Shares in Beiersdorf dropped more than 10% today after the maker of Nivea skin cream warned that its operating margin would fall in 2019 as it invests to compete with niche brands that are disrupting the sector.
Beiersdorf was the latest consumer goods company to reset profit expectations for 2019 after German rival Henkel and Colgate-Palmolive last month, and following Kraft Heinz's writedown last week.
"The consumer goods industry is in turmoil," new Beiersdorf CEO Stefan De Loecker, who took over on January 1, told a presentation to analysts. "I need to act now."
De Loecker said the future of mass-market labels was being challenged by the rise of small, disruptive brands as consumers increasingly expect more personalised products and services.
Warren Buffett said this week that his Berkshire Hathaway overpaid in the 2015 merger that created Kraft Heinz, noting retailers such as Amazon and Walmart are making it harder for brands to push through price hikes.
Beiersdorf said last night that it expects group sales growth of 3-5% in 2019, down from 5.4% in 2018, and an operating margin of 14-14.5% in its core consumer business unit, down from 15.3% in 2018.
To counter the slowdown in sales, Beiersdorf will invest up to €80m a year in its consumer business, which makes Nivea and other brands including Eucerin.
The additional spending on opening new markets, innovations, digitisation and training should boost organic growth in this area to 4-6% by 2023 and the operating margin to 16-17%.