].

Have you witnessed any fundamental changes in the marketplaces?

I see changes in the high-end cosmetic market, in the selective market, where businesses have been seriously affected. But when it comes to our categories - we're talking pretty basic requirements like body care, skincare - these are things that people have always wanted. In particular, when it comes to countries like Thailand, I've always been impressed [by the fact that] even people who do not have big incomes really take particular care of their bodies. The same is true for China and Japan and many countries in Asia, where personal care has, historically, been much more important than in many European countries.

When the first Europeans arrived in Japan hundreds of years ago, when they saw people actually having a bath, they couldn't believe it. It was thought to be very unhealthy. But that was hundreds of years ago.

There is an interesting phenomenon, and this is almost worldwide: in bad times, in particular, you want to look good and feel good. I'm not saying that this is totally unaffected by economic developments. You may not be able to buy your new TV tomorrow or your new camera, your new furniture or your new car, but this you will continue to do. In particular, when it comes to your face, when you have products that you like, you will not change so easily because you just want to look good and feel good, especially when times are bad.

What we have done in countries like China is offer smaller sizes. Even with less money you can still buy your Nivea products.

Last month, Beiersdorf appointed the first Asian, James Wei, to its board. He will reportedly have responsibility for many countries in Asia and for "New Ways to Business". What is meant by "New Ways to Business"?

I'm very happy that we managed to bring James Wei onto our board because it's a very clear indication of how important Asia is to us. One of our most interesting challenges is China. Mr Wei, who is Taiwanese, certainly has a lot of personal affinity with that part of the world, including his language. But he is not supposed to run only China. He is also going to be responsible for Thailand [and some other countries].

"New Ways to Business" is future-oriented. An example of what this is for us is "travel retail", like the duty-free channel. It's business at airports where we have a strong presence of [cosmetic brand] La Prairie, [but] where we are almost non-existent, apart from Dubai, with Nivea.

His job is also to think about [using] new channels for Nivea that are not totally crazy. In the past we have not paid too much attention to [these alternative channels] because of capacity, time restriction, and many other things. This has nothing to do with the crisis. We are pretty successful in our traditional distribution channels, like mass markets, pharmacies, and even "selective" [markets]. But there are many more distribution opportunities that we have never actively looked at. [We will] just evaluate, like I said, travel retail, for example, and other opportunities that are still close to the traditional way of our business model, but beyond our present business model in terms of distribution.

Can you share some of your targets and plans for Asia and Thailand, in particular?

We want to continue growth in the double-digit range in Thailand. We have a very good market position here, but there are still areas where we have enormous potential.

I'm absolutely convinced that many nations in Asia will move out of the crisis faster than, for example, many European nations.

I do see, generally speaking, much more dedication in many Asian nations to say: "Okay, we have to work hard"; "We want to get out of it"; "Yes. At the moment it looks a bit dull, a terrible situation, but if we don't start, we can't sit and wait for others to do it." This is an energy that I see in many Asian people, but unfortunately I don't see in too many European people any more.

nKleinschmidt gave this interview while in Thailand last week to preside over the expansion of Beiersdorf's Bang Phli factory, which doubled its production capacity to 31,000 tonnes with an investment of ¤10 million (Bt475 million). He was general manager of Beiersdorf (Thailand) from 1991-96.

pichaya@nationgroup.com