Procter & Gamble (P&G) faced a significant setback as its high-end SK-II skin-care brand experienced a sharp 34% decline in sales within the greater China region during its latest quarter. While the brand’s reliance on travel retail and higher prices contributed to its struggles in the wake of China’s slower economic recovery, P&G executives pointed to another unexpected factor: anti-Japanese sentiment.
The roots of this sentiment trace back to Japan’s decision to release treated radioactive water from the Fukushima nuclear power plant into the Pacific Ocean. This move, aimed at managing the aftermath of the plant’s destruction by an earthquake and tsunami over a decade ago, sparked strong opposition from neighboring countries, including China. In response, China imposed a ban on all seafood imports from Japan and saw a surge in boycotts of Japanese brands among Chinese consumers, who feared radiation contamination. P&G, including its SK-II brand, found itself caught in the crossfire as consumers expressed concerns about the safety of its products.
Despite these challenges, P&G remains optimistic about SK-II’s future. Consumer research indicates a positive shift in sentiment towards the brand, and executives expect to see a gradual recovery in sales in the coming months. CFO Andre Schulten highlighted this trend during the company’s earnings conference call, expressing confidence in the brand’s resilience. CEO Jon Moeller also emphasized that previous tensions between Japan and China have impacted SK-II’s sales before, but the brand has historically rebounded from such setbacks.
While P&G’s overall beauty business reported flat volume for the quarter, the company’s stock saw a 4% increase in afternoon trading following the release of its earnings report. Despite falling short of sales expectations, P&G’s earnings surpassed Wall Street estimates, indicating investor confidence in the company’s ability to navigate challenges and capitalize on opportunities in the evolving market landscape.
(Source: CNBC | NBC10 | YNC)
