Dr Scheller to sell production facility to Weckerle

By Simon Pitman

- Last updated on GMT

Related tags Dr. scheller Manufacturing Procter & gamble

Germany-based personal care provider Dr. Scheller says it is in advanced negotiations to sell its Eislingen production facility to contract manufacturer Weckerle Cosmetics.

The companies say they have agreed on the basic terms of the acquisition, with the plan to sell all production related aspects of the site, together with the real estate, as an on-going business.

More importantly, this will leave Weckerle in an ideal position to serve as a contract manufacturer for Dr. Scheller, with the aim of achieving synergies that will keep costs down as well as increased efficiencies that will cut time to market for new products.

The facility currently employs 200 staff involved in the production of cosmetics, and accordingly all of those staff will be kept on when the business changes hands, with no plans for any forced redundancies.

Weckerle increases footprint

In recent years Weckerle Cosmetics has built up its business to provide manufacturing services for some of the biggest brands in the business, including Nivea, Christian Dior, Estee Lauder and Avon.

The company already has branches all over the world, including Brazil and the USA, as well as France, Switzerland and Russia.

It says that, alongside serving Dr Scheller, the acquisition of the new facility in Eislingen will enable it to serve a wider portfolio of customers in Europe, and particularly Germany-based players.

Production co-operation

Both companies have agreed on a medium-term production co-operation, which will see Weckerle Cosmetics supplying Dr. Scheller for the next five years, following the signing of the contract, which is mooted for April 1, 2009.

Dr Scheller has pointed to the current economic situation as the reason for the sale, citing tough competition, and the desire to concentrate solely on the marketing of its leading brands, which include its flagship colour cosmetic range Manhattan, together with the Clearface skin care.

The decision means that Dr. Scheller will be sourcing all of its production through contract manufacturing, which leaves it more flexible to organise the production needs around consumer demand.

Fast moving decorative market

The company says this is particularly crucial as it serves the fast-moving decorative cosmetics category, where constant changes to products mean that production has to be as flexible as possible.

Likewise, with consumer trends quickly adapting to a shrinking spend, this should also give the company more opportunity to adapt to changing patterns, as consumers are increasingly down-grading to less expensive alternatives.

Dr. Scheller serves the mass market category, which continues to be dominated by leading players such as Procter & Gamble and Beiersdorf.

In recent years these players have increasingly moved to contract manufacturing in an effort to stay on top of changing consumer trends, as well as achieving considerable synergies that have helped to keep production costs down.

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