Beiersdorf AG

Very good morning, everybody. This is Jens Geissler.

Welcome to Beiersdorf's Conference Call. Joining me this morning is Beiersdorf CEO, Vincent Warnery, and our CFO, Astrid Hermann.

We would like to share with you Beiersdorf's business results of the first nine months of 2021. We'll start with a brief presentation, which you can access through the link in your invitation.

We'll be happy to take your questions after that. Please remember that the Q&A session will be limited to two questions per caller.

And with that, I now hand over to Vincent.

Thank you, Jens. A warm welcome also from my end to today's conference call.

And thank you for joining us. Astrid and I are very pleased to lead you through our performance over the first nine months and the key developments of the past quarter.

At the last quarterly conference call, I gave you an insight into Beiersdorf's C.A.R.E.+ strategy and presented my roadmap for the company. Before we look at our performance in detail, let me quickly reiterate the three key strategic focus areas that are of utmost importance for me.

Firstly, our overall strategic goal. We win with skin care.

Secondly, we put a strong focus on accelerating our digital transformation. And thirdly, we are shaping a climate-positive future.

As CEO of Beiersdorf, I have been driving forward the implementation of this strategic roadmap. The digital transformation and the shift towards a climate-positive future are increasingly relevant all around the world and therefore need to be tackled on a global scale.

Furthermore, we have worked intensively in the background to adjust our operating model going forward. Let me illustrate this with a brief example.

From 2022 onwards, we will have stronger global governance of NIVEA product launches and marketing campaigns. This will help us to drive fewer, better, and bigger launches and campaigns, whilst running our business more efficiently.

As part of our focus on winning with skincare, we are building stronger innovation by investing in early innovation discovery. We have created a new, diverse team of experts, with a singular focus on identifying relevant trends to feed our innovation pipeline and create break through innovation.

Ladies and gentlemen, approaching the end of 2021, we have made significant progress in implementing our strategic priorities as part of C.A.R.E.+. This is clearly reflected in our financials.

Overall, we have seen a successful quarter with continued growth and steady recovery from the challenging previous year – a development that we are particularly delighted to report after the impact of COVID-19. We succeeded in gaining significant market shares, especially in emerging markets, and successfully launched new innovative products.

These successes are reflected in our financial results for the past nine months. Despite the ongoing restrictions due to the COVID-19 measures that are affecting some categories, we have seen sales growth of 6.8% with NIVEA compared to 2020.

This brings us back to the pre- pandemic level of 2019. We are proud to see our body and face care categories continuing to accelerate and will give you some more details on this development in a second.

Derma continued its outstanding performance in the third quarter. Thiamidol is supporting the growth momentum, and we are expanding regionally and in new categories.

Our healthcare business was able to accelerate the growth from the previous quarters in nearly all markets. We are now significantly above 2019 levels with this part of our business.

La Prairie is also continuing its remarkable recovery despite ongoing headwinds in the global travel retail channel. We are now up 26.2% compared to the previous year.

All in all, this equates to a growth in the Consumer Segment of 10.4%. tesa once again outperformed the competition, especially in the Direct Industries segment, and grew again in the third quarter, resulting in 19.4% growth for the first nine months.

At group level, we are now clearly above 2019 levels and finished the first three quarters with 12 % growth compared to 2020. Astrid will comment on the figures in detail later.

Looking at NIVEA, the global net sales are back to 2019 levels despite different developments in the various categories. Product categories like sun protection, lip, and face cleansing are still negatively affected by travel restrictions, the wearing of face masks, and the less frequent use of make-up.

In contrast, other skin care categories are performing exceptionally well, and we have used this momentum successfully. Face care sales have risen 21.1% compared to 2020 and are even up 11.5% versus 2019.

We are winning market shares in face care in two-thirds of the countries where we are active. And we are especially proud of our market share gains in highly competitive markets such as Germany and France.

Let us go more into detail on these two markets and start with France. The skin care market is strongly growing there, especially driven by the face care category.

After three years of consecutive market share losses, we were able to turnaround this development and gained massively market shares in the face care category, especially compared to our biggest competitor brand. This results in a sharp market share increase of 200 basis points to date.

Our anti-pigment innovation Luminous has been the most successful anti-aging launch over the last three years in the entire market, securing top positions in the anti-aging category from the start. The serum as well as the day fluid have become bestsellers in this category.

We can see a similar development in our home market Germany. The NIVEA Luminous 630 serum quickly became the number-one seller in the face care anti-aging category in Germany.

The total NIVEA Luminous630 product range is the main driver of the fast-growing face care Anti-Aging market, representing alone more than 80% of the total market growth. Let me now turn to Eucerin.

Eucerin has also been able to achieve strong growth, driven in particular by the success of our Thiamidol-based range, whose sales are growing by more than 50% year-on-year. The strong performance is led by the launch of the 3D Serum in all our markets as well as the strong growth of the existing range, especially in Latin America.

And we are further expanding into new segments. Currently, we are entering a completely new market.

With the launch of Eucerin DERMOPURE TRIPLE EFFECT SERUM with Thiamidol, we have been able to bring Thiamidol into the acne category, thus continuing the success story of our life-changing ingredient Thiamidol with 95% of consumers claiming that it beats post acne marks. Our TikTok campaign in France generated over 17 million views within a few weeks.

And this is what we mean with “winning in white spots.' Conquering new markets and expanding into new segments.

And we will continue to do so. In the first quarter of 2022, we will launch Eucerin in the US sun category – the largest sunscreen market in the world.

