When it comes to P&G, Chinese consumers are no strangers. Even if the name of P&G sounds a bit strange to you, you must have seen advertisements for P&G products, such as Head & Shoulders, Rejoice, Sassoon, Shufujia, Crest, and Bilang. Tide products such as Tide and other cleansing products.
Formerly P&G was the absolute king, and many countless daily necessities brands became household names, but with the upgrade of China’s consumption, this 181-year-old fast-moving giant is stepping down the altar.
Net profit plunging
The latest financial report released by P&G Group shows that the company achieved net sales of 102.339 billion yuan in the quarter, up 4% year-on-year. Organic sales (excluding mergers and acquisitions, divestiture, exchange rate impact) increased by 1%; net profit was 15.966 billion yuan. , down 1% year-on-year.
P&G Group’s gross profit margin decreased by 100 basis points to 48.8% due to insufficient cost and pricing power; operating profit margin decreased by 130 basis points to 20.2%. In addition, in the nine months ended March 31, P&G Group’s net sales were 316.202 billion yuan, up 3% year-on-year; net profit was 50.079 billion yuan, down 40% year-on-year.
According to different business departments, the net sales of the beauty department reached 18.443 billion yuan, a year-on-year increase of 10%, organic sales increased by 5%, and the beauty department also had the highest sales increase in all sectors; the net sales of the personal care department was 121.57 billion yuan, up 5% year-on-year, organic sales increased by 1%; fabric and home care sector sales in the third quarter was 33.076 billion yuan, up 6% year-on-year, organic sales increased by 3%; baby care sector sales were 280.22 100 million yuan, unchanged from the same period last year, organic sales fell 3%.
On the other hand, it is worth noting that P&G announced that it has signed a M&A agreement to purchase its consumer health business from Merck Group for a price of 26.368 billion yuan. The transaction is expected to be at 2019. Completed in the year.
Retreat, back 10 years ago
P&G has grown from a small workshop for making candles in 1837 to today’s global consumer goods super giant, which has a history of 181 years. Chinese consumers know about Procter & Gamble’s products, starting in 1988. In the era when the materials were not too rich, P&G products first came to the Chinese, a bottle of 300 ml of Headwaters shampoo, the price was as high as 19 yuan. It should be known that the average worker’s salary was only 100 yuan a month.
Although the price is high, but P&G’s products have successfully attracted the attention of domestic consumers. Subsequently, P&G’s Rejoice, Olay, Pantene, Shufujia, Bilang, Tide and other brands also adopted the same price strategy to enter the Chinese market.
This also opened the eyes of the people of the country, the foreign brands can actually make such a pattern of daily necessities, and even give a psychological hint of “you have expensive reasons.” During the 15 years from 1998 to 2013, P&G’s revenue in China increased nearly six times, but since then it has gone downhill, growth is weak, and market share has gradually been eroded.
This year is the 30th year of P&G’s entry into China. P&G, with its reputation as a marketing talent, “Whampoa Military Academy”, has made great strides in the Chinese market and has become a household commodity giant. At its peak, its resilience, Head & Shoulders and Pantene once occupied more than 60% of China’s shampoo market. Shufujia, Bilang and Tide are almost all products that are used by every family.
Looking back at P&G’s recent 10 years of earnings, sales exceeded $80 billion between 2011 and 2014, especially in 2013, reaching a peak of $84.2 billion, but since 2015, the situation has become less optimistic, 2015 Sales to 2017 were deteriorating, at $76.3 billion, $65.3 billion, and $65.1 billion.
At present, P&G only released the data for the first three quarters in FY18. According to the average sales, the overall sales in FY18 will be around $66.5 billion.
In fact, since 2016, P&G’s annual sales have remained at around $65 billion. Compared to the 2006 sales of $68.2 billion, P&G seems to “return to 10 years ago”.
“Slimming” is not effective
In the past 20 years, China’s consumption pattern has undergone earth-shaking changes. When P&G first entered China, the purchasing power of the Chinese people was still insufficient, so some cheap products would also be introduced to attract customers.
But now the purchasing power of Chinese consumers has gone up, and low-priced products are no longer popular. For example, the best shampoo sold in China every year is Sassoon. You know, Sassoon is the highest price among P&G’s shampoo brands in China. It shows that the Chinese people are not bad money, and more is the pursuit of quality.
