Presentation of Material Risks and Opportunities

Consumer

The Consumer Business Segment experienced the following year-on-year change in the overall risk situation in the reporting period: In reaction to global political and economic volatility, the probability of occurrence of certain material risks shaping the overall risk situation increased; furthermore, a greater impact on the entire supply chain from climate-related changes is expected. The potential risk impact decreased slightly due to the effectiveness of mitigating actions taken and the revised or optimized assumptions underlying the risk assessments. For instance, we assumed a growing risk in the years ahead in assessing the shortage of skilled professionals (talent), but now expect a delayed effect, as employees are less keen to seek new employers in the tense current economic environment. The risk of “shortage of raw materials, natural resources, and energy” was integrated into two existing risks due to the similarity between their root causes and impacts.

Consumer

Material Risks in the Consumer Business Segment

Growing Political and Economic Uncertainty

Geopolitics and the global economy are currently transitioning from a global rules-based world order to a new one – with the outcome not yet clear. Events are shaped by the competition between superpowers and the formation of new alliances, and an increasing number of interstate conflicts, some of them armed. The economy is suffering increasingly due to rising government debt, protectionism, and trade barriers, not least because of US tariffs.

Impacts on our business may be reflected in the supply chain in the form of restricted access to the procurement market, disrupted supply chains, a shortage of production materials, and export restrictions, all of which could result in price increases. For instance, we were also affected by the tariffs introduced by the US administration on imports of finished goods from Mexico, Europe, and Switzerland to the USA. In the area of sales, the ongoing military conflict in Ukraine and the continued political uncertainty in the Middle East are having a direct impact on our sales in the countries concerned, as well as an indirect impact on consumer confidence in those regions. It remains to be seen whether, and to what extent, the factors influencing global economic development will affect a potential loss of purchasing power in the medium term due to slowing market growth for Beiersdorf.

China remains the greatest element of uncertainty in Asia, as in the previous year. There has been an upward trend in some areas of private consumption in China, albeit moderate, which may be due to a shift in the political focus towards supporting consumption in certain sectors in the first half of the year. It remains unclear whether the result will be a substantial turnaround in consumer confidence. That would benefit not least our key La Prairie business in China. Beiersdorf remains geographically relatively well balanced across all its business areas, without extreme dependency on a particular market.

We are reacting to this volatile environment with adequate measures at all relevant levels. We are aligning business models with the current and expected economic and political developments, comprehensively assessing potential market entries in new countries or segments in light of the respective conditions, and actively managing our currency risks and cash flows. Safety policies and codes of conduct are in place for our staff and our sites. Against the background of general global tension, we continue to categorize the risk from the impact of an escalating interstate conflict or economic crisis in a market relevant to Beiersdorf as major and possible.

Reputational Risks to Brands and the Company

Maintaining and increasing the value of our major consumer brands with their broad appeal remains of decisive importance to Beiersdorf’s business development. The trust of consumers in our products, but also of our customers, is essential to this and cannot be taken for granted. The reputation of our brands and the credibility and attractiveness of Beiersdorf – including as a preferred employer – play a key role. Our reputation may be damaged through wrongly interpreted marketing activities, inadequate product quality, or failure to meet environmental, social, and governance (ESG) requirements. We find ourselves increasingly exposed to the effects of outside developments – growing political polarization, politicization of the business space, such as through pressure on D&I (diversity and inclusion) programs, tangible effects of regional conflicts on our business, for example in the Middle East, but also the rise in misinformation and disinformation in social media.

We have geared our risk management system towards fully justifying this trust at all times and thus successfully protecting the value of our brands in the long term. We continuously review our internal processes in all areas of the company in order to be able to react appropriately, correctly, quickly, and effectively in the event of any harmful incident potentially damaging or endangering our reputation. A global media monitoring campaign on publications involving our brands and our company enables early identification of potential risks from external communications. This is underpinned by all activities designed to optimize the quality of our products and our overall brand and market presence. We assume that no critical issues will arise even though we should always be aware of the possibility of reputational damage. This applies not only to our brands, but also to our company as a whole. Our extensive measures in relation to sustainability, D&I, and other aspects of Corporate Social Responsibility also help to limit the risks.

We consider ourselves to be well positioned thanks to our extensive established measures and continue to categorize the risk as medium and possible.

