This article is from Management magazine
Who knows Beiersdorf? Not many people. On the other hand, its flagship product, Nivea cream, is world famous. But, for a brand, it is always risky to depend on a single product. Diversifying was therefore a necessity for the German creator of the little blue box, born in 1911, especially since the threat of the cosmetics giants was reinforced at the turn of the 2000s, with multinationals like L’Oréal and Unilever, three or four times bigger than the family business until 2003. The year, precisely, in which Procter & Gamble would have absorbed it if the city of Hamburg, the birthplace of Nivea, had not stepped up and preferred the brothers Herz. At the head of the Maxingvest holding company, they become reference shareholders and launch a vast diversification program.
Foundation, eye shadow, mascara, lipstick, body care … Nivea is expanding its range. But this race for novelty is too hasty, while the brand’s R&D resources are much less important than those of its powerful competitors. Result: in many departments, it goes almost unnoticed. In 2012 Stefan Heidenreich, a former Procter, took over as chairman of the management board. Its mission: to reorient the strategy.
> Video. Our journalist investigated the recipes for the success of Nivéa cream:
In figures: 6.7 billion euros in turnover in 2015 (+ 6.4%). 17,000 employees, including 5,500 in Germany. 700 researchers around the world. 7 R&D centers.
THREE SOLUTIONS WERE OFFERED TO HIM
1. Play stability by refocusing on its flagship product
The image of Nivea is inseparable from its little jar of face cream, so why not concentrate all the resources on it by offering an infinite range of variations? A defensible solution in the short term, but risky in the long term for the brand – will Nivea cream cross the threshold of the next generations? and for the whole group.
2. Continue to invest in R&D, but review the innovation policy
If there is one area where customers are eager for new products, it is cosmetics. Nivea can continue to use brand awareness to amaze consumers with products unmatched in the market. But, as its budgets are not unlimited, it would have to be confined to a few well-targeted ranges and find a way to reduce the risks.
3. Diversify through external growth, by acquiring brands
Beiersdorf has already established itself in the pharmaceutical sector with its Hansaplast (dressings) and Labello (lip care) brands. Diversification reinforced by the takeover of its Swiss rival La Prairie, specialist in anti-aging creams, in 1991. A policy that is certainly effective, but costly in capital, especially when competitors on the lookout are called L’Oréal or Unilever.
> HE CHOSEN THE SECOND AND MOST INNOVATIVE OPTION: restricting the range of products, but adapting it better to the needs of the public
Launching innovative products, the Beiersdorf group has proven, since its founding in 1882, how much it can do. In particular with the development of the Eucerit emulsifier: used to stabilize a mixture of water and oil, it enabled the first cosmetic cream to emerge in 1911. We also owe the creation of the solar indices to Beiersdorf. SPF in the 1970s or the use in its creams of coenzyme Q10, believed to have anti-aging effects.
> Video. A look back at the Nivea saga, a century-old brand:
When the brothers Michael and Wolfgang Herz took control of the capital in 2003, it was only natural that they were counting on innovation to transform the Nivea nugget into a true vein. They then break the piggy bank of Maxingvest, their family holding company, whose turnover peaks at 7.6 billion euros, to allocate more resources to R&D.
FOCUS ON THE SKIN, THE STRONG POINT. Dozens of biologists, immunologists, biochemists, physicists and bioengineers swell the ranks at the headquarters in Hamburg. Over the years, they transform the brand dedicated to skincare into a generalist in body care and multiply the launches. But, ten years later, the observation drawn up by the new chairman of the management board, Stefan Heidenreich, is severe: too many products fail to stand out from the competition.
Without questioning the need to innovate, he imposed a radical turn by refocusing the brand on its roots and abandoning around 20% of the references, ie the entire makeup line. Nivea keeps deodorants, sunscreens and products for men. “The aim was to focus on our strong point: the skin,” explains Ralph Schimpf, director of analytical laboratories. None of our competitors can analyze skin cells as deeply as we do. ”
Read also: Nivea, 105 years old and not a wrinkle!
700 INNOVATIVE RESEARCHERS TO MEET CUSTOMER NEEDS
The results justify this repositioning: turnover started to rise again in 2013 and now stands at 6.7 billion euros, in a stagnant market. In addition, the brand has been able to improve its know-how: thanks to its R&D department of 700 people, including 200 doctors, with a budget of 180 million euros, it has acquired unparalleled knowledge of the largest organ in the human body ( about 2 square meters), the skin.
We are then witnessing a reorientation of research, now in connection with the markets. A radical change to which the labs had to comply. “Researchers used to turn over 100 stones to try to find a rare gem in terms of innovation,” said a leader. Now we show them where to look through our customer research and they can focus on the ten most promising stones. ” Maria Langhals, R&D Director for Facials, confirms: “We involve consumers as early as possible in our research processes.”
Tens of thousands of consumers parade through the labs to test the brand’s future products very early on:
35,000 VOLUNTEER COBAYES
A visit to the test center, located below the research labs, illustrates this policy. More than 35,000 volunteers parade here each year to try out the brand’s future products. “Thanks to a very high definition camera and software developed especially for us, we can measure the structure of the skin as well as the length, width and depth of wrinkles,” explains Anke Pilzner, test manager.
A little further, a sauna allows the guinea pigs to try deodorants. Noses then come to smell their armpits to detect possible bad odors. Cameras also film volunteers in the shower, in order to observe their way of washing. “Some women rinse their hair for long minutes,” observes Anke Pilzner, “because they always have the impression that there is shampoo left. This waste of time can upset them. By changing the sensory aspect of our products, we can eliminate this inconvenience. ”
The German brand relies on seven research centers around the world, in order to better unravel the secrets of different skin types: dark skin does not have the same needs or the same reactions as lighter skin.
In order to deepen its knowledge of the needs of consumers around the world and develop products for each type of skin, the group has opened seven R&D centers around the world, notably in India, Mexico and Brazil. A quarter of researchers today work in these foreign laboratories.
At the same time, the group is investing heavily in open innovation. “About fifteen people act as an interface with our external partners,” explains Andreas Clausen, responsible for partnerships. Universities, subcontractors, private organizations, even Sunday inventors. Every day I receive proposals for collaboration on our social networks. ” Thanks to these new innovation circuits, Nivea’s relatively small size compared to its main competitors becomes an asset. «Small is beautiful, Ralph Schimpf notes. Here people from different departments can work together, because we are physically close to each other. ”
The group also pampers its “scientists”: by supporting their projects and helping them to present their work in scientific publications, it attracts many researchers. “As for our partners, they know that we want to establish long-term relationships with them, concludes the manager, and that we do not demand price reductions every year.” This is not necessarily the case with all of its competitors …
The brand is establishing Nivea Haus in Germany, as here in Hamburg. More than just shops, they are real beauty and relaxation institutes.
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