Nowadays, young people have lost interest in the brands such as Head & Shoulders, Rejoice, and Pantene. From the market share, it can be seen that the brands that have occupied half of the country have now reduced their share to 35.8%, while the high-end shampoo The market share of hair products has increased from 4.7% in 2014 to 7.5% in 2016.
On the other hand, the decline in sales of P&G is inseparable from its large-scale divestiture of its products. P&G has had more than 300 brands. In 2008, P&G’s performance reached its peak, becoming the world’s sixth-largest company by market capitalization and the 14th largest company in the world.
However, since 2014, P&G has sold, terminated or eliminated some brands in order to reduce costs. However, P&G has cut off more marginal brands, and products that hold 90% of core profits will naturally not give up.
Coty became P&G’s “Pan Man” and acquired 43 brands of P&G for $12.5 billion, making it a sensational event in the industry. In the second half of 2017, P&G announced that its brand has been reduced to 65. P&G, which is actively “slimming”, does not seem to have achieved the expected results. It is still going all the way down. In the third quarter of fiscal 2017, it even created a record of 13 consecutive quarters of decline in net sales.
More than half of the brands are gone, although P&G is “slimming”, but it is inevitable that some of the force is too strong, and it hurts itself. On the other hand, “Picture Man” Coty also failed to eat a fat man, the performance is not good-looking, and there are some “indigestion”.
Winning or losing does not matter
As the saying goes, “Chengdu Xiaohe, defeat also Xiaohe”, for P&G, is “Chengdu China market, defeated the Chinese market”, China’s big, large to occupy one-fifth of the world’s consumer market, P&G took foreign investment The “super-huge” that has entered China has swept across China through traditional advertising models. At that time, P&G was invincible. However, this consumer goods giant did not expect that the status of the king would be shaken because of the rise of the Internet era.
The era of mobile Internet has directly changed China’s consumption channels. The United States still dominates the offline channels, while China is the opposite. The line is the king, which makes P&G not responding for a while.
Even Wal-Mart, an international chain of supermarkets, has suffered a major impact. The large number of TV commercials has been released, and the effect of the harvest has been greatly reduced. The Chinese consumers have completely adapted to Internet shopping, watching cable TV and shopping in supermarkets. Young people are getting less and less.
Procter & Gamble’s sales peaked in 2013, but why did it start to decline thereafter? The answer is very simple. In 2013, it was called the “first year” of the major Internet. It was the rapid rise of the Internet that brought a fatal blow to the traditional media. P&G’s response was not fast enough. Although it seized the traditional media, I missed the battlefield of the Internet.
P&G relies too much on ad traffic, but finds that traffic has been difficult to bring enough users. In the first 20 years after the reform and opening up, China’s traffic can be said to be “completely centralized.” At that time, it was very simple to monopolize traffic. It is enough to buy CCTV prime time traffic.
However, when entering the Internet era, this road will not work. More and more traffic has become decentralized traffic. WeChat, public number, and major self-media platforms have become the portals for traffic. Therefore, any enterprise It is almost impossible to monopolize traffic by saving money.
Once P&G, holding a lot of capital, in China, the money was turned to traditional media such as television, radio, newspapers, and even the advertisements of Head & Shoulders, Rejoice, and Pantene took turns in the golden period of CCTV, and the advertisements were overwhelming, so that every Chinese I have known P&G.
But nowadays, in the past, P&G has cut off half of its agents worldwide in 2017, and will continue to shrink again. It is expected to cut advertising agencies by 80% in two years. The rise of the Internet has destroyed P&G’s traffic layout over the years, making its traffic a huge funnel, and ultimately making it difficult for P&G to return.
The stagnation of P&G’s development, if it is only blamed on the huge changes in the channel, is obviously not comprehensive. The rapid rise of China’s own brand has also given P&G a big blow. Today’s China is no longer a “cottage”, many involve domestic In the field of brand, there is a good market performance. The most obvious is the smartphone market. In just a few years, it has reversed the market of Apple and Samsung in the domestic market.
More and more giant brands are losing ground in the Chinese market, which is the epitome of the tremendous changes in the Chinese market over the past decade. In the past, it was a foreign brand that could come to China to make money. Now, the competition in the Chinese market is very fierce. P&G is not the first company to decline, and certainly not the last one. In the face of the domestic enterprises that have swept the giants, the giants should be careful not to think about the channels, but also how to retain the hearts of Chinese consumers.