Despite importing half of its fast moving consumer goods (FMCG) portfolio, Nivea India has decided to hold on to prices and not pass on the higher costs to consumers due to foreign exchange fluctuations .
Rakshit Hargave, Managing Director, Nivea India said, “More than half of our portfolio is imported yet we have not been increasing our prices for the past year. We have defined our pricing strategy in such a way that we can absorb costs by increasing our volumes and revenues and are growing in excess of 20 per cent today.”
Margins impacted
While margins have been impacted with escalating costs, the skincare major believes its volumes will take care of the blips faced by the economy, with high input cost, inflation and a weak rupee impacting the business.
As Hargave says, “There may be a drop in the margin percentage, yet absolute margins are still intact as there is value and volume growth in the business. With scale, we are building efficiencies which has helped us in growing ahead of the skincare category which is between 10 per cent and 15 per cent.”
Skincare is considered as a discretionary category, where consumer spending has been impacted. Nivea has made sure it has new products to lure buying along with enhanced distribution to reach out to consumers.
“Spending on skincare is discretionary and there is data to support this. But we believe in systematically beating this with new products and enhanced distribution. Our shares continue to be healthy in categories such as deos, body lotions and lip care,” adds Hargave.
Engaging in high-growth categories such as the Rs 1,800-crore deo category, Nivea recently launched five new deo variants for men and women. It also re-launched its Nivea for men range recently and has roped in Arjun Rampal to endorse it.
“While there is innovation and growth in the new products, there is organic growth through some of the older categories such as the smooth whitening lotion, where we have also created variants. Our advertising spends have also gone up to support these new products,” he added.
Despite being a premium brand, Nivea has been trying to go beyond urban markets but has been facing distribution challenges. Today, it is better equipped with its distribution network. “Our presence in tier 2 cities is now better and we have direct coverage in 100 top towns and would be adding another 20 towns this year. The wholesale distribution coverage would be at least five times the size of our direct coverage,” said Hargave.