General economic situation

The first months of 2003 were dominated by a highly uncertain global political situation. The war in Iraq unsettled companies and consumers alike, thus putting a substantial strain on the global economy. In addition, the appearance of the SARS virus impacted economic developments in Asia for several months. After the end of the war in Iraq, sentiment indicators recovered rapidly, especially in the USA. The US economy in particular picked up significantly in the first half of the year, buoyed by defense spending. The Japanese economy also showed signs of recovery, led by the export sector. Economic growth in these key markets was, however, primarily based on production increases in the manufacturing sector and the capital goods industry. Consumer demand, especially in the cosmetics sector – a key market for Beiersdorf – remained weak. General economic development in the euro zone stagnated, with Germany, Italy, and the Netherlands dipping slightly into recession.

In the second half of the year, optimism with respect to a global economic upturn increased. In the USA in particular, economic growth continued to accelerate. The euro zone economy also picked up again slightly on the back of foreign demand, despite the appreciation of the euro. Consumer spending offered little in the way of stimulus.

These macroeconomic trends also impacted the cosmetics market. Developments in this growth market, which is relatively robust in principle, varied extremely in the different market segments and countries for the second successive year. While some European countries and Asia continued to develop well, the markets in Germany and in the USA contracted in a number of segments.

Demand on the procurement market dropped noticeably, leading to underutilization of capacity at some of our global suppliers and hence to a general reduction in prices. The rise in the euro against the US dollar also had a positive effect on the cost of imported materials, particularly at our production facilities in the euro zone. Beiersdorf improved its position on the procurement market by systematically standardizing the raw materials and packaging used. All in all, this led to average material price reductions of 2 – 3 % within the Group.