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Nivea Case - Brand Management

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ICMR Case Collection
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ICFAI Center for Management Research
Nivea and Umbrella Branding
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SCMKTG- 0 8 7
This case was written by A. Mukund, ICFAI Center for Management Research (ICMR). It was compiled from
published sources, and is intended to be used as a basis for class discussion rather than to illustrate either
effective or ineffective handling of a management situation.
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This is a simplified and shortened version of a 13 page case study, "Nivea - Managing an Umbrella Brand."
(Ref. No. MKTG087).
 2004, ICFAI Center for Management Research. All rights reserved. No part of this publication may be
reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means- electronic or mechanical, without permission.
To order copies, call 0091-40-2343-0462/63 or write to ICFAI Center for Management Research, Plot # 49,
Nagarjuna Hills, Hyderabad 500 082, India or email [email protected] Website: www.icmrindia.org
SCMKTG/087
NIVEA AND UMBRELLA BRANDING
“The concept is one that spans a great many categories. Coca-Cola as a brand does not have a lot
of extendability. Whereas Coke means Coca-Cola, Nivea is not Beiersdorf.”
- Jane Perrin, Managing Director, leading marketing information firm A C Nielsen’s Global
Services Division, commenting on Nivea’s brand extension successes, in April 20031.
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AN ODE TO NIVEA’S SUCCESS
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In May 2003, a survey of ‘Global Mega Brand Franchises’ revealed that the Nivea cosmetics brand
had a presence in the maximum number of product categories and countries. The survey,
conducted by the US-based AC Nielsen, aimed at identifying those brands which had ‘successfully
evolved beyond their original product categories.’ A key parameter was the presence of these
brands in multiple product categories as well as countries.2
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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 in over 14 product categories
and was available in more than 150 countries. Nivea was the market leader in skin creams and
lotions in 28 countries, in facial cleansing in 23 countries, in facial skin care in 18 countries, and in
suntan products in 15 countries. In many of these countries, Nivea was reportedly believed to be a
brand of local origin – having been present in them for many decades.
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In its home country Germany too, many of Nivea’s products were the market leaders in their
segments. This market leadership status translated into superior financial performance. Between
1991 and 2001, Nivea posted double-digit growth rates every year. For 2001, the brand generated
revenues of € 2.5 billion3, amounting to 55% of the parent company’s (Beiersdorf4) total revenue
for the year. According to analysts, the brand was the single largest factor for the 4.4% increase in
the company’s revenues (€ 4.74 billion) and 10.7% increase in after-tax profit (€ 290 million) for
the year 2002.
1
‘Nivea and Nestle Extend the Bounds in Mega Brand Survey,’ uk.news.yahoo.com, April 01, 2003.
2
The study covered 200 consumer 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 name had to be used in at least
three product categories and meet brand franchise criteria in at least three of the five geographical regions.
3
July 2003 exchange rate: $ 1.1279 = 1 €.
4
Beiersdorf, founded in Germany in 1882, was a leading multinational company involved in developing,
manufacturing and distributing branded goods. Beiersdorf had over 100 affiliates across the world. The €
4.7 billion company derived around 70% of its revenues from outside Germany. Besides Nivea, it owned
successful brands such as Hansaplast, Elastoplast, Futuro, 8x4, atrix, tesa, Eucerin, Juvena, Labello,
Florena and la prairie.
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Nivea and Umbrella Branding
The 120-year old, Hamburg (Germany) based Beiersdorf has often been credited for meticulously
building the Nivea brand into the world’s number one personal care brand. According to a survey
conducted by A C Nielsen in the late 1990s, the brand had a 15% share in the global skin care
products market. While Nivea had always been the company’s star performer, the 1990s were a
period of phenomenal growth for the brand. By successfully extending what was essentially a
‘one-product wonder’ into many different product categories, Beiersdorf had silenced many critics
of its umbrella branding decisions.