We will launch seven sun products, thereby combining advanced sun protection and skin care benefits. In the face category, for example, we will launch a product custom-made for oily and acne prone skin.

The products were developed with dermatologists, have clinically proven efficacy and benefit from the comprehensive sun expertise and know-how from Coppertone. We just presented this launch to our US retailers and the number of SKUs listed by each retailer is above our expectations.

Let me move from the US to Latin America, where we have been especially successful during the first nine months. We grew by more than 21% compared to 2020 and by more than 27% compared to the pre-crisis level.

Our clear focus has been on three pillars: Expanding our skin care offering. Taking advantage of the fast-developing e-commerce and digital environment in the region.

And further penetrating Brazil, one of the biggest skincare markets in the world. Over the past nine months, we gained market shares in 70% of the countries and categories where we are present in Latin America.

For example, we became number 1 with NIVEA sun, face, body and lip in Brazil. We outperformed all our major competitors in Latin America, driven by the combination of strong innovation, excellence in execution and prioritization of e-commerce.

In e-commerce, we achieved year-on-year sales growth of 77% for the first nine months. We can now serve customers digitally, for example, in remote areas of Brazil and other countries.

This is steadily increasing our market shares and making NIVEA the number one skin care brand online in the majority of the region. Brazil is one of the biggest skin care markets in the world.

With our NIVEA brand, we are already well established in the Brazilian market. Nevertheless, we have managed to expand our top positions in the market and have reached a record high market share of more than 19% across all categories.

Three years ago, we launched Eucerin in Rio and Sao Paulo, and are now expanding the brand to Brasilia. We can see that this focus is paying off.

With Eucerin, we have achieved the number one position for the anti-pigment category in the Brazilian market as a whole, increasing our market share to 23%. With this ongoing success of our face business in Brazil, we have gained market shares in the last nine months, reconfirming our decision to fully exploit the potential of this important skincare market.

And to serve our customers in the best possible way, we continue to invest in capacity and capabilities to deliver excellent products in the region. Already today, 90% of our sourcing comes from within the region.

And we want to further strengthen this. In Mexico, for example, we have invested significantly to increase the capacity of our local production by 30%.

Ladies and gentlemen, as you have seen in our performance in Latin America, driving digitalization is a key strategic priority for us. As the last 18 months have shown, it is crucial for a successful business model.

Accelerating the digital transformation therefore remains high on my agenda. Our ambition is to offer personalized superior skin care solutions for everyone.

This means providing targeted information for individual needs. One example is the dynamic messaging system we developed for NIVEA sun.

As the sun care brand number one, we know about the harm the sun does to unprotected skin. Based on weather data and user behavior, we do inform our consumers not only about how to protect their skin against the sun, but link the information with the right product offering.

With over 200 dynamic executions of precision marketing campaigns in UK and Germany, we were able to reach over 16 million consumers during the summer. The campaigns are also linked with a strong digital educational platform in cooperation with our European skin care partners in the UK and Germany.

In the first nine months of 2021, we increased our activities with precision marketing campaigns significantly – a tenfold increase compared to the entire 2020 financial year. In Germany, we were able to gain 170 basis points of market share for NIVEA sun, thereby strengthening our top position in the sun category.

Another example of the importance of value-adding data analytics is our approach to cater and develop our products with strategic partners. Last year, we established a partnership with the Alibaba Group's powerful co-innovation platform: the Tmall Innovation Center (TMIC) in China.

TMIC is aiming at helping brands identify new channels and strategies to tap into the Chinese market by using precise market analysis, real-time consumer insights, and product concept testing. We currently have half a dozen projects at different stages of development together with TMIC.

Three innovative products for our iconic NIVEA brand have been developed so far, such as NIVEA MEN's eye gel, which was co-innovated in the space of just nine months. We sold 15,000 sets online within just three seconds.

Leveraging Tmall's data capability and tools provides us with consumer insights to tailor our products to the relevant trends and needs among Chinese consumers and to drive agile product development and successful co-creation. These are just two examples of how we are accelerating our digital strategy further.

Our products are where our consumers are. That means our investment in e-commerce has proven valuable, which we see in our results across all brands and all regions.

We continue to grow significantly in e-commerce. In the first nine months, our online sales for the total Consumer Business grew by 38%.

As you can see, Hansaplast and Elastoplast have had the largest growth year-to-date, followed by Eucerin and Aquaphor. I am very happy with our progress in ecommerce.

Since 2019, we have increased our focus on e-commerce and it is paying off. We have doubled our percentage of net sales to around 10%.

That being said, our reduced exposure to China and the US impacts our performance versus some of our competitors. However, excluding this geographic mix factor, we are within the range of the industry best-in-class.

My ambition is that, within the next 18-24 months, on a comparable basis, Beiersdorf will start to be ahead of competition in terms of percentage of net sales in each of our geographies. The COVID-19 pandemic has been a catalyst for e-commerce and has initiated transformational changes that are here to stay.

The same applies to climate change, an issue that has become top of mind all around the globe in recent years. Investigating innovative new and more sustainable product and packaging formats and transforming our supply chain processes are important aspects of our sustainability journey.

All these activities allow us to reduce our CO2 footprint as a company and that of our consumers as well. Let me show you what we have done in recent months.

Already now, more than 90% of our PET bottles in Europe are made of recycled plastic. Our NIVEA Naturally Good bottles need 50% less plastic than the classical one.

