A man on a mission: Nivea turns its attention to travel retail

“Hopefully the creation of our new global travel retail department will highlight to the trade how seriously we are targeting the channel.“

Robert Taylor-Hughes Managing Director Beiersdorf Middle East

INTERNATIONAL. Beiersdorf Middle East Managing Director Robert Taylor-Hughes is a man with a mission. A mission that involves propelling the Nivea brand to the forefront of the travel retail channel’s cosmetics offer, while challenging entrenched operator perceptions about margin and stock turn.

It’s a tall order, but one which Taylor-Hughes is clearly relishing. Just three years ago, in his own words, Nivea had “limited travel retail exposure” in the region, trading in just four locations: Dubai, Abu Dhabi, Sharjah and Muscat.

Since then, the brand has been listed in Cyprus, Pakistan and Iraq, and has rebuilt its furniture practically everywhere else. “We’ve done quite well,” acknowledges Taylor-Hughes. “We now have some very impressive displays in duty free, of which I think Dubai Duty Free (DDF) is one of the best examples.

“We have prominent wall units in Dubai Terminal 3″¦and for the first time ever we have equal space with L’Oréal, a key competitor for us in the channel. It’s a very simple equation – with the space come the sales”¦ and this year in our region we’ve grown +25% year to date.”

Those sales are poised to gain further momentum with the creation earlier this year of a global travel retail department, located in Switzerland and headed by Ilka Schuette. The department will handle all Beiersdorf brands, but will focus primarily on Nivea.

“It’s a development we’ve pushed for from this region,” revealed Taylor-Hughes. “And hopefully it will highlight to the trade how seriously we are targeting the travel retail channel. We are still fine-tuning the business model, but it’s likely that in the future all duty free will be handled out of Switzerland.” *

Taylor-Hughes underlines how much untapped potential there is for mid-priced brands, such as Nivea, in the channel. “Aside from us and L’Oréal, there are hardly any players in the masstige sector – virtually everything else is prestige,” he explains.

“Yet we know that there are between 30% and 50% of passengers who don’t buy anything at all in duty free, because they are not interested in such products. So where’s the offering for them? We firmly believe we can attract new consumers to travel retail, who are looking for strong brands within the FMCG/masstige sector, either for gifting or for personal use.”

The stumbling block to date, however, has been the sector’s well-documented fixation on margin, which has made it mighty tough for mass- and mid-market cosmetics brands to flourish.

“Most duty free retailers have adopted a very simplistic business model, which [revolves around] giving 60-65% margin,” notes Taylor-Hughes.

“In contrast, we are working hard to explain that by operating at a lower margin, but with a much higher stock turn, everybody involved makes more cash profit. A retailer can make more money by selling bigger quantities of our products for every one of another brand’s high-end face creams.”

Beiersdorf has worked hard to establish the Nivea brand in the Middle Eastern travel retail channel

He continues: “Everyone knows Nivea – and everyone knows they can afford Nivea too. So give them a chance to buy it. We have engaged extensive research about the various consumer profiles that travel through duty free, to map out the different types of buyers. We discovered that teenagers are not well catered for; the 50+ age profile is not well catered for; and that the majority of travel retail products tend to be geared towards western European travellers. In short, there are some big gaps that we can help to plug.”

Taylor-Hughes also believes that retailers should be adapting their offer to appeal more to the low cost clientele. “There has been a huge growth in low cost carriers in recent years,” he points out. “Is someone who has spent, say, £29 to £50 on a ticket, looking to spend £50 on a face cream? I’m not saying that type of traveller is necessarily less well-off, because that isn’t the case, but I think a lot of those travellers are looking for something different. So why not offer a selection of products that are more suited to their needs, as opposed to just the traditional range of prestige brands?”

Margin aside, travel retail often incurs hefty costs in other areas, such as promotions, training and events. Is that sort of expenditure a realistic commitment for a mass/mid-market brand?

“Yes,” replies Taylor-Hughes emphatically, “because we do that in the general trade anyway. Believe me, it’s no less expensive to trade in, say, Carrefour, and to run promotions and animations and brand promoters there, than it is in duty free.

“That type of above and below-the-line expenditure is in our budget globally, and in fact I’d say it’s an area where we excel, because we’ve got so good at it domestically.”

Travel retail exclusives now account for around 25% of Nivea’s business in the channel

One of the key projects Nivea is currently working on involves sustainability – interestingly, duty free has been chosen as a test market. “Basically, we are trying to encourage consumers to return empty packaging, which we can then recycle and re-use,” reveals Taylor-Hughes.

“This is important, because according to our research, Generation Y ranks sustainability number two in terms of choosing which brands it will use in the future.”

Nivea is keen to balance worthy initiatives such as this with offbeat, fun ideas. The brand has gained valuable exposure with its Skin Science Express – a mobile beauty spa in the guise of a bus.

“The Skin Science Express is very popular,” acknowledges Taylor-Hughes. “It’s a 40-foot, luxury RV”¦ that has been fantastic in terms of consumer engagement. It’s also been a great investment. It has real longevity, unlike an exhibition stand which might only last for two shows. And of course we can take it virtually anywhere.”

