Nivea - Managing an Umbrella Brand, ;'In many countries. consumers are convinced that Nivea is a local brand, a mistakewhich Beiersdorf, the German makers, take as a compliment. "

- As quoted on leading brand consultancy Wolff-Olins' website,www.wolff-olins.com.

"The concept is one that spans a great many categories. Coca-Cola as a brand doesnot have a lot of extendability. Whereas Coke means Coca-Cola. Nivea is notBeiersdorf"

- Jane Perrin, Managing Director, leading marketing information firm A CNielsen's Global Services Division, commenting on Nivea's brand extension

successes, in April 2ooi.

AN ODE TO NIVEA'S SUCCESS

In May 2003, a survey of 'Global Mega Brand Franchises' revealed that the Niveacosmetics brand had a presence in the maximum number of product categories andcountries. The survey, conducted by the US-based AC Nielsen, aimed at identifyingthose. brands which had 'successfully evolved beyond their original productcategories.' A key parameter was the presence of these brands in multiple productcategories as well as countries?

Nivea's performance in this study prompted a yahoo.com news article to name it the'Queen of Mega Brands.' This title was appropriate since the brand was present inover 14 product categories and was available in more than 150 countries. Nivea wasthe market leader in skin creams and lotions in 28 countries, in facial cleansing in 23countries, in facial skin care in 18 countries, and in suntan products in 15 countries. Inmany of these countries, Nivea was reportedly believed to be a brand of local origin ­having been present in them for many decades. This fact went a long way in helpingthe brand attain the leadership status in many categories and countries (Refer Table I).

Table I: Nivea - Market Positions

Source: www.germandata.com

I As mentioned in the article 'Nivea and Nestle Extend the Bounds in Mega Brand Survey,' inuk.news.yahoo.com, dated April 01, 2003.

2 The study covered 200 conswner packaged goods brands from over 50 global manufacturers.The brands had to be available in at least 15 of the countries studied; the same brand namehad to be used in at least three product categories and meet brand franchise criteria in at leastthree of the five geographical regions.

107

L

.---------------Brand Management

In its home country Germany too, many of Nivea's products were the market leadersin their segments. This market leadership status translated into superior financialperformance. Between 1991 and 2001, Nivea posted double-digit growth rates everyyear. For 2001, the brand generated revenues of€ 2.5 billion3, amounting to 55% ofthe parent company's (Beiersdorf) total revenue for the year. According to analysts,the brand was the single largest factor for the 4.4% increase in the company'srevenues (€ 4.74 billion) and 10.7% increase in after-tax profit (€ 290 million) for theyear 2002.

The 120-year old, Hamburg (Germany) based Beiersdorf has often been credited formeticulously building the Nivea brand into the world's number one personal carebrand. According to a survey conducted by A C Nielsen in the late 1990s, the brandhad a 15% share in the global skin care products market. While Nivea had alwaysbeen the company's star performer, the 1990s were a period of phenomenal growthfor the brand. By successfully extending what was essentially a 'one-product wonder'into many different product categories, Beiersdorf had silenced many critics bf itsumbrella branding decisions.

NIVEA - ORIGIN & EVOLUTION

Beiersdorf was a well-known name in Germany in the early 1900s due to its range ofbody care products, adhesive tapes and bandages (Refer Exhibit I for a brief note onthe company). In 1912, Beiersdorf's owner Oskar Troplowitz (Troplowitz), a chemistIsaac Lifschfttz and a dermatologist Paui Unna jointly developed a skin cream basedon Eucerit, the first ever water-in-oil emulsifier. In addition to Eucerit, the cream

contained glycerin, citric acid, oil of rose and extract of lily of the valley (fragrant .bell-shaped white flowers).

Prior to the introduction of this cream, skin care creams were prepared using animaland vegetable fats. Such creams decomposed as the fats lost their freshness. The mild,sweet-smelling product introduced by Beiersdorf, with its stable, long-lasting formulawas thus a revolutionary product for cosmetic buyers. Troplowitz named this productNivea, based on the Latin world 'nivius' (meaning snow-white).