We have also introduced a range of solid facial-cleansing NIVEA products that are eco-certified and use no plastic at all. Furthermore, 100% of our folding boxes, already limited to a very few SKUs, are FSC certified.

As for the ingredients, 100% of our palm oil-based ingredients are responsibly sourced since end of 2020. Currently, we are introducing the first aerosol cans with 100% recycled aluminum in our deodorant and male shaving categories.

Through this measure alone, we can reduce the emissions by 35%. These are only a few examples.

As for our supply chain, our production site in Berlin will be carbon neutral from 2022, and 100% of our global electricity already comes from a renewable source since 2019. CO2 reduction is our top priority at Beiersdorf, driving all our sustainability initiatives.

Our plans and measures here are at the edge of what is technologically feasible right now and we are working hard to achieve our ambitious target – a reduction of 30% of our scope 1, 2 and 3 emissions in absolute terms by 2025 along the entire value chain. These targets are approved by the Science Based Targets Initiative, with our product transformation efforts at the center of our climate strategy.

Looking at our entire value chain is especially important for us, as more than 95% of our emissions are within the scope 3 category, which is closely associated with the packaging and raw materials we use. In order to reduce their CO2 impact, we also work closely with key suppliers.

This allowed us to launch the first Face Care Jar from certified renewable plastic, as well as the first aerosol can from 100% recycled aluminum that I just mentioned. Both initiatives significantly reduce CO2 emissions.

We know, however, that what is currently feasible technologically as reduction is not sufficient. Time is pressing and nature's capability to absorb CO2 must be increased as we speak.

That's why, in addition to our significant investment into a more sustainable business, we will also make an important contribution to natural CO2 absorption projects. This combination of ambitious emission reduction and the support of natural CO2 absorption forms our climate care strategy.

As of 2022, we will balance the entire value chain emissions of NIVEA and Eucerin with certified carbon removal projects, making them our first 100% climate neutralized skin care brands. As a company highly committed to the sustainability dimension, we are determined to bring climate care to skin care.

This is a strong commitment that underlines our aspiration to become a leader in our industry with regards to climate action and to inspire others to follow. More information about our efforts will be shared with you at a dedicated sustainability event in January.

So, stay tuned. And now, I will hand over to my colleague Astrid Hermann.

She will present the financial results in detail.

Thank you, Vincent. Good morning, ladies and gentlemen.

I welcome you to our sales update for the first nine months of the year and would like to give you some more background on our results. Let's take a closer look at the sales figures for the Beiersdorf Group as well as for our two business segments.

Our Consumer Business grew by 10.4% organically in the first nine months. Due to foreign exchange effects, nominal sales grew by 8.0%.

Our tesa business continued its strong performance and achieved organic sales growth of 19.4% in the first three quarters of the year. Exchange rate effects led to nominal growth of 18.4%.

Combined, we recorded total sales of €5.76 billion, and like-for-like sales growth of 12.0% for the group. Looking at our Consumer Segment by quarter, we can see that the recovery continues.

After moderate growth in the first quarter and a strong rebound in the second quarter, which was most impacted by the pandemic last year, we generated growth of 4.1% in the third quarter on the back of a stronger third quarter 2020. Year-to-date, we have now surpassed the 2019 levels despite ongoing restrictions in global travel retail.

Let's have a closer look at the developments by brand. Our NIVEA brand grew by 2.6% in the third quarter.

We recorded a strong recovery in our sun care business, although the recovery decelerated in the second part of the quarter due to bad weather in Europe and we finished below 2019 levels. Vincent already spoke about the remarkable performance of our face care category.

Additionally, the body care category is growing double digits year on year and also compared 2019. This performance is mainly driven by our iconic products like our NIVEA Body milk, but also by the extension of our very successful NIVEA Naturally Good body lotion.

Last, but not least, we are also pleased to see a sequential recovery in our personal care business around the deo and shower categories. Our Derma brands confirmed their success story with 18.2% growth in Q3 on top of an already strong prior-year quarter.

At the nine-months stage, we are now more than 30% above 2019 levels. Once again, our key markets in the US and Germany performed very well and were supported by continuous growth in Latin America.

As mentioned earlier, we will continue to expand our business regionally and also from a category perspective. The return to a pre-pandemic lifestyle and to more sports activities gave our sports category another push.

Our Hansaplast/Elastoplast business accelerated in the third quarter in all our main markets, finishing the first nine months with growth of 14.4%. This excellent development was also supported by our brand relaunch at the beginning of this year.

The strong recovery of La Prairie saw a temporary slowdown due to travel restrictions around Hainan. We are also running up against a strong comparable period in the second half of the year as Q3 and Q4 last year were supported by revenge shopping after the reopening.

Nevertheless, we continued to deliver very strong results in China, significantly above 2019 levels. This is driven by an expansion of doors, continuous strong performance in Tmall and the superior growth in domestic travel retail around Hainan.

Next, let's focus on the performance at regional level. In Europe, we recorded sales growth of 6.7% for the first nine months of the year.

Western Europe grew by 6.2%, mainly driven by strong performance in Italy, the UK and Switzerland, but also supported by the ongoing recovery in Germany. As mentioned in previous calls, the global travel retail business of La Prairie, which is reported under Western Europe, remains a major growth driver.

Eastern Europe reports strong broad-based growth throughout all countries. Poland, Russia and Romania continue to lead the growth.

The Americas is the area with the strongest overall growth of 17.2%. North America's growth of 13% in the first nine months was driven by strong sales in Coppertone, double-digit growth for Eucerin and Aquaphor as well as the recovering La Prairie business.