Critical Ingredients Challenges

Unexpected or unforeseen challenges on the part of our customers or consumers, or possible statutory bans or restrictions on ingredients or product formulations, may have a negative impact on sales, market approval, brand reputation, or the profitability of our products. The risk may become elevated due to a variety of reasons: the increasing regulation in shorter implementation cycles, growing awareness among retailers of the environmental impacts of certain ingredients (e.g., in aerosols), and increased transparency towards consumers regarding ingredients – the latter in particular due to the use of assessment tools such as the EcoBeautyScore, which can affect the perception and acceptance of products.

Our research and development function (R&D), with its broad expertise and geographical coverage, ensures that we always comply with local legal requirements. It is supported in this by a specialized regulatory affairs function with increased human resources. We are also a member of relevant associations, primarily at overall European level, and are in permanent dialogue with the relevant authorities so that we can react promptly when changes to product formulation or ingredient requirements begin to emerge. We have established an internal management process for critical ingredients, and the R&D function is working proactively on the transition from substances viewed as critical (e.g., aluminum packaging for deodorants) in order to preempt potential challenges.

We continue to categorize the risk as medium and possible.

Accelerating Digitalization

Digitalization is becoming an increasing factor in all business areas with the risk of a loss of competitiveness if the digital transformation is not implemented with sufficient speed. We divide the risk into internal and external digitalization aspects. Internally, the risks relate in particular to potential suboptimal processes and low productivity in individual areas due to a lack of or too poorly developed digitalization. It remains a challenge to meet the basic requirements of sufficient expertise and recruitment of suitable talent. Externally, the penetration of digital technology in consumer interaction all along the marketing and sales process is constantly increasing. Beiersdorf continuously strives to plan and implement these interactions to be as specific to the target group as possible, in order to inspire and maintain consumer loyalty. The field of data analysis is crucially important for providing fast and accurate information to guide our actions, including in close dialogue with our customers. This requires a “digital integration” of all business areas, with particular regard to increasing online consumer contact and sales going forward. Numerous measures are already being implemented or stepped up, such as the development of an omni-channel strategy to ensure a seamless consumer experience across all sales channels (physical and online sales), enhancement of the direct-to-customer approach to brand development, and building up expertise and talent, primarily to increase usage of AI (artificial intelligence) and to integrate AI into internal processes.

We continue to assess the risk as medium and possible.

Cybersecurity Threat

The risk of loss of critical data, critical access to our IT systems, and imposition of fines for non-compliance with statutory requirements present a perpetual challenge. The increasing prevalence of cloud services, IoT (Internet of Things) devices, AI-supported applications, and mobile working environments multiply the potential points of attack for cyber criminals. Moreover, lucrative business models such as ransomware (malware that encrypts data to make it inaccessible) and cyber extortion, aided by anonymous cryptocurrency payments, make cybercrime particularly attractive. “Cybercrime-as-a-Service” now enables attackers to access professional attack tools, ransomware guides, and stolen data easily and cheaply via the “darknet”. In addition, AI and automation enable attacks to be scaled and personalized – such as through deepfake phishing (a deceptive attack through AI-generated fakes) or automated vulnerability analyses. In this light, legal regulation is also increasing in the area of ensuring cybersecurity.

We continued to successfully defend ourselves against constantly increasing direct and indirect attacks on our own IT systems. We completed our cyber attack preparedness plan in 2025, and are working consistently on the resilience of our supply chains, including assessments of our suppliers in terms of their IT security. This is underpinned by continuous monitoring and safeguarding compliance with the requirements of NIS2 (EU Network and Information Security Directive) in all countries in which we operate.

Despite the growing overall number and type of threats, we continue to categorize the risk as medium and possible, due to our continual improvements to the countermeasures.

Non-Compliance With ESG Requirements

The risk of potential non-compliance with ESG (environmental, social, and governance) requirements relates in part to potential inadequate implementation of legal requirements. Although the implementation of ESG regulations has slowed in Europe and the USA, many non-European legal systems are driving their own requirements forward (such as for packaging waste, transparency on products, and climate reporting). Transposing these onto specific business processes remains a challenge due to the volatility and diversity of the regulations.

On the other hand, the risk relates to the potential failure to meet the expectations of consumers and customers with respect to sustainability and social matters, also in comparison with competitors. Retailers for example, are placing increasing ESG requirements on suppliers (e.g., regarding the recyclability of packaging or product-related carbon footprints) in order to meet their own sustainability targets, comply with statutory requirements, and respond to the expectations of consumers.

Beiersdorf continues to pursue ambitious sustainability targets regardless of legal requirements and political developments. These targets include increasing the proportion of recyclates in our packaging and reducing greenhouse gas emissions (see the respective chapters of the “Non-Financial Statement”).

