Nivea chief nourishes brand’s roots; Heidenreich bent on keeping identity of skincare brand; Herz family now own 50.5 per cent of Beiersdorf; it is hard to imagine that political and business interests in Hamburg would ever let them hand Nivea to foreigners

July 18, 2013 4:10 pm

Nivea chief nourishes brand’s roots

By Tony Barber

Heidenreich bent on keeping identity of skincare brand

Beiersdorf, the German cosmetics and adhesive tapes company, is more than just Nivea. But not much more. For almost 90 years, Nivea has been one of the world’s strongest skincare brands, recognisable in its comforting blue tins and tubes to almost everyone who has visited a shop selling skin cream. Without Nivea, it is inconceivable that Beiersdorf would be a member of Germany’s blue-chip Dax 30 index, boast a market capitalisation of more than €17bn and employ more than 16,000 people worldwide. This is the essential context for understanding why Stefan Heidenreich, Beiersdorf’s chief executive, decided last August to get rid of Rihanna as the face of Nivea. The sizzling Barbadian pop star was, Mr Heidenreich observed austerely, “a no-go . . . Nivea stands for trust, family and reliability”.At the time of her fall from German corporate grace, Rihanna had yet to release “Pour It Up”, the moody hit single in which she portrays herself splashing out cash and drinking shot after shot of liquor in a strip club: “Strippers goin’ up and down that pole / And I still got more money.” But it is safe to assume that Mr Heidenreich feels vindicated in having parted company with Rihanna as promptly as he did.

Moreover, Mr Heidenreich will be pleased that Beiersdorf’s publicity team has unquestionably heard his message about family values loud and clear. In a breathless press release about Nivea last month, the team’s copywriters found a way of using the words “family” and “families” no fewer than 19 times.

To judge from Beiersdorf’s 30 per cent share price increase over the past 12 months, investors think Mr Heidenreich has made the right call in returning the Nivea brand to its roots. For under Thomas Quaas – his predecessor, who spent 33 years at Beiersdorf and was CEO from 2005 to 2012 – Nivea had begun to lose its unmistakable identity. Experimental by-products and advertising gimmicks were replacing common sense and close attention to consumers’ preferences.

Mr Heidenreich – having earned his spurs as a brand manager at Procter & Gamble, and as CEO of Hero, the Swiss foods group – knows the importance of keeping Nivea’s profile sharp and distinctive. To bring the company closer to its worldwide customers, he is developing production centres in the Chinese city of Wuhan and Silao in Mexico. This forms part of a plan to reduce its dependence on economically stagnant western European countries and, like so many consumer products companies, to accelerate expansion in Brazil, China, Russia and other promising markets.

Without Nivea, it is inconceivable that Beiersdorf would be a member of Germany’s blue-chip Dax 30 index

The results so far are mildly encouraging: outside Europe,sales and earnings are gaining momentum. Even so, they are hardly strong enough to justify Beiersdorf’s remarkably buoyant share price. Most probably, the explanation lies in the hopes of some investors that P&G, Unilever or another global colossus will jump in with an offer for Beiersdorf – or at least for the Nivea brand.

Nobody has forgotten that P&G expressed keen interest in Beiersdorf in 2003 when Allianz, the German insurer, decided it was time to sell its 40 per cent shareholding. More recently, Robert McDonald, P&G’s former CEO, stirred memories of that interest in 2010 when he let slip his opinion that Nivea was a “terrific global brand”.

But anyone betting on a sale of Beiersdorf, or of Nivea on its own, should keep in mind the sobering lesson of 2003. For the events of that year demonstrated that politicians and businessmen in the city-state of Hamburg, Beiersdorf’s headquarters, would stop at nothing to prevent a famous homegrown company – and major employer and tax contributor – from falling into foreign hands. These bigwigs snuffed out a bidding war by arranging for about half of Allianz’s stake to pass to Tchibo, owner of a large chain of German coffee shops as well as a chunk of Beiersdorf bought as far back as 1977.

The investors behind Tchibo are the Herz family, who now own 50.5 per cent of Beiersdorf through an investment vehicle called Maxingvest. Only 39.5 per cent of the shares are in free float; the rest are treasury stock. In theory, the Herz family may one day want to sell up, but in practice it is hard to imagine that political and business interests in Hamburg would ever let them hand Nivea to foreigners.

Perhaps the P&Gs of this world could make better use than Beiersdorf of the Nivea brand. But they are unlikely ever to get the chance. Instead, it is up to Mr Heidenreich to show the Herz family that Nivea need not move from Hamburg in order to cream the competition.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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