sk-ii damage control in china
TRANSCRIPT
Proctor & Gamble: Crisis Response in China
ASIA CASE RESEARCH CENTRE
Proctor & Gamble
1940s:Expands to Asia & S. America
1950s +:Acquires brands such as Folger’s, Charmin,
Max Factor,
Iams and more
1961: Introduces
First Disposable
Diaper
1911:Begins
Producing Crisco
Global Brand Powerhouse
1837: CompanyFounded
1859: Sales
Reach $1M
1880:Launches Ivory Soap
1940: Introduces
Tide Detergent
1930s:Expands to
Europe
Billion Dollar Brands
Billion Dollar Brands
IT’S A P&G WORLDFOUR INTERNATIONAL DIVISIONS: NORTH AMERICA, EUROPE, LATIN AMERICA AND ASIA
Cultural Nuances Create ChallengesEstablishing market presence in Japan was slow:
Lack of regard for distinct needs and habits of Japanese.
Inability to keep pace with major competitors in Japan: more creative and more agressive
Inadequate adaptation to Japanese distribution system.
P&G and the Japanese Cosmetics Market
Entry into beauty market strained growth
1991: P&G purchased Max Factor
Max Factor is a distant 5th place in market with only 3% market share (Shiseido has 20%)
New high end product: Max Factor Blue is a flop
Asian VP cleans up: down to 500 SKUs and 150 staff
SK-II in Japan
• Discriminating Japanese customers were already using SK-II• P&G purchased the company and within three years boosts awareness
from 20% - 70% • Ad campaign is launched in Hong Kong & Taiwan (30% of brands’s sales)• Loyal SK-II customers spend about $1,000 each year
So why not China?
Olay model: Sales at counters in state-owned department stores
30% - 40% growth rate of prestige beauty segment anticipated
Potential Challenges with Chinese Market
A strategic distraction from becoming mainstream Chinese company
Is Chinese customer ready?
Historical conflict between Japan & China
Widespread counterfeit prestige products
Import registration process & duties
A PROCTOR & GAMBLE NIGHTMARE OF COSMETIC PROPORTIONS SK-II: DAMAGE CONTROL IN CHINA
By September 2006
97 sales counters
400 sales personnel
Every tier one city
Most tier two cities
China: 7% of brand’s global sales
Chromium & Neodymium
National Quality Inspection Department of the State Administration of Quality Supervision, Inspection & Quarantine (AQSIQ)
9 products contained two ingredients banned under Chinese law.
Initial Statement from P&G
We are actively communicating with the relevant government departments with their investigations and problem solving. Corporation executives today are in consultation with the relevant agencies, and next Monday will have talks with the parties concerned.
Accordingly, SK-II can be returned by consumers to SK-II counters following the authorisation of related products return procedures; we will provide the best possible service to meet consumer demand.
On the relevant SK-II products under the frame of investigation, we are working to communicate with the relevant government departments to make a final decision.
Why the storm?
Customers had to sign a document saying SK-II was not faulty (the “King Clause”)
Product had to be more than 2/3rds full
One month waiting period for refunds
Arrogance!
P&G is seen as arrogant in the mind of media and Chinese consumer.
THE TWO WEEKS FROM HELLSEPTEMBER 14 - SEPTEMBER 27
Your AssignmentIt’s September 30...
How does P&G respond? • Create a plan outlining the
recommended response to quell crisis and rebuild the prestige of SK-II in China
Considerations
• Pull all product from shelves? • New spokesperson? • Government advocacy? • Media relations?• New return policies?• Consumer relationships?