ICMR Case Collection tC op y ICFAI Center for Management Research Nivea and Umbrella Branding No 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. Do 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 icmr@icfai.org. 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. op y AN ODE TO NIVEA’S SUCCESS tC 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 No 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. Do 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. 1 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 op y 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 No tC NIVEA CREAM Do 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. 2 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 op y 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. No tC 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. Do 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. 3 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 Do No tC op y 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. 4 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 op y 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. tC 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. No 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. Do 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. 5 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.’ tC op y 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. No 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. Do 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. 6 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. op y 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. tC 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! No QUESTIONS FOR DISCUSSION: Do 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? 7 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, op y 8. Beiersdorf Grows February 19, 2002. 9. Wilke Michael, Nair and Nivea Groom Gay Men, www.commercialcloset.org, March 02, 2002. tC 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. No 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. Do 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 8