Beiersdorf, the maker of Nivea, has reported that it expects organic group sales to be up by between 3% and 5% this year, with its core consumer business segment expected to rise by a similar amount.
The group made the assessment as it launched a new strategy programme, C.A.R.E.+, with which it hopes to grow the consumer business segment to 4% to 6% annual growth by 2023, and develop EBIT margin to 16% to 17% in the same period.
It reported that the C.A.R.E.+ programme is a 'response towards profound transformation of the industry', incorporating entry into new markets, innovation, digitalisation and upskilling.
Historical Disruption
“The consumer goods industry is undergoing a historical disruption. Our entire business model needs timely adaptation due to new market realities and fast-changing technology developments,” says Stefan De Loecker. “This requires, first and foremost, higher investments. We at Beiersdorf are motivated and prepared to kick-start this phase of transformation.”
C.A.R.E.+ is an acronym, De Loecker added, for 'courage, aspiration, responsibility and empathy,' adding, "The plus sign at the end underscores our commitment to create more value with C.A.R.E.+ for people and society in the long term."
The group reported that it boasts net liquidity of €4.4 billion and a 'robust' balance sheet, which will enable it to further the investment needed to implement the programme.
Group sales at the business increased by 5.4% in organic terms and 2.5% in nominal terms last year, to €7.233 billion.
Analyst Viewpoint
Commenting on its strategy, analysts Liberum Capital said, "Beiersdorf’s management is spending an additional €70-80 million on new markets, innovation, digitalisation and upskilling to support top-line growth in an increasingly competitive beauty market. This leads to short-term margin pressures, although the group will remain focused on efficiencies, improving cash conversion and working capital.
"We expect Beiersdorf will return to margin improvement from 2020 on track to reaching its 16-17% EBIT margin target, while also delivering 4-6% like-for-like sales growth," the analysts added.
"We expect the shares will come under pressure near term, as the market digests the margin reset and the timing of the expected accelerating in top-line growth," they furthered.
© 2019 European Supermarket Magazine – your source for the latest retail news. Article by Stephen Wynne-Jones. Click subscribe to sign up to ESM: European Supermarket Magazine.
