2013-01-07

Daily chemical industry trapped in a low - price struggle

Procter & Gamble's first-quarter financial results from 2012 to 2013 released recently showed that the company's revenue was $20.74 billion, down 3.7% year on year. Among the sectors, the beauty and cosmetics business, led by Olay and SK-II brands, fell the most, with net sales falling $375m to $4.94bn from $5.315bn in the same period last year. In a sense, in a decade, cosmetic giant profits in the Chinese market is more and more thin, so they will channel sinks, to three or four line city, main 10 yuan products, resulting in daily chemical industry in a low price, various chemical company is using a low-cost strategy, this is clearly not effective weapon cosmetic enterprises continue to survive.

Procter & Gamble, the godfather of household chemicals, is facing a difficult transition. On the one hand, a wave of layoffs and the loss of a large number of innovation cadre rumors make it under suspicion; On the other hand, the sales of P&G's "Dayi Chemical" integrated product line in China have entered a declining channel. P&G China responded that "the retention rate of new employees is as high as 95 per cent", but played down rumours of a loss of innovation cadre.

Net sales of toiletries and health care products also fell 7.4% and 3.5%, respectively. In the fields of shampoo, toothpaste, soap and skincare products, Procter & Gamble, Unilever and other daily chemical giants are facing shrinking business performance and transformation problems. In fact, when technology is no longer an obstacle, more companies are piling into the once highly profitable industry of cosmetics. It is understood that China has more than 3000 cosmetics factories, more than 7400 brands, homogenization of serious competition, plus L 'Oreal, Shiseido and other brands nibbled the market, at present domestic daily chemical industry has been far from the "high profit years".

In China's daily chemical market, Procter & Gamble has always been the champion, and its comprehensive market share of hair care products in China once exceeded 50%. What is the root cause of P&G's current "problems"? It also reflects the current living environment of China's daily chemical market?

When foreign and local brands are entering the low-end market, this seemingly vast market space becomes crowded immediately. The low-end price war also makes both brand owners and distributors fall into a dilemma. In addition to market share, technology is becoming more sophisticated and the products themselves are becoming less differentiated.

At present, the pattern of China's daily chemical market is that the three foreign enterprises (Procter & Gamble, Unilever, Johnson & Johnson) monopolize the middle and high-end market, while the national enterprises represented by Nax and Liby occupy the low-end market.

However, the delicate balance between foreign and local brands has been disrupted as foreign giants have accelerated their expansion into the middle and lower end of the market. At the same time, some local brands, which have withstood the onslaught of foreign brands, are also trying to fight back into the high-end consumer market.

For example, Herborist, a trendy Chinese herbal personal care brand owned by Shanghai Jahwa, has successfully entered the network of Sephora, the upmarket global cosmetics retailer, and will be sold in nearly 300 stores in Europe. In addition, Longrich and other local daily chemical companies have also developed their own high-end brands.

However, when both foreign and local brands enter the low-end market, this seemingly vast market space becomes crowded immediately. The low-end price war also makes both brand owners and distributors fall into a dilemma.


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