Before Nivea, skin creams were targeted primarily at women from the upper strata ofsociety. However, Beiersdorf mass-marketed Nivea, thus making it very popular withcustomers. As the market for female grooming evolved, Beiersdorf took the help ofadvertising to gain recognition. By the time the company began exporting Nivea toother countries in the 1920s, it knew that it had a winner on its hands. The decisionnot to meddle with the basic formulation and packaging in most of the exportdestinations paid off well.

Despite the fact that after the end of the First World War, a tin of Nivea was pricedover 100 billion Deutsch Marks (the currency of Germany before the Euro'sintroduction), the product did not lose its appeal. In 1924, the company decided tocompletely revamp the brand's image - reportedly, one of the first major. brandrevamp exercises ever in the global corporate world. As part of this revamp, Niveawas given new packaging - a blue tin with Nivea Creme written in white on it (thisnew packaging was to become one of the most well-recognized brand packages in theworld over the next few decades, Refer Figure I).

3 July 2003 exchange rate: $ 1.1279 = 1 €.

108

Nivea - Managing an Umbrella Brand

Beiersdorf also revamped the advertising imagery associated with Nivea. Whileearlier the campaigns featured only female models, the new advertisement showed

, three healthy, good-looking boys. The idea was to expand Nivea's usage from ladiesto the whole family.

Figure I: Nivea Cream

Source: www.sabermais.com

During the 1930s Beiersdorf extended NJvea to other product categories such assuntan lotion, shaving cream, facial toner and shampoo. However, the companycontinued to focus on its· flagship product, Nivea cream. Promotional support forNivea and the broad-basing of its customer base contributed greatly to the cream'scontinuing popularity. By the mid 1930s, Beiersdorf was successfully selling thecream in many foreign countries.

However, the Second World War brought with it a series of problems for Beiersdorf,especially with respect to Nivea. The company tried to disassociate itself with thepolitical problems of Germany through advertisements depicting happy, sporty girls.Despite the above, Beiersdorf could not stop the expropriation of the Nivea brand byother countries after Germany lost the war. The assets and trademarks associated withthe brand were forcibly sold off. In the UK and Ireland, the rights were bought by anEnglish company, Smith & Nephew. After the war, the company began taking steps torevert back to its pre-war phase of growth and to buy back Nivea's rights in variouscountries.

The next three decades were an era of expansion and consolidation for Beiersdorf asfar as Nivea was concerned. As detailed in the website www.nivea.com. advertisingsupport for the brand was continuously modified in line with the requirements ofchanging customer preferences. In 1992, when Smith & Nephew sold Nivea back toBeiersdorf, the process of acquiring the brand and its rights from various countriescame to an end

MARKETING GAMEPLAN FOR NIVEA

Millions of customers across·the world have been familiar with the Nivea brand sincetheir childhood. The visual (color and packaging) and physical attributes (feel, smell)of the product stayed on in their minds. According to analysts, this led to theformation of a complex emotional bond between customers and the brand, a bond thathad strong positive undertones. According to a superbrands.com.my article, Nivea'sblue color denoted sympathy, harmony, friendship and loyalty. The white colorsuggested external cleanliness as well as inner purity. Together, these colors gaveNivea's the aura of an honest brand.

The key brand values of Nivea (namely mildness, reliability, gentleness, protection,high quality and value for money) ensured that generations of customers keptpatronizing Nivea. Commenting on the reasons behind the brand's popularity, Uwe

109

Brand Management

Wolfer, a Beiersdorf board member, said, "Outstanding quality products to meetconsumer needs at the right time and constant updating of the advertising approach ­these are the essential factors in Nivea' s success, keeping the brand young, attractive,sympathetic and familiar.,,4

To customers, Nivea was more than a skin care product. They associated Nivea withgood healt:h, graceful ageing and better living. The company's association of Niveawith many sporting events, fashion events and other lifestyle related events gave thebrand a long-lasting appeal. In 2000, Franziska Schmiedebach (Schmiedebach),Beiersdorf's Corporate Vice Presideirt (Face Care and Cosmetics), commented thatNivea's success over the decades was built on the following pillars: innovation, brand

extension, and globalization (Refer Table II for the brand's sales growth from 1987­1999).