We continue to assess the risk as medium and possible.

Climate Change Induced Disruptions in the End-to-End Supply Chain

The risk of possible impacts of climate change on our entire supply chain (from the procurement of critical raw materials to production infrastructure and any transport) – or those of our suppliers – is increasing in global terms. Scientific evidence confirms a worldwide increase in unforeseeable extreme weather events, including more intense heat waves, forest fires, and floods. Risks also arise indirectly through increasing regulation in many countries as regards the use of natural resources.

We perform annual water and climate risk assessments for our own infrastructure, to identify site-specific risks such as water scarcity, flooding, and heat waves. One focus in 2025 was on the development of an action plan to mitigate site-specific water risks, in order to integrate it in investments plans for our production sites and in network plans. In regard to suppliers, we continuously monitor the availability and price development of raw and packaging materials. Completion of a supplier assessment system and establishment of active supplier relationship management are planned to help make our supply chains more secure. We are constantly updating our emergency plans for critical infrastructure and supplies so that we can swiftly and fully respond to such situations.

We continue to assess the risk as medium and possible.

Shortage of Talent and Skills

The risk of the increasing challenge to recruit and, in particular, to retain suitable talent persists in light of a shrinking talent pool, not least in developed/Western countries. This risk therefore affects both our German locations and our national affiliates, particularly in relation to all tasks with a strong digital component. Beiersdorf is competing here not only with other players in our industry but also with technology firms both large and small. A change in the attractiveness of our industry compared to other sectors can be expected in this context.

We continue to run our successfully launched staff recruitment and retention programs, such as “Employer Branding” and “#BTheLead” to foster loyalty and optimal development of talent. Our active presence on social media has been boosted by the use of influencers in order to raise Beiersdorf’s profile and increase awareness of us as an attractive employer and appeal more strongly to the relevant target groups.

Partnerships and contact with universities also serve to build links with qualified potential new employees so that we can prepare them for a career at Beiersdorf through special trainee programs. We have launched training programs to tailor employees’ skills to the constantly growing requirements, particularly in relation to digital technology. These cover general and function-specific skills for which our various in-house online academies are responsible. As in previous years, we reviewed our employees’ satisfaction using an external, standardized, and anonymous survey, comparing the results both to our own track record and to the wider market. The high engagement level of the previous year was maintained.

Given the aforementioned measures, our continuing attractiveness as an employer, particularly in economically difficult times, and our competitive strength, we maintain our assessment of the risk as low and possible.

Use of Generative Artificial Intelligence

The risk continues to exist due to the continuing momentum of the topic of “artificial intelligence” (AI). As a manufacturer of branded products, Beiersdorf is exposed to particular challenges here. We distinguish between two types of risks: firstly, risks arising from the unintended and/or unauthorized feeding of data to external models, and secondly, risks arising from the use of these models’ output. We have transitioned Beiersdorf’s internal LLM (large language model) application to the latest technology. Moreover, our communication guidelines on the use of AI for all global brands remain in place, as a guide for both our own employees and our agencies. In addition, we have bundled all marketing-related AI tools on one platform so that work on new application processes can be carried out globally in a secure environment with a high level of transparency. The further strategic development of AI at Beiersdorf across all functions remains a core task. We will continue to work on shaping the framework for the safe use of these tools.

We continue to assess the risk as low but possible.

We have integrated the risk of “shortage of raw materials, natural resources, and energy” into “growing political and economic uncertainty” and “climate change induced disruptions in the supply chain” due to the similarity between their causes and impacts.

Consumer

Functional Risks in the Consumer Business Segment

Potential risks to the Consumer business in the next one to two years from the perspective of our global functions are primarily to be found in the following risk areas: damage to our brand reputation, disrupted supply chains, threats to our IT security, and climate change-related impacts. Risks are also posed by increasing regulation in various fields. They largely correspond to the strategic and thus material risk areas. The risk situation has barely changed in terms of probability of occurrence and impact; the impact has reduced slightly due to adjusted assumptions regarding risks that could cause reputational damage, and a lower assessment of risks associated with price increases for production materials.