Numbers for Latin America confirm once again the strong momentum in the region. On a nine-month basis, Latin America is up by 21.7%.

All countries are supporting this growth, although Brazil and Mexico are making the biggest contribution here. Africa/Asia/Australia grew by 11.6% in the first three quarters.

We can report strong growth in the majority of countries, led by the excellent La Prairie performance in China. Our business in India, Malaysia, Turkey and South Africa also strongly contributed.

However, we recorded some slowdowns in the recovery due to new lockdowns, for example, in Thailand. Moving to the tesa segment.

Despite an exceptionally strong basis in Q3 2020, we were able to deliver another quarter of growth. With single-quarter growth of 4.6%, we are ending the first nine months up 19.4% on a like-for-like basis.

The trade markets division delivered 11.8% on the back of a pandemic year which boosted the do-it-yourself sector. This year, the areas around craftsmen and our general industrial markets are growing especially strongly.

The main growth driver remains our direct industries segment. The excellent growth of 24.7% for the first nine months is once again led by our electronics business in China, but also supported more and more by the strong recovery in automotive globally.

We are also pleased to announce that we have not seen any major supply chain issues in the last quarter. As we are getting closer to year-end, we would like to take the opportunity to update our guidance for the full-year 2021.

For the Consumer Segment, we expect organic sales growth between 7% and 9%. Our guidance for the Consumer EBIT margin remains unchanged and we expect it to be at previous year's level.

However, we are seeing pressure from input cost inflation, which we are looking to offset although a slight risk remains. At the same time, I would like to confirm that year-to-date quality of EBIT is good based on a slightly positive gross margin development.

For the tesa business segment, we are raising our guidance for both sales and profitability. Backed by the continuous strong performance in the third quarter, we now expect organic sales to achieve growth of between 11% and 13% and expect tesa's EBIT margin to be above the previous year's level.

For the total group, organic sales growth should come in between 8% and 10%. The group's EBIT margin reflects the different trends in Consumer and tesa and, as a combined figure, is expected to be at the previous year's level.

Let's now take a look at the qualitative outlook for the year 2022. While there is still continuing uncertainty due to the pandemic, I would like to share with you our expectations for the coming year.

We will continue to develop our skin care business through innovations as we are currently doing with the successful launch of our NIVEA Luminous range. On the back of easing pandemic-related restrictions, we expect a significant recovery in travel retail and in the sun care business.

Our innovations and the recovery of important parts of our Consumer Business will help us deliver growth above market. For the tesa business, which tends to be more cyclical, the outlook is more challenging, especially given the recent supply chain issues around the world.

Nevertheless, we expect our electronics business to remain a major growth driver. In addition, we see encouraging signs from automotive and expect a further acceleration of this business.

For 2022, we expect to offset input cost inflation through pricing, mix and efficiency gains. We are targeting a slight EBIT margin growth year-on-year.

Thank you for your attention. I would now like to hand back to Jens for the Q&A.

Well, thank you. We will now start the Q&A session and we're happy to take your questions.

Please remember that we have a limit of two questions per caller.

Guillaume Delmas, UBS.

Two questions for me. One on La Prairie and another one on your 2022 margin guidance.

So, on La Prairie, which decelerated in Q3 and you explained it was down to mostly travel restrictions. The brand is facing a much more challenging basis of comparison in Q4, in particular.

So my question here is, are you still confident about La Prairie going back to a double-digit organic sales growth run rate as early as Q4? That would be my first question.

And the second one on your 2022 margin comments and guidance of a slight improvement. First, would it be fair to assume that this guidance applies to both Consumer and tesa?

So, a slight margin expansion for both divisions? And secondly, for the Consumer division specifically, what are your expectations at this stage at least for your gross margin development and your advertising and promotional spend as a percentage of sales?

So in other words, are you confident you will be able to accept fully the commodity pressures? And does your 2022 margin guidance bake in a step up in A&P spend or you expect a relatively flat ratio as a percentage of sales?

I will take the first question. Astrid will deal with the second one.

Yes, we are absolutely confident with the recovery, with the turnaround of La Prairie after 2020 which was difficult. A few reasons for that.

As I mentioned, the figures in China are absolutely amazing. And despite the fact that, obviously, Hainan was more difficult for everybody, we didn't lose in Hainan which I think is – we might be one of the only brand which did not decline in the third quarter in Hainan with just one or two opening of stores.

We see also the success of Tmall. We are extremely cautious on online.

We were one of the last brands to enter Tmall because we are absolutely dogmatic in our ability – willingness not to promote anything that – in this market, our competitors are promoting between 60% and 80% of their sales. We do zero promotion.

So, entering Tmall was a bet for us and we are very happy with the bet because it's a very healthy business and it's an additional to the brand. So, the recovery of travel retail through Hainan.

The fact that, in the US, we're doing much better, also with a better management of our consumer base in the department store, makes us very optimistic regarding not only 2021, but also 2022.

Let me take the question around our margin guidance for next year. So, as we just communicated, we are looking to have a slight EBIT margin growth at group level.

That is looking to come with really quality of earnings. We're trying to drive pricing, mix and efficiency gains and are not looking to touch our investment, whether it's the investment behind our strategy or A&P investment to deliver this EBIT margin growth.

Bruno Monteyne, Bernstein.

It's really following up on the previous discussion because if I look on page 20, you say La Prairie had 2% organic growth. But at the same time, you're saying Hainan is up, you're one of the few ones to be up.