Table II: Nivea- Worldwide Sales Growth

(in %)

Source: The Irish Times, Business 2000 Millennium Edition.

Source: www.beiersdorfcom.

INNOVATIONS & BRAND EXTENSIONS

Innovations and brand extensions went hand-in-hand for Nivea. Extensions had been

made back in the 1930s itself and had continued in the 1960s when the face care rangeNivea Visage was launched. However, the first major initiative to extend the brand toother products came in the 1970s. Naturally, the idea was to cash in on Nivea's strongbrand equity. The first major extension was the launch of 'Nivea For Men' aftershavein the 1970s. Unlike the other aftershaves available in the market that caused the skin

to burn on application, Nivea For Men soothed the skin. As a result, the productbecame a runaway success.

The positive experience with the aftershave extension inspired the company to further

explore the possibilities of brand extensions. Moreover, Beiersdorf felt that Nivea'sunique identity, the values it represented (trustworthiness, simplicity, consistency,caring) could easily be used to make the transition to being an umbrella brand. Thedecision to diversify its product range was also believed to have been influenced byintensifying competitive pressures. L'Oreal's Plenitude range, Procter & Gamble's Oilof Olay range, Unilever's Pond's range, and Johnson & Johnson's Neutrogena rangeposed stiff competition to Nivea.

Though Nivea was the undisputed market leader in the mass-market face creamsegment worldwide, its share was below Oil of Olay's, Pond's and Plenitude's in the

4 As mentioned in the article 'The World's Greatest Skin Care Brand', in The Irish Times,Business 2000 Millerurium Edition.

110

Nivea - Managing an Umbrella Brand

US market While most of the competing brands had a wide product portfolio, theNiv'ea range was rather limited. To position Nivea as a competitor in a larger numberof segments, the decision to offer a wider range was inevitable.

Beiersdorfs research center employing over 150 dermatological and cosmeticsresearchers, pharmacists and chemists supported its thrust on innovations and brandextensions. During the 199080Beiersdorf launched many extensions including men'scare products, deodorants (1991), Nivea Body (1995), and Nivea Soft (1997). Most ofthese brand extension decisions could be credited to Rolf Kunisch. who became·Beiersdorfs CEO in the early 1990s. Rolf Kunisch firmly believed in the company's'twin strategy' of extension and globalization.

By the beginning of the 21't century, the Nivea umbrella brand offered over 300products in 14 separate segments of the health and beauty market (Refer Table III andExhibit n for information on Nivea's brand extensions). Commenting on Beiersdorfsbelief in umbrella branding, Schmiedebach said, "Focusing your energy andinvestments on one umbrella brand has strong synergetic effects and helps buildleading market positions across categories.,,5 A noteworthy aspect of the brandextension strategy was the company's ability to successfully translate the 'skin care'attributes of the original Nivea cream to the entire gamut of products.

Table III: Nivea - Brand Portfolio

5 As mentioned in the article 'Global branding for NIVEA: The Art of Thinking Global andActing Local on www.stichtingmarketing.be.

111

Brand Management

Source: www.nivea.com

The company ensured that each of its products addressed a specific need ofconsumers. Products in all the 14 categories were developed after being evaluated ontwo parameters with respect to the Nivea mother brand. Firstly, the new product hadto be based on the qualities that the mother brand stood for, and secondly, it had tooffer benefits that were consistent with those that the mother brand offered. Once a

new product cleared the above test, it was evaluated for its ability to meet consumerneeds and its scope for proving itself to be a leader in the future. For instance, a Niveashampoo not only had to clean hair, it also had to be milder and gentler than othershampoos in the same range.

Beiersdorf developed a 'Nivea Universe' framework for streamlining and executingits brand extension efforts. This framework consisted of a central point, an inner circleof brands and an outer circle of brands (Refer Figure 11).

Figure II: The Nivea Universe

Source: The Irish Times (Business 2000 Mil/ennium Edition).

The center of the model housed the 'mother brand,' which represented the core valuesof trustworthiness, honesty and reliability. While the brands in the inner circle wereclosely related to the core values of the Nivea brand, the brands in the outer circlewere seen as extensions of these core values. The inner circle brands strengthened theexisting beliefs and values associated with the Nivea brand. The outer circle brands,

112

Nivea - Managing an Umbrella Brand

however, sought to add new dimensions to the brand's personality, thereby openingup avenues for future growth.

