SK-II China slump: Consumer research leaves P&G hopeful that luxury brand will recover by H2
P&G reported that SK-II sales fell by 34% in the Greater China region, including domestic travel retail, during its latest quarter ending December 2023.
Overall, P&G’s beauty segment grew by a modest 1% because of SK-II’s challenging quarter.
The company attributed the tumble to the Chinese consumers’ safety concerns over Japanese brands over Tokyo’s decision to release treated radioactive water into the Pacific Ocean last year.
This triggered a backlash and prompted Chinese consumers to boycott Japanese goods, including beauty and personal care products.
A quick search on Weibo – an online Chinese platform similar to X/Twitter – today will yield thousands of comments supporting the boycott.
However, P&G latest consumer research has been more positive.
“The SK-II sentiment is improving, based on our consumer research in China. And we are continuing to drive innovation, equity investment and really relying on our most loyal and passionate user base to help amplify that messaging, which is working well. So, we expect the effects to improve year over year, quarter over quarter,” said Andre Schulten, chief financial officer, P&G.
Jon Moeller, the firm’s chief executive, added that SK-II has weathered similar anti-Japanese obstacles in China.
“We've had, not identical, but similar consumer sentiment dynamics in the past as relates to this brand and as relates to the relationship between [China and Japan]. And it has always resolved itself with SK-II moving to higher heights,” said Moeller, who is also P&G chairman and president.
The company expressed its confidence in SK-II’s future in China, believing it will see recovery in the latter half of the year.
“We remain confident that as the sentiment improves, which we see already, with continued investment in SK-II, we see that business recovering over the back half,” said Schulten.
At the same time, the brand was working to win back its Chinese consumers through various communication efforts.
“What we're doing is really doubling down with innovation and doubling down with communication on the efficacy, the quality of the product, the quality of the brand and leveraging the most loyal and passionate consumer group to help us make the case for SK-II, which we believe will help us improve run rates in the second half,” said Schulten.
Moeller highlighted a personal experience with a “heavy SK-II user”, he had come across in Beijing.
“She said: I’m much more afraid of the pimple I will get if I don’t use this, than I am about [treated wastewater].”
Nuclear fallout
Japan’s polarising move had repercussions not just on SK-II but many Japanese cosmetics companies.
Firms such as Shiseido and Kosé, which have historically been held in high regard by Chinese beauty consumers, have felt the negative impact on sales.
The luxury skin care brand famed for its Facial Treatment Essence, known as ‘miracle water’ among Mandarin speakers, has faced challenges due to China’s sluggish recovery over the past year.