Guest Background
As the first domestically trained CEO of Procter&Gamble in its history, Ms. Xu Min joined Procter&Gamble in 1997 and has over 25 years of management experience spanning six categories and seven brands.
In 2015, Xu Min promoted the establishment of Procter&Gamble's China e-commerce business unit and upgraded it to a global retail business group in 2019. Nowadays, Procter&Gamble's e-commerce business is rapidly developing, not only occupying an important position in the Chinese market, but also providing rich development experience for other markets of Procter&Gamble.
In this issue, New Beijing News Shell Finance invited Xu Min, Chairman and CEO of Procter&Gamble Greater China, to the "Dialogue CEO" column.
Procter&Gamble, founded in 1837, is headquartered in the United States. Currently, Procter&Gamble has factories or branches in over 70 countries and markets worldwide. In 1988, Procter&Gamble entered the mainland Chinese market. Today, Procter&Gamble has eight factories, 22 distribution centers, and a global research and development center located in Beijing.
For Procter&Gamble, the Chinese market is very important. Data shows that Procter&Gamble currently serves over 5 billion people worldwide, with one fifth of them located in China. As the first domestically trained CEO of Procter&Gamble in its history, Xu Min shared the latest insights into the industry with reporters, introduced some of the problems and solutions encountered by Procter&Gamble in product innovation, traced the development process of Procter&Gamble's e-commerce business, and also discussed common industry challenges such as how sustainable development can be achieved.
Responding to market demand with technological innovation, a new product was launched in China every 10 days on average last year
Beijing News Shell Finance: This year, Procter&Gamble's exhibition area at the 6th China International Import Expo was divided into six themes: "Future", "Harmony", "Joy for oneself", "Vitality", "Growth", and "Green". What is the significance of this design?
Xu Min: Our exhibition plan this year is completely different from previous years. In the past, we arranged exhibitions based on product categories, but this year we have reorganized all our products with the aim of creating consumer scenarios and lifestyles.
We realize that what consumers currently lack is not just a product that can meet their functional needs, but how we can better explore more updated and better life needs and unmet needs through our insights into Chinese consumers.
Beijing News Shell Finance: Speaking of industry insights, in your opinion, what significant changes have taken place in China's consumer market compared to 10 or 5 years ago?
Xu Min: It is difficult to summarize China's consumer market in one word because it has huge potential and is full of personalization... In such a market, we can see that the needs of users are influenced by many factors such as age and life stage, resulting in differentiation and differences in various directions.
Our team has several interesting observations on the consumption behavior and habits of young consumers at present: firstly, they pay more attention to pleasing their own consumption, both materially and spiritually pleasing themselves. For example, in the past, 'anti aging' was considered a need for people to reach middle age, but now young people are talking about 'anti aging' as soon as they turn 20. The younger generation of anti aging is a very important signal of self satisfaction. Based on this insight, we also have corresponding products in research and development.
Secondly, they are particularly concerned about green consumption. In our research, over 90% of consumers are very concerned about whether their consumption methods will cause environmental pollution and whether there can be more environmentally friendly consumption methods.
The above two cases can reflect the diversity of Chinese consumers' consumption needs, while Procter&Gamble is responding to demand through technological innovation. You may also notice that Procter&Gamble is rapidly introducing new products in China. Taking 2022 as an example, we launch a new product every 10 days on average to respond to market demand.
The 'taking' and 'giving up', 'changing' and 'unchanging' in the process of product innovation
Beijing News Shell Finance: How does Procter&Gamble make trade-offs in the innovation process? What can be changed and what cannot be changed?
Xu Min: When we innovate, we always remind ourselves not to innovate for the sake of innovation, not to ignore the needs of consumers and blindly push so-called new technologies to them. Therefore, since its establishment, Procter&Gamble has always adhered to the same insight into consumers, and the core of all innovation must be to meet the true needs of consumers. For Procter&Gamble, the cornerstone of innovation comes from insights into consumers, and we adhere to everything based on insights rather than technology.
Beijing News Shell Finance: In the process of product innovation, smooth sailing is difficult. Can you share some failed cases, as well as the experiences and lessons learned by P&G?
Xu Min: Of course, we also have failed cases. For example, there are some new products that have not undergone in-depth consumer research. At that time, we may only want to create a high-end product or a product with a beautiful packaging. When we want to recommend them to consumers, we find that the success rate of such new products is very low.
Because sometimes we are also tempted by some new technologies, and we also use our own preferences to see and find the packaging very attractive. But what remains unchanged and what we repeatedly verify is that once this thing departs from deep consumer insights, neither the new product nor the brand can succeed.
Beijing News Shell Finance: This year, Procter&Gamble proposed an upgrade strategy of "leading category growth". How do you understand this strategy?
Xu Min: We believe that in the absence of category development, it is meaningless to focus solely on internal competition, as internal competition can harm innovation and the long-term development of the industry. Only by making the cake of the category bigger and bigger can we truly create value for our consumers, businesses, brands, retailers, and all partners within the category.
So, where does the increment of categories come from? We have observed that there are still many opportunities for a large number of categories in terms of market penetration, frequency of product use, consumer usage habits and methods, and so on. In many categories, we also see opportunities for consumption upgrading and grading.