Every brand in the portfolio either enhanced or expanded the associations with the,mother brand. For instance, Nivea Visage offered the core values and enhanced themother brand by adding its feminine and technologically advanced image to it. Thedeodorants range extended the core values by adding personal hygiene and body carebenefits to it. By following the above framework, Beiersdorf was able to ensure thatthe various sub-brands benefited from the attributes of the umbrella brand.

The extensions into decorative cosmetics, hairstyling and technologically advancedproducts (such as the Nivea Visage cleansing strips and facial cream Nivea VisageQlO) were accepted well by customers across the globe. Beiersdorf's extensiondecisions helped rope in many new customer segments: men (men's care), women

with mature skin (Nivea Vital), and people who purchased cosmetics (Nivea Beaute).Commenting on Beiersdorf's success with various Nivea product categories, IanLindemann, Global Director (Brand Valuation) at Interbrand, said, "They are a classicexample of how far you can go with brand extensions.,,6 In Interbrand's annual list of

the world's 100 most valuable brands for 2002, Nivea posted the second largest gainof 16% in its brand value -largely due to its success with the brand extensions.

THE 'GLOBAL-LOCAL' STRATEGY

From 1910 onwards Nivea was made available in Europe, and from 1920 onwards, itwas made available in the US markets. Over the next few decades, the number ofcountries in which Nivea had a presence kept on increasing due to Beiersdorf's focuson global expansion. The cream's rapid acceptance in many parts of the world

highlighted its truly global appeal.

However, according to company sources, the brand retained its strong Germanheritage and was not treated as a global brand for many decades. In the early days,local managers believed that the needs of customers from their countries weresignificantly different from those of customers in other countries. As a result,Beiersdorf was forced to offer different product formulations and packaging, anddifferent types of advertising support. Consequently, it incurred high costs.

It was only in the 1980s that Beiersdorf took a conscious decision to globalize the.appeal of Nivea. The aim was to achieve a common platform for the brand on a globalscale and offer customers from different parts of the world a wider variety of productchoices. This was a radical departure from its earlier approach, in which productdevelopment and marketing efforts were largely focused on the German market. Thenew decision was not only expected to solve the problem of high costs, it was alsoexpected to further build the core values of the brand.

Beiersdorf went about achieving the above goals by focusing on changing the way itsemployees in different parts of the world 'looked' at the brand. They were clearlyinformed of Nivea's core values, the brand philosophy, as well as the company'sfuture plans for the range. Nivea' s success factors and the company's plans for eachsub-brand were also explained clearly to the· employees. They were also made to

6 As mentioned in an August 5, 2002, BusinessWeek article 'The Best Global Brands.'futerbrand is a leading global brand strategy and design consultancy with operations in 22cO\ll1tries.It is a part of Omincom, one of the world's largest advertising, marketing andcorporate communications companies.

113

Brand Management

appreciate that a truly global brand had enormous power over customers in localn\.arkets.

To globalize the brand, the company formulated strategies with the help of a team of'international' experts with 'local expertise'. This team developed new products forall the markets. Their responsibilities included among others, deciding about the wayin which international advertising campaigns should be adapted at the local level. Theidea was to leave the execution of strategic decisions to the local partners. However,Beiersdorf monitored the execution to ensure that it remained in line with the globalstrategic plan.

This way, Beiersdorf ensured that the nuances of consumer behavior at the local levelwere understood and that their needs were addressed. Company sources claimed thatby following the above approach, it was easy to transfer know-how betweenheadquarters and the local offices. In addition, the motivation level of the localpartners also remained on the higher side.

Beiersdorf appointed two advertising agencies to look after its advertising needs in allparts of the world. Since these agencies, Foote, Cone & Belding (FCB) and TBWA,had their offices in the countries that Nivea was marketed in, localizing the globalcampaigns was not much of a problem for them.

