The lockdowns that hit China in April and May, particularly in major cities Beijing and Shanghai, had a negative impact on La Prairie, the company’s high-end skin care brand.
It was further aggravated by several other COVID-19-related restrictions, such as the requirement of a negative PCR test for entering places like department stores.
La Prairie was particularly impacted because the brand was “significantly more dependant” on Beijing and Shanghai, said Beiersdorf CEO Vincent Warnery during the firm’s first-half earnings conference held on August 4.
Furthermore, the brand was not able to offset this with e-commerce distribution, as Alibaba-owned Tmall was also affected by the lockdown.
“Due to our very selective distribution, we were not able to offset the effects of the lockdown by boosting our e-commerce activities. This is not only because we are only distributed at Tmall which stopped supplying customers in Shanghai during the lockdowns, but even more because, unlike our competitors, we do not promote our brands through festivals such as 18.6 or 11.11,” said Warnery.
As a result of these circumstances, La Prairie sales in China declined by 30% in April and May. However, the firm has already seen a rebound and sales shot up by 32% in June and July.
Overall, the firm limited the negative impacts of the China lockdowns. It recorded organic sales growth of 1.8% in the first half of the year and grew by 17% in June.
The company will continue its expansion plans in China on the back of this performance.
Warnery said the firm will open 10 new doors before the end of 2022 – nine of which are located outside of Beijing and Shanghai.
Additionally, it will expand its online distribution with JD.com in the next few weeks. Warnery expressed his optimism for this new venture, highlighting thatJD.com’s market share in online premium skin care went up from 7% in Q2 21 to 20% in the second quarter of 2022.
“With this in mind, we are expecting very good double-digit Q3 growth not only in China but also for the overall La Prairie business.”
NIVEA and Eucerin
Similar to La Prairie, NIVEA also experienced setbacks from the COVID-19 restrictions but recovered quickly in the last couple of months.
“After being impacted in April and May by the restrictions to fight the pandemic, NIVEA recovered very quickly in June with strong growth. Especially body care in mainland China, but also the face care category via cross border sales, grew significantly,” said Warnery.
The brand which was the least affected by lockdowns was Eucerin, thanks to its digitally-led approach.
“Thanks to our digital-only approach we were able to almost double our sales year on year in the second quarter,” said Warnery.
“We are well on track in China, and we are constantly gaining market shares.”