Beiersdorf pulls out of color cosmetics market in Germany

By Katie Bird

- Last updated on GMT

Related tags Color cosmetics Board of directors

Beiersdorf has announced new measures designed to focus the business on skin care, which it says will weigh on next year’s operating margin, including pulling out of the color cosmetics market in Germany.

The move is part of the company’s attempts to streamline the business and focus on skin care, which will incur costs of approximately €270m before 2012. According to the company, about €120m of this is expected to affect fiscal year 2010.

Beiersdorf claims the changes will make the company ‘even more competitive and even more profitable’. “Today we have laid key foundations to safeguard the company’s long term future,”​ said Thomas B Quaas, chairman of Beiersdorf’s executive board.

Color cosmetics no more in Germany

Withdrawing from color cosmetics in Germany was described by company spokesperson Rolf Lange as ‘clearly strategic’.

“We now focus on skin care and not on color cosmetics, it’s a different business and different approach…it is a tough decision to go out of the market in Germany as it is still an interesting segment, but we want to focus our resources on skincare,”​ he told USA.

“In skincare we are often the number one in the market, like for deodorants in Europe for example. We have a lot of number one positions, but for color cosmetics in Germany we are number 5, so with the new strategy it was decided not to focus on this area,”​ he added.

However, Lange did say that local affiliates were able to continue the color cosmetics business if it was deemed appropriate.

“This also related to our second focus, being closer to the markets. In some local markets it might be important for skin care to have a color cosmetics segment, if this is the case, then the color cosmetics business could continue,”​ he explained.

Drops in sales experienced as a result of withdrawing from the sector are likely to be offset in the medium term by new, innovative product launches, the Germany-headquartered business said.

Details of the other streamlining and global harmonization measures could not be given at this time.

However, the company did say that writing down some of the intangible assets relating to the China business would also lead to additional costs.

Lowering outlook for EBIT margin

Due to costs related to the restructuring programme, the company has lowered its outlook for its EBIT margin for the fiscal year 2010 from 11 percent to 9 percent, and predicts sales growth of between 2 and 3 percent.

Other changes announced include merging the Brands and Supply Chain divisions, which Lange said was designed to make the business more efficient as well as lead to significant cost savings.

In addition, the company has appointed Ümit Subaşi as the new Executive Board member for the emerging markets, a previously unfilled position.

“This is a strong sign, internally and externally, of a stronger focus on this area,” ​Lange said.

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