We consider the following individual risks to be material:

Market risk from investments: Potential default risks relating to the investment of the Group’s liquid funds are limited by only making investments with counterparties deemed reliable. Counterparty risk is monitored daily based on ratings and the counterparties’ liable capital as well as continuously updated risk indicators. These parameters are used to determine maximum amounts for investments with partner banks and securities issuers (counterparty limits), which are compared with the investments actually made throughout the Group. We have invested most of our liquidity in low-risk investments (such as government/corporate bonds and “Pfandbriefe”). Our formalized investment strategy is regularly agreed with our internal supervisory body and the Supervisory Board. Our risk management process includes looking at the conditional value at risk so that even extreme market situations can be simulated, understood, and factored into investment decisions. Our financial risk management is characterized by the clear allocation of responsibilities, central rules for limiting financial risks as a matter of principle, and the conscious alignment of the instruments deployed with the requirements of our business activities. Specific, additional information on the extent of the currency, interest rate, default, and liquidity risks described above can be found in Note 30 of the notes to the consolidated financial statements, “Additional Disclosures on Financial Instruments, Financial Risk Management, and Derivative Financial Instruments.” We therefore categorize this risk in purely arithmetical terms as medium but unlikely, as in the previous year.

As a global company, we also operate in countries in which movement of capital is limited by regulatory requirements. We run a foreign bank counterparty risk of being unable to transfer bank balances to the parent company. Our Finance department monitors the situation in the countries concerned on an ongoing basis, and remains in close contact with the affected affiliates. The risk is classified as medium and possible.

Retail concentration at regional and global level presents a constantly growing risk. Concentration means that retail partners join together – either voluntarily via buying groups or branches, or involuntarily through takeovers. Consolidations of all kinds create more transparency among retailers with respect to trade, conditions and contractual terms. Retail concentrations generally increase purchasing power vis-à-vis suppliers and may result in a lower price level. However, they do not necessarily lead to higher sales potential. We counter this risk with a global sales policy, including a defined pricing policy. We assess this risk as medium, and, because we expect concentrations to continue to increase, rate the occurrence as likely.

The estimated financial effect of the risk cited in the previous year of “Non-conformity in relation to European capital markets law” was downgraded to very low based on the actual net risk, taking into account the current practice of the “Bundesanstalt für Finanzdienstleistungsaufsicht” (Federal Financial Supervisory Authority, BaFin) and the current procedure with regard to subsequent shareholders’ lawsuits in accordance with the Kapitalanleger-Musterverfahrensgesetz (Capital Markets Model Case Act, KapMuG). However, the theoretical risk remains considerably higher, in the event that the risk mitigation measures are unsuccessful – but we see ourselves in a very good position in this regard.

Short-Term Operational Risks and Opportunities for the Consumer Business Segment

In addition to the short-term impacts of the risk areas mentioned in the long-term view, the stagnating or negative market performance in many of our sales markets remained the greatest challenge, primarily in the luxury segment, and resulted in a reduction in our growth forecast for the year 2025. We were able to pass on or offset the effect of “Trump’s tariffs” in the affected markets that we served in 2025, but we see further risks for 2026 for example when the tariff agreements on imports from Mexico expire. However, we will attempt to mitigate any negative impacts to an acceptable extent, at least in the short term, for example by means of appropriate inventory management. We see further challenges in slow economic development and dwindling consumer confidence, primarily in Europe, as well as in potential customer conflicts due to price increases, particularly in the markets outside of Europe and North America. Positive developments expected in some of our European markets, and opportunities outside Europe with our NIVEA and Eucerin brands may help to counter the challenges.

The relevant net operational risks remaining arise from legal and tax proceedings and from tax audits, as in the previous period. These risks were prudently quantified by both internal and external experts to the extent possible. Assessing the course and outcome of legal disputes is associated with considerable uncertainty. Based on the information currently available, no material charges are expected for the Group that would be considered likely.

Consumer

Consumer Business Segment

We see material opportunities in achieving the goals we have set with our “Win with Care” strategy ahead of schedule. We see these in particular in the following three areas:

Tapping Into New Business Areas

We aim to both tap unused potential in the skin care segment and seize opportunities in emerging sales channels, primarily in the area of e-commerce. We may be able to exceed the targets assumed in our baseline plan through more targeted and systematic implementation.

Breakthrough Innovations

We continually invest in research and development of dermocosmetic skin care in the areas of anti-aging, anti-acne and anti-pigment in order to address the primary needs in modern facial care. Combined with investments in new technologies, our efforts may lead to successful innovations sooner than expected.

Acquisitions

Stepping up and focusing the search for new potential acquisitions which, by their nature, are heavily influenced by external factors, is leading to success faster than planned.

All three topics are about potential business developments that may lead to positive earnings development compared to our forecast and to unplanned market share gains.