Chef Vincent Warnery warns of further price increases

Mr. Warnery, Beiersdorf has increased its prices once before this year. The second round of negotiations is currently underway. How complicated are these?
They are no longer as easy as they used to be, but we experience good and fair discussions. Most of the negotiations are through, we are still talking to individual dealers.

Recently, price negotiations have often escalated: Kellogg’s Cornflakes are missing from Rewe, Coca-Cola and Snickers from Edeka. Are the Beiersdorf brands threatened with the same fate?
That is part of negotiations. I don’t want to rule out the possibility that this could also happen to us if we don’t come to an agreement. But Nivea will not be missing from the shelves across the board.

The trade accuses the companies of taking advantage of the current situation to increase their profits. Beiersdorf’s is also increasing.
Our costs this year are 20 percent higher than expected – we are forced to adjust our prices. And retailers know that too, we show them the numbers. We want to pass on 50 percent of the increased raw material costs, which we think is very fair. That’s why we can push through our price increases.

To what extent can you pass on costs?
So far we have passed on half of the increased costs in Europe and 100 percent in the emerging countries. By the end of the year, we want to reach 70 to 80 percent on average worldwide.

Are there any further price increases?
The adjustments for 2022 are not enough. We have to raise our prices in 2023 as well. In any case, the plus will not be as high as this year, because we no longer expect costs to rise so dramatically.

Will everyday products soon become luxury goods?
Nivea deodorant no longer costs 1.95 euros, but 2.45 euros. That is still far from luxury. We have a very large portfolio – with La Prairie the most expensive brand in the world and the number one inexpensive brand Nivea. That helps us in the crisis.

Beiersdorf’s sales increased organically by 11.1 percent. You don’t name the margin for the third quarter. Is it falling in view of the high expenses?
no We can partially cushion the increasing costs through price increases and more efficient processes. Because our high-margin main business of the Eucerin brand and our luxury line La Prairie have recently grown strongly, EBIT is actually going up slightly.

Can the increase in sales be explained solely by price increases?
About half. We are also growing in volume – despite price increases.

Isn’t there a risk that Nivea customers will switch to cheaper private labels because of the higher prices? L’Oréal recently noticed this in the British market, which is suffering from particularly high inflation.
After the first price increases, we did not see this effect. It remains to be seen what effect the recent price increase will have. We must be careful on this subject. It’s easier to raise prices at La Prairie. With the inexpensive Nivea products, we think twice about every cent.

“Business with Russia is not a question of profit right now”

Speaking of considerations: Beiersdorf continues to deliver to Russia, while competitors such as Henkel have withdrawn. Why?
After the Second World War, Nivea lost its trademark rights in many countries. It took 50 years for us to bring them back country by country. If we withdraw from Russia, there is a real danger that this will happen to us again and that other companies will sell creams under our name. We want to prevent that.

Beiersdorf generates two percent of its sales in Russia and 0.2 percent of its EBIT. A withdrawal would be economically manageable.
Business with Russia is not a question of profit. However, we have a responsibility towards our 320 Russian employees. We want to maintain the basic supply of the local population, who cannot help the war, with our products. In Russia, we only produce everyday products such as Nivea cream or shower gel, no longer luxury products. With Tesa we left the Russian market. In principle, we have stopped all marketing activities.

Don’t you fear negative effects on your reputation?
The risk is there. That is why we are constantly monitoring the situation. We do not take this lightly. We responded to every criticism from consumers, some of which I wrote personally.

Do you also feel the criticism in business, with customers boycotting Beiersdorf products?
no way.

Russia is putting Germany under a lot of pressure when it comes to energy supplies. How long do you intend to stick to your plans?
We discuss this regularly. We currently think we have found the right strategy for Beiersdorf.

How important is gas as an energy source for Beiersdorf?
We need gas in our production in Hamburg to heat creams, but we are not an energy-intensive company. Energy accounts for only two to four percent of our production costs. We have prepared emergency plans and can switch to oil, diesel or heat pumps.

However, a lack of gas could have a negative impact on Beiersdorf if the suppliers’ products are missing. And they need a lot of gas.
Yes, but we don’t expect gas supplies to stop completely.

“We want to expand our China business”

Against the background of the war, do you also have to reassess other foreign engagements? You have proclaimed China as a growth market – things are not democratic there either.
Everything we do follows our ethical principles. However, we do not judge countries according to whether they are a democracy, but whether it is an interesting market for us.

Are you considering stopping your investments in China?
no We want to expand our China business. If we do it with our values ​​in mind and help the local population by paying them well, we can do it with a clear conscience.

>> Read more: German business has little desire for a “day trip” to China

Your predecessor Stefan de Loecker left his post overnight in spring 2021. You, too, had planned a farewell, as one hears. Now you are the CEO. Why did you stay?
My contract as board member for the selective brands would have expired one way or the other. At that point I looked at all the options – to continue working for Beiersdorf, but also to switch to other companies. When the board of directors asked me if I wanted to be CEO, it didn’t take me a minute to decide. To be honest, I wasn’t expecting the offer.

Your change was not the only one: seven out of eight board members have been replaced in the past 20 months. Where is the unrest coming from?
Nobody had to leave the company. Contracts have expired or colleagues have retired. We wanted to put together a new top team of internal and external board members to ensure continuity – and we succeeded. What I would like to emphasize: Half of my Executive Board team is made up of women. When I started in 2017, there were only men there.

So the change isn’t because the Herz family is dissatisfied with the work of the board?
no The owners are currently very satisfied with the board.

“We have indeed lost momentum over the past ten, 15 years”

There are enough reasons not to be. In the past decade, Beiersdorf has not been able to increase profits or sales.
We have indeed lost momentum over the past ten, 15 years. Beiersdorf lacked focus, we wanted to be present in too many product categories. We haven’t invested enough money in digitization, sustainability and our luxury brands. And we weren’t ambitious enough to do business in big countries like China, the USA, Russia or India. The good news is: We are growing organically again and the share price is also increasing.

The stock is up more than 10 percent since the beginning of the year. Where is the growth coming from?
We are pursuing a different business model: we are making our brands more global and more digital. Unlike in the past, we want to bring new products onto the market at the same time worldwide – and accompany this with global marketing campaigns. We are also investing a lot more money in digitalization. We’re growing 30 percent in e-commerce – faster than anyone else in the industry.

>> Read more: New Nivea strategy: fewer products, higher prices, more margin

However, at a low level. Beiersdorf generates only 11 percent of its sales online, while L’Oréal accounts for almost 30 percent.
Yes, we entered this area too late. But we’re getting better.

Beiersdorf is sitting on a mountain of cash worth over four billion euros. Why don’t you invest the money in acquisitions?
We made two acquisitions in 2019 with the US sunscreen brand Coppertone and in the spring with the American luxury cosmetics brand Chantecaille. Nothing happened in this area in the previous twelve years – so something is happening.

What brands are you looking at?
We’re primarily interested in acquisitions in premium facial care and we’re looking at the US market. But not in the coming months. We want to integrate Coppertone and Chantecaille first to prove to ourselves that we can make acquisitions. Then we will continue – and use the mountain of cash.

You increasingly rely on expensive facial care products with your products. Why?
More and more people strive for a good and young looking face. This is the cosmetics area that is growing the fastest and generates the largest margin – and we want to participate in that. This is especially true in Asia. Many people there get up earlier to care for their face – with up to nine different products. In Germany there are just three. We are not yet active in this area in Asia. We will change that.

Mr. Warnery, thank you for the interview.

More: Beiersdorf raises forecast and increases sales