China Consumer

Brand protection

UK firm struggles to replicate its condom success


A survey from Durex earlier this year revealed the average age that people lose their virginity around the globe. Ranking top was Iceland at just 15.6 years, followed closely by Denmark, Norway, Sweden and Finland.

The Malaysians were last in the list at 23 years, although the Chinese weren’t too far behind, on 22.1.

Tabloid newspapers in the UK have reported on the study again this month (the British were mid-table in the rankings, but just ahead of the French, which was some compensation). Indeed, it’s a British company, Reckitt Benckiser, that owns the Durex brand.

It first arrived in China in 1995 but it wasn’t until 2012, that it really sought to cultivate local consumers.

At the time, Reckitt Benckiser promised to spend Rmb500 million to grow its brands such as Durex, Dettol and Nurofen. But four years on, its China operations have brought a string of headaches. Although the firm’s portfolio of no-nonsense household goods means that it hasn’t been hurt by the slowdown in the luxury sector, like many other foreign brands, Sina Finance reckons its China business still isn’t profitable (there is no direct data as Reckitt Benckiser doesn’t offer revenues by country – however, suggestively it did announce recently the lay-off of 25% of its 2,000 staff in China).

Disappointing performance may have contributed to this week’s lowering of its full-year sales outlook (to 4% growth), the second time Reckitt Benckiser has guided estimates lower in three months, reports the Wall Street Journal.

“Reckitt Benckiser has stretched the pie too thin [in China], growing too many segments simultaneously. It is a strategy Procter and Gamble has tried in the past. But even P&G acknowledged that it had to get more streamlined and focused. As of now, other than Durex and Dettol, Chinese consumers are not familiar with Reckitt Benckiser brands,” warns Beijing Commercial Daily.

The newspaper adds that another strand in the company’s strategy hasn’t worked out: “It was hoping that by introducing products that are in niche categories it could generate higher returns. But the problem is, when the market is small, demand is limited, so the company needs to invest a lot to educate and nurture consumers.”

Take Finish, a dishwasher detergent. While it is popular in Europe and the US, dishwasher detergent has been a tougher sell in China, where dishwasher ownership is limited (about 1% of households have dishwashing machines).

Thankfully, there is one bright spot: Durex. The contraceptive brand is still the undisputed leader in China’s $1.8-billion condom market, with about a third of sales, and company bosses want to see income increase to Rmb10 billion, or $1.47 billion, by the end of 2020.

Durex is not without competition in China. Jissbon, which is owned by the Australian firm Ansell, claims 28% of condom sales, while Japan’s Okamoto controls 13% of the market. And all of the brands are expecting sales to increase as condom usage becomes more commonplace (only about 10% of sexually active people use condoms in mainland China, versus 50% in Hong Kong, Durex estimates. It’s hopeful that a similar proportion will eventually be used in the much larger mainland market).

Part of the challenge is consumer education (in another survey of more than 12,000 college students by Xi’an Jiaotong University this year, only a fifth of respondents knew how to use a condom correctly). But at least the foreign brands have an advantage with consumers worried about the quality of local condoms. In an embarrassing case this year, the Chilean government dumped a bulk order from a Chinese supplier, when the goods were proved to be faulty. And last year, Shanghai police busted a gang that was producing defective condoms.

In the meantime Reckitt Benckiser is tilting more towards healthcare. In 2013, it acquired Golong Medicine, an Anhui-based manufacturer known for a sore-throat treatment based on traditional Chinese medicine. And just last week, it agreed to purchase a $50 million stake in China Resources Pharmaceutical, the country’s second-largest drug maker, ahead of its $2 billion Hong Kong IPO, which began trading today. Analysts say China Resources Pharma’s wide distribution network across the country could help the UK firm expand its reach.

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