How P&G Plans to Fix Its China Business

February 18, 2016, 6:22 PM UTC
Tide and Arial laundry powder on the shelves in a Chinese
(Photo by Zhang Peng/LightRocket via Getty Images)
Photograph by Zhang Peng — Getty Images

Procter & Gamble (PG) missed the boat in the mother of all emerging markets by underestimating the sophistication of consumers in China and their willingness to pay top dollar for quality household goods.

That was the blunt assessment of P&G boss Dave Taylor on Thursday in his first investor presentation as CEO of the maker of Tide and Gillette.

Calling P&G performance in China “unacceptable,” Taylor, who took the reins in November, acknowledged that the company had misread local appetite for its premium products. That has hurt P&G’s ability to charge more in that market and let other consumer brands take market share.

“We looked at China too much like a developing market as opposed to the most discerning market in the world,” Taylor said at the Consumer Analyst Group of New York conference in Boca Raton, Florida at a session that was webcast.

In January, P&G said that its organic sales in China fell by a “high single digits” percentage last quarter, a painful performance in its second biggest market by both revenue and sales (after the United States). So, the company is expanding its higher-priced offerings there. Those include premium diapers in both the taped and pull-on segments, compact formats of its Ariel liquid detergent, and upcoming upgrades to Tide. P&G is also launching Oral B Gum Care, a new premium line of toothpaste, in China and ramping up advertising. And the list goes on.

But improvements won’t come overnight, one analyst warned, since P&G’s rivals have been quicker to sell online in China.

“It will take a few years to stem share losses,” JPMorgan analyst John Faucher wrote in a research note on Thursday. “They do have an uphill battle there, in our view, as their competitors have made more progress online,” he added, mentioning Kimberly-Clark (KMB) as one rival that has made inroads in that area.