Procter & Gamble (P&G) is experiencing a significant decline in sales of its high-end SK-II skin-care brand in China. The greater China region saw a 34% decrease in SK-II sales during the latest quarter, and P&G attributes this decline to various factors. While the brand has been struggling due to its high prices and reliance on travel retail amid China’s economic recovery, another unexpected factor has played a crucial role in the decline: anti-Japanese sentiment.
August marked the release of a substantial amount of treated radioactive water from Japan’s Fukushima nuclear power plant, which was damaged over a decade ago by an earthquake and tsunami. This event triggered strong backlash from neighboring countries, particularly China. In response, China imposed a ban on all seafood imported from Japan, leading Chinese consumers to participate in widespread boycotts of Japanese brands, including P&G’s SK-II. Consumers feared that these products might be tainted by radiation.
P&G executives assured investors that SK-II’s sales are already showing signs of improvement. Consumer research suggests a positive shift in SK-II brand sentiment, and the company expects to witness sequential growth in the back half of the fiscal year. Despite previous tensions between Japan and China impacting SK-II’s sales, the brand has historically demonstrated resilience and successfully bounced back.
Although SK-II faced a significant decline in sales, the overall beauty business of P&G reported flat volume for the quarter. This implies that other brands within the company’s portfolio managed to compensate for the specific challenges faced by SK-II. Investors responded positively to P&G’s earnings report, with the company’s shares rising by 4% during afternoon trading. However, the quarterly sales fell slightly short of expectations.
Procter & Gamble’s SK-II brand has encountered a setback in China due to a combination of factors, including economic challenges and anti-Japanese sentiment. While the brand has struggled in the past, history suggests that SK-II will regain its market share in the near future. It remains to be seen how P&G will navigate these challenges and how the ongoing economic recovery in China will impact the brand’s performance.
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