We don't just do e-commerce for the sake of it
Beijing News Shell Finance: We understand that in 2015, it was you who proposed e-commerce, high-end, and digital strategies, and promoted the establishment of Procter&Gamble's China e-commerce business unit. It is said that the e-commerce business was once considered "unprofessional" within Procter&Gamble, but now, Procter&Gamble's e-commerce business has supported half of the company's presence in the Chinese market. Can you tell us about the growth process of Procter&Gamble's e-commerce business?
Xu Min: In that era when e-commerce was an emerging channel, perhaps everyone was exploring it, and what I saw was that for a company, it was of great significance.
Firstly, e-commerce belongs to the sales channel, and in 2015, we regarded e-commerce as a channel for brand building and product innovation, using e-commerce to push and upgrade the digital connection between Procter&Gamble and consumers. To a large extent, e-commerce has brought brand merchants and consumers closer together.
In addition, in order to be more efficient in e-commerce business, Procter&Gamble has made significant upgrades in the supply chain. Since 2018, we have upgraded the operation of the national warehouse network. Today, all of our factories have the ability to send packages directly, greatly reducing the distance between a product and consumers' homes.
In this process, there is actually a high demand for the digitization and intelligence of our overall supply chain. When we make these upgrades, it also better feeds back our offline business.
Therefore, we never believed that e-commerce was just for the sake of doing e-commerce. It fed back our national business with faster speed and higher standards, and can bring us consumers nationwide. Wherever they shop, they will have a better experience and better products. This was the goal we particularly wanted to achieve when doing e-commerce, and we are constantly practicing and improving.
Sustainable development requires a higher and more comprehensive perspective
Beijing News Shell Finance: We have noticed that Procter&Gamble has invested a lot in sustainable development in recent years. As a foreign-funded enterprise, how does Procter&Gamble, guided by global experience and combined with Chinese characteristics, carry out sustainable development work in China?
Xu Min: Firstly, one of the characteristics of China is that other markets do not have such a large e-commerce business. The problems of secondary packaging and packaging waste treatment brought about by e-commerce business are actually not encountered abroad. This is why all the e-commerce related innovations we have launched in the past few years, such as Xiaolubao, Dalilubao, Air Capsule, Memory Honeycomb, etc., all originate from China's innovation team.
Secondly, we see that a very important feature of sustainable development in China is that we must combine this concept with consumers' demand for product efficacy. Procter&Gamble is not doing sustainable development for the sake of sustainable development, but this product is both environmentally friendly and can meet the real needs of consumers, which is their favorite product.
Beijing News Shell Finance: Is there any other experience you can share on how to make sustainable development sustainable?
Xu Min: Firstly, combining with products is the only way to better enhance the competitiveness of our products. Secondly, we believe that good sustainable development should bring cost savings rather than cost increases. Sustainable development cannot be viewed from a single point of view, but rather from a full link perspective. We must make full link modifications to make the links shorter and de nodding, so that we can see overall efficiency and efficiency improvement across the entire link.
Therefore, sustainable development is not something that a certain department does, but rather a CEO project, because only from a higher perspective can we see the possibility of value creation throughout the entire chain.
Beijing News Shell Finance: As you said, sustainable development is not about increasing costs for enterprises, but rather about reducing costs for enterprises. This requires a division between short-term and long-term goals. In the short term, there is often an increase in costs, while in the long run, it is possible to achieve a reduction in costs. So, will there be any internal disagreements within the P&G team during this process?
Xu Min: That's why we plan our sustainable development plan with a ten-year milestone, because if the path of sustainable development is compressed to two or three years, it may bring some short-term choices or a surge in short-term costs. However, when you extend the time period to 10 years, you may find that there may be some short-term cost increases, It can be corrected by future technological innovations, and if we can carry out full link transformation, the efficiency of the entire link is actually improved. Therefore, a 10-year plan is very important for us.
In the process of promotion, we will definitely comprehensively measure the final gold standard - what consumers really think. If consumers feel that the packaging and positioning of this product are excellent, and they are willing to accept it, then we will do it; If he thinks it's meaningless, and even if this product will discount the consumer experience, we will temporarily put it on hold, and then we will re study whether there are alternative solutions. Therefore, many of our solutions have undergone a lot of polishing before making them.
Beijing News Shell Finance: As the first domestically trained CEO of Procter&Gamble in its history, how do you view the new era of foreign investment in China?
Xu Min: I see that more professional managers in China can lead foreign-funded enterprises in China, which I think is a good thing. Because we understand the Chinese market and of course, we also understand some of the global economic or business rules. I believe we can better serve as a bridge between the world and China, and also export more of China's experience.
Beijing News Shell Finance: What is the significance of the Chinese market for enterprises? Will investment in the Chinese market continue to increase in the future?
Xu Min: The Chinese market is the second largest regional market for Procter&Gamble globally. It not only holds a pivotal position in Procter&Gamble's global business, but after years of continuous cultivation, the insight and innovative strength of the Chinese market can already feed back consumers around the world.
Since entering the Chinese market, Procter&Gamble has chosen to invest heavily in assets. It can be said that we have established three roots in the Chinese market: the first root is our supply chain, the second root is research and development, and the third root is our entire sales channel in the market. In the future, Procter&Gamble will continue to deeply cultivate the Chinese market and invest in innovative research and development, as well as local talent cultivation.
Yan Xia, a reporter for Shell Finance at the New Beijing News