Despite the challenging market conditions in China cause by the COVID-19 restrictions, Nivea managed to grow its business thanks to its premiumisation strategy both online and offline.
“We are concentrating our resources on driving premium and high-margin products. Online, we are placing strong emphasis on face care, and we have experienced great success with Nivea’s Luminous630 technology which we handle via cross-border e-commerce," said Beiersdorf CEO Vincent Warnery.
“Although we have an established business in China, we have had to optimise a portfolio and focus on more premium products – our Nivea serum is a prime example of this approach.”
The company’s attempts to premiumise its portfolio helped to increase the average selling price of its facial care products.
“As a result of our efforts in face care, market share reached a historic high. Over the past year, we have increased the average selling price in the face care category to EUR22.8 compared to EUR4.5 in 2020,” said Warnery.
At the same time, Nivea’s average selling price increased in its core body care category by 23.9% in 2022 compared to 2020.
“We are delighted with the progress we have made in Nivea business in China as our premiumisation strategy is yielding positive results both on and offline,” said Warnery.
“We have demonstrated the ability of Nivea to be more premium. The best success ever of Nivea is Luminous630. We are selling the product, according to the country, between 25 and 29 euros and we used to be more dependent on products so that were between five and 10 euros.”
Overall, Nivea’s organic sales growth increased by 18% in the quarter ending March 2023. The brand recorded double-digit growth in all key markets.
Growth was led by the sun care, lip care, and deodorants categories. In addition, double-digit sales increases were also seen in face care. This growth was underpinned by price increases and a positive volume contribution for the entire portfolio.
Premiumising without hurting equity
However, despite the company’s success, Warnery said the company has to ensure not to get carried away with its price increases.
“I think we have to absolutely to respect the equity of Nivea, which is a value for money brand. This is why the price increases we have done in 2023 are more reasonable in comparison to 2022 because the increase in cost was not as high in 2022. We are looking at that with a lot of scrutiny it in order to not to cross the line and to become too expensive in the eyes of customers.”
The firm believes that Nivea still has more room for premiumisation in other categories aside from face care.
“We used to be highly represented in cheap personal care offline categories and we want to be much stronger in premium online skin care categories,” said Warnery.
“It means increasing prices, it means launching new products with a much higher price. It means also stopping existing franchises which are not adding to the equity of the brand. This is what we are going through. And we will continue to that, again benefiting from the fact that we have a strong R&D facility in China.”