THE MARKETING GAMEPLAN FOR NIVEA
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Millions of customers across the world have been familiar with the Nivea brand since their
childhood. The visual (color and packaging) (Refer Figure I) and physical attributes (feel, smell) of
the product stayed on in their minds. According to analysts, this led to the formation of a complex
emotional bond between customers and the brand, a bond that had strong positive undertones.
According to a superbrands.com.my article, Nivea’s blue color denoted sympathy, harmony,
friendship and loyalty. The white color suggested external cleanliness as well as inner purity.
Together, these colors gave Nivea’s the aura of an honest brand.
FIGURE I
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NIVEA CREAM
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Source: www.sabermais.com
The key brand values of Nivea (namely mildness, reliability, gentleness, protection, high quality
and value for money) ensured that generations of customers kept patronizing Nivea. Commenting
on the reasons behind the brand’s popularity, Uwe Wolfer, a Beiersdorf board member, said,
“Outstanding quality products to meet consumer 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.”5
To customers, Nivea was more than a skin care product. They associated Nivea with good health,
graceful ageing and better living. The company’s association of Nivea with many sporting events,
fashion events and other lifestyle related events gave the brand a long-lasting appeal. In 2000,
Franziska Schmiedebach (Schmiedebach), Beiersdorf’s Corporate Vice President (Face Care and
Cosmetics), commented that Nivea’s success was built on the following pillars: innovation, brand
extension, and globalization (Refer Table I for the brand’s sales growth from 1995-2002).
5
As mentioned in the article ‘The World’s Greatest Skin Care Brand’, in The Irish Times, Business 2000
Millennium Edition.
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Nivea and Umbrella Branding
TABLE I
NIVEA – WORLDWIDE SALES GROWTH
Sales Growth
In Million €
In %
1995
1996
1997
1998
1999
2000
2001
2002
1040
1166
1340
1542
1812
2101
2458
2628
9.8
12.1
14.9
15.1
17.5
16.0
17.0
6.9
Source: www.beiersdorf.com.
INNOVATIONS & BRAND EXTENSIONS
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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 range Nivea Visage was
launched. However, the first major initiative to extend the brand to other products came in the
1970s. Naturally, the idea was to cash in on Nivea’s strong brand equity. The first major extension
was the launch of ‘Nivea For Men’ aftershave in 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 product became a runaway success.
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The positive experience with the aftershave extension inspired the company to further explore the
possibilities of brand extensions. Moreover, Beiersdorf felt that Nivea’s unique identity, the values
it represented (trustworthiness, simplicity, consistency, caring) could easily be used to make the
transition to being an umbrella brand. The decision to diversify its product range was also believed
to have been influenced by intensifying competitive pressures. L’Orèal’s Plenitude range, Procter
& Gamble’s Oil of Olay range, Unilever’s Pond’s range, and Johnson & Johnson’s Neutrogena
range posed stiff competition to Nivea.
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Though Nivea was the undisputed market leader in the mass-market face cream segment
worldwide, its share was below Oil of Olay’s, Pond’s and Plenitude’s in the US market. While
most of the competing brands had a wide product portfolio, the Nivea range was rather limited. To
position Nivea as a competitor in a larger number of segments, the decision to offer a wider range
was inevitable.
Beiersdorf’s research center employing over 150 dermatological and cosmetics researchers,
pharmacists and chemists supported its thrust on innovations and brand extensions. During the
1990s, Beiersdorf launched many extensions including men’s care products, deodorants (1991),
Nivea Body (1995), and Nivea Soft (1997). Most of these brand extension decisions could be
credited to Rolf Kunisch, who became Beiersdorf’s CEO in the early 1990s. Rolf Kunisch firmly
believed in the company’s ‘twin strategy’ of extension and globalization.
By the beginning of the 21st century, the Nivea umbrella brand offered over 300 products in 14
separate segments of the health and beauty market. Commenting on Beiersdorf’s belief in umbrella
branding, Schmiedebach said, “Focusing your energy and investments on one umbrella brand has
strong synergetic effects and helps build leading market positions across categories.”6 A
noteworthy aspect of the brand extension strategy was the company’s ability to successfully
translate the ‘skin care’ attributes of the original Nivea cream to the entire gamut of products.
