html On the evening of November 19, Procter & Gamble announced its second quarter (October-December 2022) financial report.reporter | Wu Rong
editor | Ya Hanxiang
During the reporting period, P&G’s net sales were US$20.773 billion (approximately RMB 140.965 billion), a year-on-year decrease of 1%; net profit was US$3.959 billion (approximately RMB 26.866 billion), a year-on-year decrease of 7%. The decline in performance was mainly due to the negative growth in net sales recorded by its three major segments (including beauty and skin care, grooming, infants, and home care).
By business, net sales of cosmetics decreased by 3% year-on-year; net sales of toiletry products decreased by 9% year-on-year; net sales of health and wellness products increased by 2% year-on-year; net sales of textiles and home care products increased by 1% year-on-year; net sales of baby, female and home care products decreased by 1% year-on-year.
Looking at regions, P&G mentioned that the United States and China are its two important markets. Its largest market, the United States, is relatively strong, while China, the second largest market, has not yet rebounded after the impact of the new crown epidemic.
"Organic sales in China fell 7% due to COVID-19 restrictions and weakening consumer confidence; China's reopening has not yet had an impact on consumption." P&G Chief Financial Officer Andre Schulten said on a media conference call.
Among them, P&G's high-end skin care brand SK-II, which was once popular in the Chinese market, has declined due to the new crown epidemic.
Although the decline was not specifically mentioned, P&G said, " innovation drives the sales growth and price increase of , resulting in low-single-digit sales growth in the organic segment of skin and personal care, but it cannot offset the comprehensive negative impact of the new crown epidemic and the decline in SK-II sales."
In fact, this is not the first time that SK-II has been "named" and criticized by P&G.
In the early days of the epidemic in April 2020, Procter & Gamble released its financial report for the third quarter of fiscal year 2020. It showed that the Asian retail market, including China, was temporarily interrupted, travel retail sales dropped significantly, duty-free shop traffic dropped sharply, and SK-II suffered a double-digit decline. In the fourth quarter of P&G's fiscal year 2022 (April-September 2022), SK-II sales dropped by double digits, which lowered the overall growth of P&G's beauty sector and had a negative impact on the company.
As a high-end brand, SK-II has been particularly impacted in the Chinese market.
Data released by the National Bureau of Statistics of China on the 17th show that in 2022, China’s total retail sales of consumer goods will be 43,973.3 billion yuan (RMB, the same below), a decrease of 0.2% from the previous year. Among them, the retail sales of consumer goods in urban areas decreased by 0.3%, while the retail sales of consumer goods in rural areas remained the same as the previous year.
It can be seen that under many uncertain factors, people tend to choose conservative consumption. This consumption psychology will affect the income of high-end brands to a certain extent. Data from the People's Bank of China show that Chinese household deposits in the banking system increased by nearly 18 trillion yuan in 2022. From 2019 to 2021, household deposits will increase by an average of 10 trillion yuan per year.
However, the "McKinsey China Consumer Report 2023" believes that China's increasingly affluent consumers have proven to be resilient. The report predicts that if consumption rebounds, consumers will have plenty of money to spend. The company concluded that the decline in consumption is cyclical after conducting a nationwide survey of 6,700 Chinese consumers.
But in addition to waiting for consumption to pick up, SK-II itself also has some hidden concerns that need to be resolved urgently.
The most obvious thing is that the SK-II price system is confusing. From a price point of view, SK-II has increased its price many times in recent years to cope with rising costs. In April 2018, the price increases of fairy water and were 5.8% and 6.5% respectively according to specifications; in July 2019, the price of SK-II fairy water 230ml increased by 6% to 1,540 yuan; in October 2022, another price adjustment was announced, and now the official price of the product is 1,590 yuan.
However, SK-II’s products are relatively expensive in official self-operated channels, as well as in distribution channels such as e-commerce and duty-free shops. Taking 230ml of fairy water as an example, the price in the Tmall official flagship store is 1,590 yuan, and in the beauty collection store "Hua Mei" it is 1,400 yuan. However, there are different quotations in China Free Daily APP, Pinduoduo and live broadcast rooms. The price increase of
has discouraged some consumers, and the confusing price system will make consumers confused about the brand and raise questions about "Will I buy it too expensive?"
In fact, the problem of confusing price system does not only happen to SK-II. High-end brands such as Estee Lauder also have similar situations. Channel and price control issues have always plagued these brands. If not handled properly, not only will the brand's reputation be damaged and consumer trust reduced, but consumers' wait-and-see attitude after comparing prices will also lower the brand's sales.
From a product perspective, with the patented ingredients of Pitera, SK-II has enjoyed a lot of bonus over the past thirty years. But now, as consumers feel aesthetic fatigue, the skin care market has also seen more new trends, and young people may also be pursuing other ingredients.
With the help of the big single product strategy of "Fairy Water + Big Red Bottle Facial Cream", SK-II has captured the hearts of consumers in the past. However, for a long time, it has not produced other big single products that can be compared with it. Judging from the monthly sales of SK-II Tmall flagship store , except for the fairy water, the sales of other products are relatively average.
With the exception of cosmetics, Procter & Gamble said sales in all categories of its products have declined, with most categories experiencing market shrinkage. Overall, P&G has raised its future expectations under pressure.
Procter & Gamble raised its total sales guidance for fiscal 2023 to a decline of 1% to flat from the previous expectation of a decline of 3% to 1%, and organic sales was raised to a growth of 4% to 5% from the previous expectation of a growth of 3% to 5%.