Tmall is up. USA is doing better.

So, if you're only having 2% organic growth and all these big drivers are doing better, so what is declining in La Prairie then to only come up with 2% organic and sort of what can you say a bit more about the exit rate of La Prairie at the end of quarter three? And the second question is back the margin modeling.

What are your assumptions about gross margins for the Consumer business this year and next year on which you base your margin guidance? Is it equally flat, growing sort of slight up for next year and roughly flat gross margin this year?

Is that the right assumption in your margin guidance?

I will take the first question. Obviously, you know that travel retail is strongly impacted.

And while Hainan is a very positive business revival, if you look at Europe travel retail, if you look at Hong Kong travel retail, if you look at North America travel retail, it's not only down, it's close to zero. And this is obviously where we used to have a very strong growth and the figures in 2021, but also the perspective in 2022, is still low.

So we are very dependent, like all our competitors, to the Chinese tourists going to Hainan or the Chinese consumers going to the department store. What is also a constraint, which we accept and which we recognize, that refusing to promote our brands online means that the weight of online versus offline is much below the level of – the kind of split you see for our competitors.

But we see today that the fact that we were the only brand during COVID time, the only one or two brands, but the only cosmetic brand refusing to promote, to do any kind of promotion is welcome by our consumers who come back to us through Tmall, go back to our department store in China. So that's a proof that, yes, short term, we are not winning as much as perhaps other.

But long term, we are doing the right things for the equity of the brand.

Travel retail is down year-on-year because of the quarter 3 last year wasn't great for travel retail. I would have assumed there's a tiny bit more travel in 2021 compared to 2020.

Is that not the case?

No, it's not the case. If you exclude China, and Hainan is travel retail – if you exclude China, the travel retail is down in most of the regions.

And again, particularly in Europe, it's totally down to a very, very low level, but also in North America and Southeast Asia.

Let me take your question around gross margin. As you might have heard in my presentation, I did touch briefly on gross margin.

Although this is obviously a sales call, I talked about it slightly being up to date. Certainly, helped obviously by favorable mix and also the pricing we have been taking this year.

We do expect it to be flat out. I also called out some risk obviously with continued input cost inflation.

And into next year, similarly, we are obviously very much looking to drive mix, pricing, efficiency gains and so on with the goal obviously to hold our gross margin.

Next would be Iain Simpson. Please go ahead.

Two questions for me, if I may. Firstly, can we talk a little bit about sun care?

Clearly, the weather was pretty weak in the third quarter 2021. I was just interested if you could give us any sense of how much recovery sun care saw, if any, in third quarter 2021 year-on-year versus pre-COVID levels.

So, how is sun care sitting relative to 2019 in the third quarter? Secondly, some of your competitors have mentioned that the situation in Hainan improves towards the end of the third quarter that September was better than August and that October looks to be better than September.

Are you able to give us any color on the phasing there for China?

And on the first question, different results. If you look at Europe, you are absolutely right.

It was a very nice July, but a very bad August. So, while we are gaining market shares, and I mentioned the precision marketing project that the overall sales are slightly down in August.

So, all in all, it's negative, but, again, with a strong July and a weak August. The US situation is totally different issue.

Remember, the real lockdown in the US started last year exactly at the beginning of the summer. So, we had an extremely bad sun season.

This year, they are growing – the sun season, the sun market will grow 30% in the US and we are gaining market share, obviously, with Coppertone. So, we have a different mix picture, but overall positive for NIVEA and positive for Coppertone.

On Hainan, yes, we have the same feeling. We have the same feeling that things are getting better.

We have seen the first results of the last week of September, which are pretty good. So, we also have some hope that, from the low results we had in the first three weeks of September, we'll have something much better in the end of the year.

Next on the line would be Celine.

My first question would be on Europe. So, how big is travel return in the European region?

And I'm still not clear. Was travel retail down overall including Hainan?

Or what was it? And then how big is Hainan?

And I think you started only this year. So it's not that meaningful.

If you could clarify that. My second question is on the cost inflation.

Can you tell us what kind of COGS inflation you're looking at for 2021 and for 2022? And in terms of pricing, what kind of pricing are we seeing?

If you could give us a pricing versus volumes in Q3. And how do you feel the competitive environment is to raise prices, especially in some categories like deodorants or body wash that tend to be more competitive.

I will take the first question. Travel retail is up for La Prairie because it's very, very up in China.

We are already very strong in China. But the fact that we are going extremely strongly on travel retail in China is more than compensating the decline in Europe and North America.

That's the first question. Second question, Astrid?

On cost inflation, so to date, we have managed cost inflation quite well, but we have seen in Q3 really pick up. And overall, we expect for the back half of 2021 to really see a low triple digit bps impact from cost inflation.

For 2022, we do at the moment expect a softening or better cost in the second half. But certainly for the half, we would expect similar triple digit – low triple-digit cost impact from cost inflation.

In terms of pricing and volume, we typically don't disclose that information in that detail. What I can tell you, though, is clearly our growth is to a great extent volume driven, but we are seeing positive pricing from the beginning of the year.

We have taken some pricing in emerging markets at the middle of the year. And we are in line with our competition there.

And in terms of comp environment, you mentioned deo and shower. We certainly have not yet, either on shelf or in promotional pricing, seen a significant uptick from our competition.

Obviously, we continue to watch and want to make sure that we win in the market.

Celine, I want to just to make a favor to you. I will give you figures or so just to support my answer on travel retail.

