China Consumer

Groomed to win

How a consumer giant came to dominate China shampoo sales

P&G: eye-catching

On a recent visit to Beijing, Bob McDonald took time out to drop in on a Chinese housewife. The chief executive of Procter & Gamble likes to pose as a market researcher, to accompany shoppers to stores and to make home visits.
His mission? A better understanding of how the Chinese shop for everyday items that the company sells, like detergent and toothpaste.
P&G already seems to have a pretty solid understanding of Chinese consumers. Since the Cincinnati-based consumer products giant first brought Head & Shoulders to the country in 1988, it has introduced a steady stream of popular American brands such as Olay, Pampers and Whisper. Last year, its sales in China reached $5 billion.
Analysts say P&G has been particularly successful in adapting its products to the local market.
For instance, the local version of its laundry detergent, Tide, works even when used with dirty water. The company also sells cheaper, basic versions of its products in smaller cities and villages. Take Olay moisturising cream: P&G sells one version in supermarkets and a pricier range with skin-whitening and anti-aging properties in upscale department stores.
P&G’s dominance of the shampoo market is particularly impressive. Its three major brands – Rejoice, Pantene and Head & Shoulders – have 60% of the Chinese market. By comparison, the Anglo-Dutch group Unilever has about 30%, with the remaining 10% split between as many as 2,000 local manufacturers, says Times Weekly.
To boost its grip across other product segments, P&G says it will invest at least $1 billion over the next five years in manufacturing and R&D in the country.
The company is also pushing beyond China’s wealthy coastal regions into the countryside. P&G is working with the Chinese government on a programme called ‘10,000 Villages’, which aims to create distribution networks for household products in rural areas. The idea, says Bob McDonald, is to train farmers in the art of retailing.
Beijing endorses the plan on the grounds that it will help to root out counterfeit goods, as well as spur wider rural consumption. “We want to serve the peasants and bring real benefits to them,” says Chang Xiaocun, the ministry official overseeing the project.
Local competitors, however, are less enthusiastic. Reports of P&G’s rural campaign have prompted a fierce backlash, especially as many accuse the American firm of monopolising the shampoo market and squeezing out domestic competition.
“The only way for local firms to compete against P&G is to retreat to third and fourth-tier markets, but even there, it is hard to compete. Everyone is complaining [about] how difficult it is just to maintain market share, which has been slipping year after year,” says Yang Huabin, an executive with a rival Japanese cosmetics firm.
Local shampoo makers complain that P&G has been leveraging its relationships with large retailers like Carrefour and Walmart to take up much more shelf space than it actually needs simply to drive out competitors.
“Many of P&G’s products are not intended for sale. They are merely there to fill the shelves in supermarkets, so we don’t get any shelf space,” one local shampoo maker griped to Times Weekly.
“The company is not going to stop until they have squeezed out competition, or until P&G has total dominance in the market.”
Some shoppers seem to be concerned too. In a survey conducted by Sina.com, the popular internet portal, 92% of those surveyed thought P&G held a monopoly in the shampoo market; 83% said they believed it was abusing its dominant market position; and almost 74% thought that it shouldn’t be allowed to acquire any Chinese shampoo brands in future.
That’s a set of numbers Bob McDonald is less likely to like.

On a recent visit to Beijing, Bob McDonald took time out to drop in on a Chinese housewife. The chief executive of Procter & Gamble likes to pose as a market researcher, to accompany shoppers to stores and to make home visits.

His mission? A better understanding of how the Chinese shop for everyday items that the company sells, like detergent and toothpaste.

P&G already seems to have a pretty solid understanding of Chinese consumers. Since the Cincinnati-based consumer products giant first brought Head & Shoulders to the country in 1988, it has introduced a steady stream of popular American brands such as Olay, Pampers and Whisper. Last year, its sales in China reached $5 billion.

Analysts say P&G has been particularly successful in adapting its products to the local market.

For instance, the local version of its laundry detergent, Tide, works even when used with dirty water. The company also sells cheaper, basic versions of its products in smaller cities and villages. Take Olay moisturising cream: P&G sells one version in supermarkets and a pricier range with skin-whitening and anti-aging properties in upscale department stores.

P&G’s dominance of the shampoo market is particularly impressive. Its three major brands – Rejoice, Pantene and Head & Shoulders – have 60% of the Chinese market. By comparison, the Anglo-Dutch group Unilever has about 30%, with the remaining 10% split between as many as 2,000 local manufacturers, says Times Weekly.

To boost its grip across other product segments, P&G says it will invest at least $1 billion over the next five years in manufacturing and R&D in the country.

The company is also pushing beyond China’s wealthy coastal regions into the countryside. P&G is working with the Chinese government on a programme called ‘10,000 Villages’, which aims to create distribution networks for household products in rural areas. The idea, says Bob McDonald, is to train farmers in the art of retailing.

Beijing endorses the plan on the grounds that it will help to root out counterfeit goods, as well as spur wider rural consumption. “We want to serve the peasants and bring real benefits to them,” says Chang Xiaocun, the ministry official overseeing the project.

Local competitors, however, are less enthusiastic. Reports of P&G’s rural campaign have prompted a fierce backlash, especially as many accuse the American firm of monopolising the shampoo market and squeezing out domestic competition.

“The only way for local firms to compete against P&G is to retreat to third and fourth-tier markets, but even there, it is hard to compete. Everyone is complaining [about] how difficult it is just to maintain market share, which has been slipping year after year,” says Yang Huabin, an executive with a rival Japanese cosmetics firm.

Local shampoo makers complain that P&G has been leveraging its relationships with large retailers like Carrefour and Walmart to take up much more shelf space than it actually needs simply to drive out competitors.

“Many of P&G’s products are not intended for sale. They are merely there to fill the shelves in supermarkets, so we don’t get any shelf space,” one local shampoo maker griped to Times Weekly.

“The company is not going to stop until they have squeezed out competition, or until P&G has total dominance in the market.”

Some shoppers seem to be concerned too. In a survey conducted by Sina.com, the popular internet portal, 92% of those surveyed thought P&G held a monopoly in the shampoo market; 83% said they believed it was abusing its dominant market position; and almost 74% thought that it shouldn’t be allowed to acquire any Chinese shampoo brands in future.

That’s a set of numbers Bob McDonald is less likely to like.


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