CINCINNATI - One of the big wins for Procter & Gamble Co. in its just-reported first quarter was the reversal of a 12-month sales slump in China.
The Cincinnati-based maker of Tide detergent and Pampers diapers reported organic revenue growth of 2 percent there, driven by double-digit increases in revenue from its toothpaste, shaving and skin-care brands.
But at least one P&G rival has accused the company of engaging in a price war to gain market share in China.
“It's one of the fastest growing markets in the world, and you're seeing lots of competitors chasing it,” said Kimberly-Clark Corp. CEO Thomas Falk in an earnings call with analysts Monday.
“The two Japanese competitors as well as P&G are all very aggressive,” he added. “It’s probably one of those things … where everyone thinks the other guy started the price war, but we're all trying to drive our business in that market.”
Another P&G rival told analysts last week that its “laundry sales in China are down in the face of aggressive and, we believe, unsustainable price competition between two local brands.” Andrew Stephen, head of investor relations for Unilever, said “the two locals are actually the number one and the number two player in China and have been for many, many years, so this isn't something new, have been going through some very aggressive price promotion.”
Those observations prompted Bernstein Research analyst Ali Dibadj to question whether P&G’s first quarter revenue growth in China will be a “fleeting victory,” driven by promotional activity instead of innovation.
Chief Financial Officer Jon Moeller said the company will respond to market conditions in countries where rivals are competing on price, but its long-term strategy will focus on innovations that bring new users to its brands.
“If we look at oral care, for example, in China, it was up almost 15 percent on the quarter,” Moeller said. “That's driven by continued progress with the Oral-B (electric) brush as well as the high-end, premium Oral-B paste that we launched a couple of quarters ago.”
P&G also enjoyed 17 percent growth in its Chinese grooming business and skin care increased 10 percent, Moeller said. But in baby care, where Huggies maker Kimberly-Clark complained about aggressive pricing, Moeller said P&G’s revenue was down double digits on the quarter.
“We feel very good about portions of our portfolio,” Moeller said. “We have some new premium taped innovations coming into the market in the next six to nine months which we're also very excited about. But that is a business that we need to keep working on.”