6
As mentioned in the article ‘Global branding for NIVEA: The Art of Thinking Global and Acting Local on
www.stichtingmarketing.be.
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Nivea and Umbrella Branding
The company ensured that each of its products addressed a specific need of consumers. Products in
all the 14 categories were developed after being evaluated on two parameters with respect to the
Nivea mother brand. Firstly, the new product had to be based on the qualities that the mother brand
stood for, and secondly, it had to offer 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
consumer needs and its scope for proving itself to be a leader in the future. For instance, a Nivea
shampoo not only had to clean hair, it also had to be milder and gentler than other shampoos in the
same range.
Beiersdorf developed a ‘Nivea Universe’ framework for streamlining and executing its brand
extension efforts. This framework consisted of a central point, an inner circle of brands and an
outer circle of brands (Refer Figure II).
FIGURE II
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THE NIVEA UNIVERSE
Source: The Irish Times (Business 2000 Millennium Edition).
The center of the model housed the ‘mother brand,’ which represented the core values of
trustworthiness, honesty and reliability. While the brands in the inner circle were closely related to
the core values of the Nivea brand, the brands in the outer circle were seen as extensions of these
core values. The inner circle brands strengthened the existing beliefs and values associated with
the Nivea brand. The outer circle brands, however, sought to add new dimensions to the brand’s
personality, thereby opening up 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 the mother brand by adding its
feminine and technologically advanced image to it. The deodorants range extended the core values
by adding personal hygiene and body care benefits to it. By following the above framework,
Beiersdorf was able to ensure that the various sub-brands benefited from the attributes of the
umbrella brand.
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Nivea and Umbrella Branding
The extensions into decorative cosmetics, hairstyling and technologically advanced products (such
as the Nivea Visage cleansing strips and facial cream Nivea Visage Q10) were accepted well by
customers across the globe. Beiersdorf’s extension decisions helped rope in many new customer
segments: men (men’s care), women with mature skin (Nivea Vital), and people who purchased
cosmetics (Nivea Beautè). Commenting on Beiersdorf’s success with various Nivea product
categories, Jan Lindemann, Global Director (Brand Valuation) at Interbrand, said, “They are a
classic example of how far you can go with brand extensions.”7 In Interbrand’s annual list of the
world’s 100 most valuable brands for 2002, Nivea posted the second largest gain of 16% in its
brand value – largely due to its success with the brand extensions.
THE ‘GLOBAL-LOCAL’ STRATEGY
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From 1910 onwards Nivea was made available in Europe, and from 1920 onwards, it was made
available in the US markets. Over the next few decades, the number of countries in which Nivea
had a presence kept on increasing due to Beiersdorf’s focus on global expansion. The cream’s
rapid acceptance in many parts of the world highlighted its truly global appeal.
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However, according to company sources, the brand retained its strong German heritage 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 were significantly different from those of customers in
other countries. As a result, Beiersdorf was forced to offer different product formulations and
packaging, and different types of advertising support. Consequently, it incurred high costs.
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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 global scale and offer customers
from different parts of the world a wider variety of product choices. This was a radical departure
from its earlier approach, in which product development and marketing efforts were largely
focused on the German market. The new decision was not only expected to solve the problem of
high costs, it was also expected to further build the core values of the brand.
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Beiersdorf went about achieving the above goals by focusing on changing the way its employees
in different parts of the world ‘looked’ at the brand. They were clearly informed of Nivea’s core
values, the brand philosophy, as well as the company’s future plans for the range. Nivea’s success
factors and the company’s plans for each sub-brand were also explained clearly to the employees.
They were also made to appreciate that a truly global brand had enormous power over customers
in local markets.
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 for all the
markets. Their responsibilities included among others, deciding about the way in which
international advertising campaigns should be adapted at the local level. The idea 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 global strategic plan.