The company gave a lot of importance to the issue of brand consistency whileextending and globalizing Nivea. Since the brand encompassed a wide range ofproducts and many sub-brands, Beiersdorf had to be careful not to dilute the motherbrand's equity or to stretch it too thin. To maintain consistency, the company ensuredthat the blue and white imagery, the attributes of mildness and softness, and thepricing and advertising strategies were all kept intact.

The company established a set of guidelines that regulated how the marketing mix ofa new product/brand was to be developed. These guidelines stipulated norms withrespect to product, pricing, promotion, packaging and other related issues. Forinstance, a guideline regarding advertising read, 'Nivea advertising is about skin care.H should be present visually and verbally. Nivea advertising is simple, it isunpretentious and human.'

Thus all advertisements for any Nivea product depicted images related to 'skin care'and 'unpretentious human life' in one way or the other. The company consciously­decided not to use supermodels to promote its products. The predominant colors in allcampaigns re~ained blue and white. However, local issues were also kept in mind.For instance, in the Middle East, Nivea relied more on outdoor media as it worked outto be much more cost-effective. And since showing skin in the advertisements wentagainst the region's culture, the company devised ways of advertising skin carewithout showing skin.

The communications strategy was also localized to meet the needs of differentcustomer segments. For instance, to target gay men for the Nivea For Men range in2001, Beiersdorfreleased advertisements in US publications that targeted this segment(such as OUT). The company reportedly received encouraging results and planned tocontinue these advertisements.

Many brand management experts have spoken of the perils of umbrella management,such as brand dilution and the lack of 'change' for consumers. However, the umbrellabranding strategy worked for Beiersdorf. In fact, the company's growth was the mostdynamic since its inception during the 1990s - the decade when the brand extensionmove picked up momentum. The strong yearly growth during the 1990s and thequadrupling of sales were attributed by company sources to the thrust on brandextension.

114

Nivea - Managing an Umbrella Brand

Commenting on the focused and continuous investment in Beiersdorf s key brands,Rolf Kunisch said, "Since the beginning of the 1990s, we have focused on 10 brand

,families. This strategy made significant funds available for the group's growingresearch efforts, the accelerated development of international markets and theintroduction of new product categories.,,7 .

THE BEIERSDORF OWNERSHIP ISSUE (AND WHAT IT MEANS FORNIVEA)

The immense popularity and business value of Nivea had led to a battle of sorts sincethe late 1990s between Beiersdorf and various other companies. At the beginning ofthe 21st century, Beiersdorf s largest shareholder, the insurance major Allianz, hadexpressed its intentions to sell its 44% stake in the company. Since then, many playershad evinced interest in purchasing the stake - largely attracted by the Nivea brand.The prospective buyers included Procter & Gamble (P&G), the cosmetics majorL'Oreal, and the coffee specialty company Tchibo, which already had a 30% stake inthe company (the remaining 26% was held by the public).

During 2002, media reports on the tussle between the above parties to own Beiersdorfkept appearing on a regular basis. P&G was reported to have made positive progresswith Allianz, but it was not able to buy Tchibo's stake in the company since the Herzfamily (which owned Tchibo) was not interested in selling its stake. P&G was alsobelieved to have made a € 5.5 billion bid for the company (denied by the companythough). Reportedly, Tchibo was planning to buy the Allianz stake itself. However,since Allianz and Tchibo could not reach an agreement over the pricing of the equitystake, nG deal was struck.

Meanwhile, two more companies, the German household products major Henkel andthe US-based FMCG giant Unilever, were reported to have joined the fray foracquiring Beiersdorf. Commenting on the various bids for Beiersdorf, Thomas Effler,a Commerzbank Global Equities analyst, remarked, "All the big personal carecompanies are interested in Beiersdorf, especially in its Nivea brand."8 Henkel wasrumored to have approached Tchibo directly to join hands with the Herz family andacquire the stake from Allianz.

