34% Plunge: "Miracle Water" Falls from Grace

Recently, Procter & Gamble (P&G), a global leader in the daily chemical industry, has released its latest financial report data.

Overall, P&G's operating income and net profit for this half year have increased slightly, which is considered normal performance.

However, keen-eyed netizens have noticed that P&G's pride, the high-end skincare brand SK-II, has seen a significant drop in sales.

In the most recent quarter, SK-II's sales in the Greater China region fell by 34%, directly lowering the profit margin for that quarter.

In response, P&G explained in the financial report that the significant decline in the brand's sales was mainly due to the impact of Japan's nuclear wastewater discharge incident.

Although SK-II was acquired by P&G as early as 1991, it has always been promoted domestically as "authentically Japanese."

Statements such as "Fairy Water has only one production site, which is Biwako in Japan" and "The special active yeast extract component contained in Biwako is the main reason for the effectiveness of Fairy Water."

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The Japanese government's "inhumane" actions that began last August have indeed triggered extreme aversion among people in neighboring countries.

However, the reason for "Fairy Water" falling from its pedestal may not be solely due to nuclear wastewater.

What is the origin of "Fairy Water"?Even if you haven't used "Faerie Water," you must have heard of this brand from the ubiquitous advertisements. Especially for men, when choosing gifts for various holidays and anniversaries, there's a high probability that they have given SK-II products. Why is this brand so popular? Because they claim to effectively solve the problem of skin aging. It is said that Japanese scientists accidentally discovered that the faces of elderly sake brewers were covered with wrinkles, but their hands were white, tender, and smooth when visiting a sake brewery. From this, they discovered a special active yeast extract called Pitera, which is the core ingredient of "Faerie Water." In the era when Japan's "craftsmanship filter" had not yet shattered, this rhetoric deeply struck the hearts of Chinese consumers. Coupled with the promotion of celebrities and artists, girls all pursued the skincare trilogy of "Faerie Water, Little Lightbulb, and Big Red Bottle." SK-II also became the "mainstay" of P&G's beauty department, with sales growth exceeding 20% for fifteen consecutive quarters. As the saying goes, "Greed is like a snake trying to swallow an elephant." After achieving a 30% increase in sales in the 2018 fiscal year, SK-II actually raised its prices, and it kept increasing. P&G may think that the consumer stickiness of SK-II is high enough, and even if the prices are raised, those who want to buy will still buy.But they never considered that SK-II originally followed a mid-to-high-end route. If its prices are already at a high-end level, why wouldn't consumers just buy from bigger brands directly?

Although the "Fairy Water" is still being advertised loudly, its sales have started to decline.

"Fairy Water" becomes "Polluted Water"

It's really a case of bad luck happening one after another. SK-II's home country, Japan, has "arrived on the battlefield."

After the Japanese government announced its plan to discharge nuclear-contaminated water into the sea, consumers began to worry about the safety of Japanese products.

In June 2023, domestic media reported that the production site of "Fairy Water," Lake Biwa, was suspected of nuclear contamination, claiming that a large amount of wood chips containing radioactive cesium were piled up on the shore where the Japanese Oka River and Lake Biwa meet.

Although Procter & Gamble issued a statement the next day, stating that all SK-II products and ingredients have undergone safety assessments before being put on the market, and this was just old news from 2014.

However, seeing Japan about to discharge nuclear-contaminated water into the sea, Chinese consumers still find it hard to act as if nothing has happened.

For a while, online public opinion surged, and some netizens even suspected that their thyroid problems were related to "Fairy Water."

Originally, the "sole production site" was a selling point for SK-II, but now it has become a "stain" in the eyes of consumers.The previous "money tree" may soon stop yielding money, as this wave is purely a case of "Japan's wrongdoing, P&G suffers."

The commercial giant amidst the storm

"Even without the issue of nuclear contamination, SK-II is also struggling to sell," an industry insider analyzes.

For so many years, SK-II has been relying on brand storytelling for marketing, with only 2 or 3 best-selling products that are worth mentioning.

Products are not innovated, promotions do not offer discounts, and prices increase year after year; naturally, consumers will weigh the value in their minds.

There are not just one company in the market doing anti-aging products, and it is indeed unnecessary to pay for the increasingly higher premiums.

For P&G, the bad news is not limited to this.

Despite record annual revenue, this commercial giant is facing significant challenges.

As the second-largest market outside the United States, China has always been P&G's "growth pole."

However, in the past two years, P&G has struggled to grow in China.In addition to the "disappointed" SK-II, Procter & Gamble (P&G) has also ceased operations for three brands in the Chinese market: First Aid Beauty, OPTE, and Snowberry.

The shampoo brand we are familiar with, "Vidal Sassoon," may also be sold by P&G at a valuation of $1 billion for its Chinese business.

The men's grooming brand Gillette, which was acquired for $57 billion in 2005, has now shrunk to only $14.1 billion.

This is not the first time P&G has faced performance pressure; in the past, the company has also improved profitability by selling, discontinuing, and naturally phasing out some brands.

Now, facing more challenging internal and external troubles, can P&G once again weather the storm safely?