This way, Beiersdorf ensured that the nuances of consumer behavior at the local level were
understood and that their needs were addressed. Company sources claimed that by following the
above approach, it was easy to transfer know-how between headquarters and the local offices. In
addition, the motivation level of the local partners also remained on the higher side.
7
As mentioned in an August 5, 2002, BusinessWeek article ‘The Best Global Brands.’ Interbrand is a leading
global brand strategy and design consultancy with operations in 22 countries. It is a part of Omincom, one
of the world’s largest advertising, marketing and corporate communications companies.
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Nivea and Umbrella Branding
Beiersdorf appointed two advertising agencies to look after its advertising needs in all parts 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 global campaigns was not much of a problem
for them.The company gave a lot of importance to the issue of brand consistency while extending
and globalizing Nivea. Since the brand encompassed a wide range of products and many subbrands, Beiersdorf had to be careful not to dilute the mother brand’s equity or to stretch it too thin.
To maintain consistency, the company ensured that the blue and white imagery, the attributes of
mildness and softness, and the pricing and advertising strategies were all kept intact.
The company established a set of guidelines that regulated how the marketing mix of a new
product/brand was to be developed. These guidelines stipulated norms with respect to product,
pricing, promotion, packaging and other related issues. For instance, a guideline regarding
advertising read, ‘Nivea advertising is about skin care. It should be present visually and verbally.
Nivea advertising is simple, it is unpretentious and human.’
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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 consciously decided not to use
supermodels to promote its products. The predominant colors in all campaigns remained 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 out to be much more cost-effective. And since showing skin
in the advertisements went against the region’s culture, the company devised ways of advertising
skin care without showing skin.
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The communications strategy was also localized to meet the needs of different customer segments.
For instance, to target gay men for the Nivea For Men range in 2001, Beiersdorf released
advertisements in US publications that targeted this segment (such as OUT). The company
reportedly received encouraging results and planned to continue these advertisements.
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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 umbrella branding strategy
worked for Beiersdorf. In fact, the company’s growth was the most dynamic since its inception
during the 1990s – the decade when the brand extension move picked up momentum. The strong
yearly growth during the 1990s and the quadrupling of sales were attributed by company sources
to the thrust on brand extension.
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 growing research efforts, the accelerated development
of international markets and the introduction of new product categories.”8
THE BEIERSDORF OWNERSHIP ISSUE (AND WHAT IT MEANS FOR NIVEA)
The immense popularity and business value of Nivea had led to a battle of sorts since the late
1990s between Beiersdorf and various other companies. At the beginning of the 21st century,
Beiersdorf’s largest shareholder, the insurance major Allianz, had expressed its intentions to sell
its 44% stake in the company. Since then, many players had evinced interest in purchasing the
stake – largely attracted by the Nivea brand. The prospective buyers included Procter & Gamble
(P&G), the cosmetics major L’Orèal, and the coffee specialty company Tchibo, which already had
a 30% stake in the company (the remaining 26% was held by the public).
8
As mentioned in the article ‘Beiersdorf AG’ on www.pressi.com, dated April 02, 2003.
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Nivea and Umbrella Branding
During 2002, media reports on the tussle between the above parties to own Beiersdorf kept
appearing on a regular basis. P&G was reported to have made positive progress with Allianz, but it
was not able to buy Tchibo’s stake in the company since the Herz family (which owned Tchibo)
was not interested in selling its stake. P&G was also believed to have made a € 5.5 billion bid for
the company (denied by the company though). 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 equity stake, no deal was struck. Meanwhile, two more companies, the German household
products major Henkel and the US-based FMCG giant Unilever, were reported to have joined the
fray for acquiring Beiersdorf. Henkel was rumored to have approached Tchibo directly to join
hands with the Herz family and acquire the stake from Allianz.
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In April 2003, Allianz sources revealed that the company was not in a hurry to sell the Beiersdorf
stake and that it was willing to wait for the right market conditions and the right price. The only
positive outcome of this tussle seemed to be the increase in Beiersdorf’s share price. Investor
interest in the stock had increased significantly due to the possibility of one or the other
multinational major acquiring Beiersdorf. Analysts opined that being taken over by any company
with a strong presence in the US market would be beneficial for Nivea. This was because even by
mid-2003, the brand had not been able to expand its presence in the US as it had done in Europe.