We are growing by 65% on travel retail. So, including obviously China and including the difficulties we are – the low market we have in Europe and North America.

So, this is why I'm pretty positive also for the year two.

Just to clarify, that means that La Prairie was down in Europe and in the US outside travel retail?

Yes, absolutely. We are recovering in the US.

We are doing a very good job in the US since Q2, which is that we've been able – which was really a premiere for us to have a grip on the consumer data. In the US, our beauty advisor are employees of the department store.

So, we are not really able to do any kind of CRM. We have been able to negotiate a lot of deals with US department store long years to build much stronger businesses or connection with those consumers.

So, that is helping us on Q2, but Europe is down, yes.

But I'm a bit surprised because a lot of your competitors in the prestige have done such great numbers in Q3. So, it's difficult to understand why La Prairie, therefore, was not better?

Two explanations, which in a way are linked. We do not run promotions.

We do zero promotions. And this is obviously restricting the potential of ecommerce for brands.

So, when you put that together, and this is why there is a huge difference in terms of the weight of ecommerce on La Prairie versus some of our competitors, we do not run promotions. You will never find one single site with a promotion of La Prairie.

Move on to, Emma, RBC.

I just wanted to clarify. You mentioned that you're winning market share in two-thirds of the countries where NIVEA is active.

Was that a metric about face care in particular? Or would that be overall brand of NIVEA?

And also, what are your market share trajectories like for La Prairie and Eucerin and what markets are you gaining or not gaining share for those two brands?

The figures we were giving in my presentation was in face care. This is where we were winning in two thirds of the countries.

But we also overall gaining market share in sun and deo. So, sun, I was answering to – I think it was Iain.

Despite the fact that the market is declining, we are over performing the market and gaining market share. When you look at the country, it's partly true for NIVEA in emerging markets.

So, I was mentioning, obviously, Brazil, Mexico, Chile, but you will find also Thailand, Malaysia, South Africa, Indonesia. In Europe, we have mixed results.

We are pretty good in Germany, Belgium and Austria and we are gaining market share in France and Italy, but particularly in face care. On derma, we are gaining market share almost everywhere.

The biggest, biggest growth is coming from the US on both Aquaphor and Eucerin, double-digit growth, gaining market share. One of the best performing brands, which obviously puts us in a very favorable situation to launch Eucerin sun and we're also gaining in Europe and in China.

So, overall, market share gains on derma everywhere. And NIVEA, particularly in face and particularly in emerging markets.

And could I ask about La Prairie as well?

Emma, it is difficult to talk about market share obviously first because there are no official data and we are such a niche brand that we have a market share which is small compared to the rest of the market. But I can tell you that the Q3 data are not yet available.

In the Q2, we were over performing not only the luxury market, but also the tier one. So the top exclusive brands of the market, we were overperforming versus these set of brands.

Next on our list here is Olivier of Goldman Sachs.

Two questions, please. First one, what drove the upgrade to the guidance for tesa, especially on margins?

Do you see input cost pressure environment improving? Or are you about to actually take more pricing when expected?

That's the first question. And second question is just to follow up actually on slide 24.

I think on one of the bullet points for consumer sales growth, you're talking about growth above market expected. But just wanted to know if you could give us a bit more details on what is the market expected and which category or geographies you're expecting to gain share in full-year 2022.

I'll take both of those questions. So, for tesa, the upgrade really comes from the strong top line delivery certainly in the third quarter with having locked a few more projects that we had hoped to gain in, so we really gained confidence there.

In terms of margin, the input costs are not yet reducing, certainly. The pressure continues to be there.

It has stabilized somewhat, but it continues to be there. tesa has done a very good job, though, to manage between taking some pricing and driving their efficiencies to offset to a great extent the impact there.

In terms of the slide 24, above market, obviously, we are still in an uncertain environment and really need to see what happens with the categories that were impacted by COVID. And really, are we coming out and seeing strong performance in sun again, in face cleansing, in lip, in men?

If that happens, we would expect, again, to get to pre COVID level of market growth, which was somewhere around 3% to 4%. And we would obviously hope to beat that.

But it really depends on how those markets will perform in the following year.

Next would be Karel Zoete, Kepler Cheuvreux.

I have two. First of all, pricing environment in Europe.

You're going to start the annual negotiations soon probably. What are your expectations for taking pricing in Europe?

Or will it mostly be about mix improvement in Europe? The second question is on supply chain stress and on shelf availability.

You also export some of your products from Hamburg. What have you seen here in recent periods?

I will take the first question and Astrid will take the second one. We are obviously announcing price increase.

We already did in July in emerging market and we'll do that in Europe beginning of next year. So we are entering into a conversation with our customers.

And we have the same level of price increase that we have seen with most of our competitors. So, obviously, difficult conversations, but we are absolutely willing to go through this process.

Obviously, the whole world has seen unprecedented stress in supply chains. And we certainly have also seen some shortages in key raw and packaging materials.

But we really have robust processes in place to mitigate these impacts and really manage this really well. What we have done is preventative measures in terms of increasing stock levels in key distribution locations and at our plants.

And we have a crisis team in place that really works on this very diligently. And what we have managed is exceptionally high service levels in the FMCG industry.

So, we're very proud of that achievement.

My couple of questions. First one is a little bit more detail about the broader market environment in China, and maybe your expectations ahead of the 11/11 Shopping Festival.

You talked about how you thought there was some revenge consumption impacting Q4 last year. So, a bit of extra color on that will be useful.