In April 2003, Allianz sources revealed that the company was not in a hurry to sell theBeiersdorf stake and that it was willing to wait for the right market conditions and theright price. Because of the ownership tussle, Germany's stock market regulator,Deutsche Borse, declined Beiersdorfs request to be entered in the DAX index (thecountry's index comprising 30 leading companies). Expressing concern over theuncertainty surrounding the company's future, Rolf Kunisch said (in April 2003), "Ihope the big shareholders will decide what they want in the next few months.,,9 Thefollowing month, in another news report, he said, "We want more clarity about ourshareholders' plans."lo

7 As mentioned in the article 'Beiersdorf AG' on www.pressi.com. dated April 02, 2003.8 As mentioned in the article 'P&G Eyes Stake in Beiersdorf in Chemical Week, dated

October 02, 2002.9 As mentioned in the article 'Nivea Maker Calls for Clarity,' on http://investmagazine.com,

dated April 02, 2003.IO As mentioned in the article 'Henkel Seeks Consolation,' on http://news.ft.com dated May 25,

2003.

115

Brand Management

The only positive outcome of this tussle seemed to be the increase in Beiersdorf'sshare price. Investor interest in the stock had increased significantly due to thepossibility of one or the other multinational major acquiring· Beiersdorf. Analystsopined tbat being taken over by any company with a strong presence in the US marketwould be beneficial for Nivea. This was because even by mid-2003, the brand had notbeen able to expand its presence in the US as it had done in Europe. As compared toits competitors, .Beiersdorf lacked size. In other words, it was not able to spendheavily on advertising and influencing leading retailers to stock its prodUcts.

The decline in Nivea's growth rate (from 17% in 2001 to 6.CJOIo in 2(02) could proveto be a cause for worry in the future. However, if the company's executives took carenot to let the ownership imbroglio and the intensifying competition negatively affectthe brand's performance, Nivea's future could be rather 'smooth' indeed!

,116

Nivea - Managing an Umbrella Brand

Questions for Discussion:

1. Discuss the reasons for the success of the Nivea range of products across theworld. Why did Beiersdorf decide to extend the brand to different productcategories? In the light of Beiersdorf's brand extension of Nivea, criticallycomment on the pros and cons of adopting an wnbrella branding strategy.Compare the use of such a strategy with the use of an independent brandingstrategy.

2. According to you, what are the core values of the Nivea brand? What type ofbrand extension framework did Beiersdorf develop to ensure that these corevalues did not get diluted? Do you think the company was able to protect thesecore values? WhylWhy not?

3. What were the essential components of Beiersdorf' s global expansion strategy forNivea? Under whatcircwnstances would a 'global strategy-local execution'approach be beneficial for a company? When and why should this approach beavoided?

4. Given the uncertainty over the ownership of Beiersdorf in mid-2003, what doyouthink the future has in store for Nivea? What measures would you suggest thebrand's managers to help Nivea sustain its leadership status?

© ICFAI Center for Management Research. All rights reserved

117

I1,'"

"

I

Brand Management

* Including non-recurring income of £ 38 million (£ 23 million after tax)from the saleof the advanced wound care business

Source: www.beiersdorfcom.

The company planned to grow each of these categories through its three-prongedfocus on new product categories, new countries and market share growth. Beiersdorfhad adopted the policy of focusing only on a small number of global brands andexploiting them to the fullest extent possible. To do so, it gave a lot of importance toR&D and used brand synergies.

Adaptedfrom www.beiersdorfcom

118

119

....................... ' ... , .''', ..· .. , - - .. " ..· '" .· .. , .. - .. " - .· ..

...•.............

· , .' .... , .n •.••.••... , ... . .n •••••· -."......... ........ . - ... .."........· .". ' .... - ...... ,- ", ....... . ' .

\/:~~i.~~~*~£tJ... - ., ' ...... .... .0 •• ' •. ~ •••••.... -- .)d,!:t"ilit#f....... - ,..:.......••••...... ,." ."'-.-,.-". -- .:::::::::"::~~:ti~~~::~:................ - ........ " .- .... " ...........••.•:

HAND CARE CREAM

NIVEA SOFT CREAM FIRMING

LIP CARE

NAPPY RASH CREAM BODY

Nivea - Managing an Umbrella Brand

Exhibit II

A Few Nivea Products

SHAVING FOAM

HAIR GEL

BATH SOAPS

DEODORANTS ISAGE SKIN TONER SHAMPOO

SHOWER OILBALSAM

LIPSTICKS

HAIR SPRAY

WASH CREAMSUN LOTION

Source: www.nivea.com

11