As compared to its competitors, Beiersdorf lacked size. In other words, it was not able to spend
heavily on advertising and influencing leading retailers to stock its products.
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The decline in Nivea’s growth rate (from 17% in 2001 to 6.9% in 2002) could prove to be a cause
for worry in the future. However, if the company’s executives took care not to let the ownership
imbroglio and the intensifying competition negatively affect the brand’s performance, Nivea’s
future could be rather ‘smooth’ indeed!
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QUESTIONS FOR DISCUSSION:
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1. Discuss the reasons for the success of the Nivea range of products across the world. Why did
Beiersdorf decide to extend the brand to different product categories? In the light of
Beiersdorf’s brand extension of Nivea, critically comment on the pros and cons of adopting an
umbrella branding strategy. Compare the use of such a strategy with the use of an independent
branding strategy.
2. According to you, what are the core values of the Nivea brand? What type of brand extension
framework did Beiersdorf develop to ensure that these core values did not get diluted? Do you
think the company was able to protect these core values? Why/Why not?
3. What were the essential components of Beiersdorf’s global expansion strategy for Nivea?
Under what circumstances would a ‘global strategy-local execution’ approach be beneficial for
a company? When and why should this approach be avoided?
4. Given the uncertainty over the ownership of Beiersdorf in mid-2003, what do you think the
future has in store for Nivea? What measures would you suggest the brand’s managers to help
Nivea sustain its leadership status?
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Nivea and Umbrella Branding
ADDITIONAL READINGS & REFERENCES:
1. Sloan Pat, Nivea Readies Big Push to Bolster US Position, Advertising Age, June 16, 1997.
2. Anhalt Nickel Karen, How Germany’s Beiersdorf Succeeds with its Own Style,
www.businessweek.com, June 28, 1999.
3. L’Orèal: The Beauty of Global Branding, www.businessweek.com, June 28, 1999.
4. Weiping Mie, The Beiersdorf Company, Journal of the GCPD, September 1999.
5. Schmidedebach Franziska, Global Branding for Nivea: The Art of Thinking Global and
Acting Local, www.stichtingmarketing.be, December 01, 2000.
6. The World’s Greatest Skincare Brand, www.business2000.ie, 2000.
7. Watts Christopher, Beiersdorf: Taking Care of Itself, www.forbes.com, January 08, 2001.
Faster
than
its
Competitors,
www.chemicalnewsflash.de,
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8. Beiersdorf Grows
February 19, 2002.
9. Wilke Michael, Nair and Nivea Groom Gay Men, www.commercialcloset.org,
March 02, 2002.
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10. Benady David, Beauty is in the Eye of the Brand Holder, Marketing Week, May 30, 2002.
11. Khermouch Gerry, The Best Global Brands, www.businessweek.com, August 05, 2002.
12. Cage Sam, ‘P&G Eyes Stake in Beiersdorf’, Chemical Week, October 02, 2002.
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13. www.ananova.com (News articles appearing during August 2002 – December 2002 regarding
Beiersdorf).
14. Datson Trevor, Nivea and Nestle Extend the Bounds in Mega Brand Survey,
http://uk.news.yahoo.com, April 01, 2003.
15. Nivea Maker Calls for Clarity, http://investmentmagazine.com, April 02, 2003.
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16. Beiersdorf AG, www.pressi.com, April 02, 2003.
17. Beiersdorf Brand is ‘Global Mega Brand Franchises’, www.ameinfo.com, May 10, 2003.
18. Harnischfeger Uta, Henkel Seeks Consolidation, http://news.ft.com, May 25, 2003.
19. Company Annual Report 2002.
20. Nivea, superbrands.com.my
21. www.mind-advertising.com
22. www.wolff-olins.com
23. www.germandata.com
24. www.nivea.com
25. www.beiersdorf.com
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