And the second question is on tesa. So, clearly, you're up around 19% for the first nine months.

Your guidance of 11% to 13% still implies a pretty sharp decline in the final quarter. Now we know you have a pretty high base of comparison in the fourth quarter, but still it seems a very steep decline that's being implied there.

So, again, a little bit more on the precise reasons for that.

I will take, Jeremy, the first question and Astrid the second one. Yes, we've seen all, the slowdown of the economy.

I must say because of our portfolio, but also the fact that we are still small, we are growing and we are growing in China year-to-date 30%. When you look at the 30%, you see obviously, as I mentioned, the recovery of La Prairie, a very strong performance.

Domestic, but also travel retail. I already mentioned that.

We are extremely happy also with Eucerin and we are growing at 70% and also really achieving our objective. 11/11 is coming in 11 days, but we have done a level of pre-sale which is making us very, very comfortable with the plan.

NIVEA is more modest. You remember I told you last time.

We are clearly reinventing NIVEA, moving the brand from being very offline and very being personal care to more skin care. We launched Luminous in online with Tmall and very, very strong results.

So we are expecting, I would say, an even stronger growth next year on NIVEA. But all in all, plus 40% in China and very happy with the results of our brands.

Now take your question on tesa. As you rightly say, we have a tough comparison in the fourth quarter.

And so, therefore, not easy to anniversary those sales. At the same time, we talked about the uncertainty of our supply chain and really of our customer supply chain, which really is what leads us to be a bit more cautious in our approach here at tesa, but obviously we'll do whatever we can to deliver strong performance in the fourth quarter as well.

Tom Sykes, Deutsche Bank.

Firstly, just would you be able to expand a bit on the sustainability investments that you're making? Is this a step up in sustainability investments in 2022 versus 2021?

And if you're making sustainability a bit more visible to the consumer, are you expecting volumes to improve on the back of that to offset the sustainability costs? And I have to admit, I'm a little bit skeptical about sort of carbon offset schemes, but will that be phased down as the other aspects of your sustainability improvements go up?

Or is that a central aspect of the CO2 reduction? And then, just another question will just be on the timeline of other investments that you've previously highlighted that you will put in.

Is the timeline on those with regards to digital, et cetera, are those all remaining the same when we look at 2022 investments, please?

I will answer the first question about sustainability and then Astrid will take the second one. If you remember, the C.A.R.E.+ strategy was about digital, about white spaces and sustainability.

So, we have been spending a lot of money. We have been also recruiting the right expertise in order to focus on the number one priority, which is to reduce CO2 emissions, scope 1, 2, 3 and which is really focusing on our products.

So, we are investing a lot of synergy and I show you a few examples. To give a perspective, already 25% of our portfolio has been hit by sustainability improvements, be it plastic, be it aluminum, be it raw materials.

So, we will continue to do that. There are a lot of projects in 2022, obviously, because we will increase this percentage of coverage, but we will continue to do that.

How do we offset the cost? Obviously, by value engineering.

So, every time we work on plastic, on aluminum, on raw materials, we also work on reducing the cost of goods of our products. So we are always managing both together.

And in some cases also with some price increase, but this is very limited. So this is a priority.

And this is really what we are focusing on. What we are also doing on top, and I think you've mentioned it rightly, we are also willing to participate to the climate neutrality.

So we are so offsetting CO2 emissions by working on afforestation projects, by investing on specific projects. So this is a complement.

This is not the priority. We would love to be able, through the technology, to decrease our CO2 emissions to 0%.

But we cannot. We cannot.

Still, we believe we have to do something. But this is clearly the priority.

And we have some good perspective in the years to come. And this is really something we want absolutely to deliver.

On the second question, Astrid.

I just answered on the question related to 2022 guidance. We are certainly looking to deliver a slight margin improvement, while not deferring from our previously committed investments and, obviously, not touching the quality of our earnings.

So, we are holding on to the timeline of our investments which we had communicated previously, which did talk about stronger investments in the earlier part of that five year journey.

Apologies because I didn't quite write down everything properly that you said on cost inflation. Would you mind just repeating those?

The cost inflation? So, what we said is that we are seeing the back half of this year low triple-digit bps impact from costing and we expect the same for next year for the first half with hopefully a more measured impact in the second half.

Chris Pitcher is next.

A couple from me. Could you give us an update on the absolute performance of Coppertone?

Where it is in terms of revenues versus your pre-pandemic levels and how the deal is progressing from a returns perspective? Is it to the point now where you would be confident of considering some further M&A?

And then, looking at the expectation to grow above the market – apologies for coming back to this – but is that the global market? Or is it taking market share in your specific regions?

Because, obviously, being underweight North America and China gives you that geographic disadvantage. And can you give us a bit more detail, Vincent, about perhaps on what you've done in terms of North American execution to improve performance there in terms of particularly on the commercial side?

How's Coppertone playing into that?

On Coppertone, we are growing this year. This is the summer.

So by 30%. So, clearly, above market growth and above expectations.

We have been able not only to get a much better support from key retailers, by the way offline and online, that in the past, but also to secure, to succeed with the launches we had put in place this summer. So this puts us in a very favorable situation.

We're coming next year, if you remember, with a full relaunch of the brand. We are changing the full packaging, introducing new SKUs.

And here also, when I look at the first feedback of retailers in terms of testing, we are pretty optimistic in our ability to continue to grow market share. You remember, Chris, that the brand had lost market share for the last 12 years.