The Skin Science Express made its travel retail debut at this year’s Middle East Exclusive (MEE) event in Dubai. Domestically, it has featured at events as diverse as bridal shows and the Dubai Ruby Sevens.

Another key instrument in terms of building awareness domestically – which ultimately has a knock-on effect in travel retail – is the opening of the flagship Nivea Haus store, in the Dubai Mall. The first Nivea Haus opened in Hamburg, the home of the brand, in April 2006.

“The Nivea Haus in Dubai has been open about a year and a half now,” confirms Taylor-Hughes. “It covers 5,000sq ft and offers a full assortment of products for sale, many of which are exclusive to that location.

The Nivea Haus in Dubai features a separate gents grooming lounge and a hi-tech skin analysis centre

“It also houses the most hi-tech skin analysis centre in the region, which can tell you everything you ever wanted to know about moisture levels, elasticity, melanin, skin age and so on. This of course is invaluable in terms of recommending which products consumers should be using.”

The Nivea Haus also features a women-only beauty treatments lounge and hair salon, a separate gents grooming lounge and state-of-the-art private treatment cabins.

Very few airports have a spare 5,000sq ft on offer, but could a scaled-down version of the Nivea Haus, or any other form of single-brand stand-alone travel retail store, be a financial reality for Nivea – or indeed any mid-market brand?

“It is a possibility, although of course everything would depend on the rent per square foot,” muses Taylor-Hughes. “I don’t see why not, providing we have the right level of footfall and the fixed costs aren’t too high.

Facial skin care, along with body care, men’s grooming and travel exclusives, is a priority for the brand

“Another option to explore would be within airport business lounges,” he adds. “Many such facilities now have small spas in them, although the issue there is that only a certain number of passengers have the time or opportunity to experience them. Perhaps manicure stations in business lounges would be a good way to test the water.”

FINE-TUNING THE PRODUCT PORTFOLIO
With over 400 products across skin, body, Visage, men and make-up, the Nivea portfolio is huge, and the brand works hard to fine-tune it properly for the travel retail channel.

“Our priorities are facial skin care, body care, men’s grooming and travel exclusives,” reveals Taylor-Hughes. “But we keep a very close eye on everything. We do a full ABC analysis every six months, so we always know what our best-sellers are and how best to optimise our shelf space. Most travel retail doors have stock rooms in a different location, so you have really got to keep on top of your replenishment issues.”

Travel exclusives now account for around 25% of Nivea’s business in the channel. The selection focuses on the brand’s best-sellers and gifting ideas. The line was recently redesigned to highlight the Nivea brand colours, and to reposition the sets at a more premium level.

“When it comes to beauty, the Nivea brand is known first and foremost for care – and trust,” notes Taylor-Hughes. “We have 97% global brand awareness, and for seven years running we’ve been voted [by Readers Digest] the most trusted brand worldwide by consumers.

“That sort of following is the result of honesty, and efficacy. We don’t make any false claims about our products. We are very careful with our packaging, and we only ever claim what we can prove scientifically.”

He adds: “In that sense our products speak for themselves. For example, in terms of technology and performance, Nivea Visage Expert Lift stands up against any of the prestige brands out there – and it’s probably a quarter of the price.”

Nivea’s next big breakthrough harnesses Nobel Prize-winning technology, according to Taylor-Hughes. “This involves aquaporines,” he explains. “These are necessary for optimum skin hydration. The technology it involves is outstanding, and in 2010/2011 we will implement it across our brand portfolio, and not just for Nivea, but for Eucerin too.”

Nivea’s recently revamped exclusives selection focuses on the brand’s best-sellers and gifting ideas

Looking further ahead, Taylor-Hughes reveals big ambitions for Nivea in duty free. “I think our growth will be massive, particularly following the decision to create a global travel retail presence,” he declares. “Soon you will start seeing Nivea everywhere in duty free.

“Within our region, we are certainly still looking to expand. We will continue to grow organically, but will also open in more outlets, with more operators. In the past perhaps we’ve been a little cautious; our policy has always been, if we can’t service an account properly, then we shouldn’t open it. Travel retail expects high service levels and we always want to deliver.

“But now we have the people on board to do that, and our benchmark is to be listed everywhere that L’Oréal is. We recognise that in future we need to try and get in before any new terminals open, to ensure we have the right space and location.”

Taylor-Hughes is keen to spread the word about alternatives to fixed margins. “It would be nice to run some workshops and demonstrate what we’ve done in the modern [domestic] trade,” he notes.

“We’ve been working category management models for more than 10 years and generally we can go into a supermarket with category capture, de-list perhaps 20% of the references and increase stock turn and profitability by +6%. There’s no reason why we can’t do that in travel retail too.

“Everyone looks at the top line”¦but you don’t necessarily sell anything extra because you’re making more margin. Retailers should be concentrating more on fast-moving brands and products.”

He concludes: “If we can turn this corner on margin mindset then I think there’s a lot more opportunity for duty free to look at alternative offerings that are not all about prestige. The only retailer that really makes an effort to do that today is Dubai Duty Free – and their results across the board speak for themselves.”

*N.B. Look out for the feature on Nivea’s new travel retail organisation, to be published on www.TheMoodieReport.com post-Cannes