So, really, being able to gain market share was really something which was essential for us. And we are very happy with that.

It's also opening the door to Eucerin being launched in the US, obviously, in the sun market. What did we do?

I think there is a combination of many things. The first thing, obviously, we have a team which has a very strong grip with strong partnerships with key retailers.

We have a good portfolio of brands. We have NIVEA in the mass market.

We have Eucerin, Aquaphor in the derma market, which is obviously the one growing. And we are now coming with Coppertone, which is an iconic brand in the sun market.

We are building some very strong synergies in terms of sales. We have the same sales organization.

So, obviously doing synergies. We have the same shopper and customer marketing.

We are also managing customers like Amazon with one single ad, which is also making the position of the brands much stronger. What is even more important in the future, we are just opening a new research center in New Jersey.

This is the research center we got from Bayer when we bought Coppertone. And we are expanding the mandate of this research center from Coppertone to NIVEA and Eucerin and Aquaphor, giving us a much better ability to deliver against local consumer needs and against customer requests.

So, we are pretty optimistic also in our ability to drive further the sales. Does it give us more appetite for M&A?

Yes. But you know also very well the company.

We are not running on any kind of project. We are looking at opportunities, and we have to tick a certain number of boxes.

It was the case of Coppertone. We have proven our ability to turn around the brand.

So, yes, we will continue to look at these kind of opportunities and we have, as you know, the cash available for that. Astrid?

In terms of your overall question around the geographic North America execution, we're extremely happy with the performance of all of our brands in the North America environment. Very, very strong performance on NIVEA Body.

Really great to see that. Extremely strong performance on Eucerin and Aquaphor, growing very strongly on top of a Q3 2020 that was also strong.

And then, La Prairie really returning to growth in Q3 with double-digit growth there as well. One area that obviously has kept us extremely busy, North America in particular, the US logistics challenges there and that continues to not let up at all.

It's probably the one market where we have the most challenges in terms of our service levels.

Maybe just a quick clarification. You said market growth of 3% to 4% is your sort of baseline thinking for next year.

Pre pandemic, the aspiration for the consumer business was 4% to 6% in that sort of environment. Is that the sort of quantum above the market we should still be thinking?

Does that aspiration still stand?

The market growth obviously refers to the market overall. We would want to beat the market.

So, I guess you can add two things together and know what we would want to target, obviously. And again, this really implies a market that returns to pre-pandemic levels.

Next we have Rogerio

I have two. In Consumer, you're guiding 7% to 9% like-for-like in the full year after north of 10% in the nine months.

So, implying very little growth in Q4. I was wondering if you could talk a little bit more about your assumptions for NIVEA and La Prairie, in particular in Q4.

And then, I just want to clarify one thing about the La Prairie performance in Europe because we see higher mobility trends, we see more brick and mortar stores open versus Q2. You mentioned avoiding promotions, but I was thinking the environment was quite supportive for full price sales for luxury brands like La Prairie in Europe.

So, any additional thoughts on European brick and mortar performance?

Astrid will take the first question. I will answer the first question on La Prairie.

Again, our comparison in the fourth quarter becomes more challenging, and we are seeing a bit of a mix of impact to our business. As I mentioned in my deck, we are still continuing to see some impact to geographies, the likes of Thailand, Southeast Asia more in general.

Unfortunately, Europe is not out of the woods either. We are taking a measured approach to the fourth quarter.

But certainly, there are some risks there that performance cannot continue quite as strongly as, certainly, we've had in the second quarter and before

On the question on La Prairie, you must remember that, in Europe, we engaged in 2019 in a very, very often and strong activity, which was to reduce the number of those. And as a matter of fact, we used to be in too many small doors in Europe.

And we have divided the distribution in Europe by two, which is pretty intensive. So, now, we are done.

We have the right level of doors. We want absolutely to be only in the most selective doors.

And obviously, we are growing those doors. So, we will surely finish the year flat in Europe.

But we are clearly also – again, it's a question of selectivity and premiumness and no promotion. We are so not willing to go for growth at any cost.

So, that's the reason why you achieve the results we are achieving. We are not willing to promote the brand and we are not willing to go into a race of opening more doors and more department store and more space in Europe at the expense of the brand equity.

So we move to the last caller, Martin, Jefferies.

I just want to mop up two small issues on the themes of the call which have been on margins and La Prairie respectively. Can I just check?

You gave 30% growth in China? Can I check whether that was a Q3 or not number?

And was La Prairie in China sort of above or below that 30% in whatever period it was? And secondly, just wrapping up on the margin moving parts next year.

What do you expect to happen to your SG&A level ex-A&P, up or down? You've talked about investments, additional investments and sticking to the plan on that.

But are those investments going into the A&P line? Or are they going into the SG&A line?

Those are the two questions.

I will think the first one on China. we are growing 30% year-to-date in China.

The growth of La Prairie, local, domestic is above 30%. And the growth of travel retail is simply that we are doubling the sales.

So, really a strong performance of La Prairie in China and making participating strongly to the overall business, growth of plus 40% for Beiersdorf in China. On the second question, Astrid.

Martin, while we're giving qualitative guidance for 2022 at this moment, what I can tell you is that we are targeting to have slight margin growth ex-A&P for next year, while keeping the investments that we had hoped to make in the business.

Thank you. I don't see any.

So, I think we've worked ourselves through the queue. So, thank you very much.

Thank you for having joined our conference call. Appreciate your interest in Beiersdorf.

Thank you and goodbye.