Procter&Gamble's "slimming down" plan is still ongoing. On February 2nd, in response to the sale of Sassoon's Greater China business, Procter&Gamble responded by "focusing more on its core product line.". Since the launch of its "slimming" plan in 2015, Procter&Gamble has intermittently reduced its nearly 100 brands through sales, shutdowns, and other means. However, such large-scale brand processing has not eased its performance, and its performance is still under pressure. When the "slimming down" plan of the past decade still fails to bring significant results, Procter&Gamble may need to consider what else to do besides "slimming down".
Rumors come true! Procter&Gamble sells Sha Xuan
The boots landed, the rumors came true, and Sha Xuan was eventually stripped by Procter&Gamble. On February 2nd, in response to the sale of Sassoon's Greater China business, a person in charge of Procter&Gamble told a Beijing Business Daily reporter, "In order to better serve consumers, support category growth, and continuously create value for the company and shareholders, Procter&Gamble will continuously optimize its product line structure. Based on this, Procter&Gamble has decided to sell the Sassoon brand to Henkel."
It is expected that Sha Xuan will be sold more. During October 2023, there were rumors that Procter&Gamble was considering selling its Sassoon China business at a valuation of $1 billion. Behind this, some speculate that it is the decline of Sha Xuan's position in the Chinese shampoo and hair care market.
In 1997, Procter&Gamble introduced Sha Xuan into the Chinese market, filling the gap in high-end professional hair care for Procter&Gamble. For a while, with the layout of mid to low end Haifeisi, Piaorou, high-end Shaxuan, etc., Procter&Gamble became the hottest presence in the Chinese washing and care market. According to Nielsen data, in 2014, Procter&Gamble had a market share of 50.4% in the domestic shampoo market, firmly holding the top spot in the shampoo market.
However, with the layout of other foreign brands and the rise of local shampoo brands, such as L'Oreal's Kashi, domestic Adolf, Ziyuan, etc., Procter&Gamble's shampoo market share is declining. According to public data, Procter&Gamble's market share in the shampoo and hair care market was 34.2% in 2022. At the same time, sales and reputation of Sha Xuan are all declining. According to data, in the first half of 2023, sales of Sha Xuan decreased by 8.7% year-on-year. In addition, with the exposure of carcinogenic substances in Procter&Gamble's shampoo brands, although Procter&Gamble has stated that their products comply with relevant Chinese standards and guarantee product safety, their trust at the consumer level is continuously decreasing.
Many consumers boycott P&G's products, and many consumers roast about the poor quality of Sassoon. Consumer Guagua roast: "Don't get close to Sassoon, it will bring misfortune." According to Guagua's introduction, the Sassoon hair conditioner purchased by the consumer is not easy to use, and after use, it will itch and cause dandruff. Scratchy scalp, dandruff, and severe hair loss have become the reasons why many consumers give up shampoos.
Wu Daiqi from Shenzhen Siqisheng Company stated that although Procter&Gamble has achieved success in multi brand strategy in the shampoo market and won the largest market share through market segmentation in the past, under the impact of other competitors, especially the rise of domestic brands, Procter&Gamble has become inadequate in the high-end shampoo market. With Procter&Gamble's channel and brand operation capabilities, if a single brand cannot achieve the desired share, revenue, and profit of the enterprise, it may be more advantageous to sell to achieve "slimming down" and improve efficiency.
If Procter&Gamble's abandonment is due to Sha Xuan's inability to achieve the desired share of revenue and profit, then Han Gao's acquisition is exactly the opposite.
The "Consumer Brand Business Unit" under the Han Gao Group, which mainly focuses on home personal care products, saw a 2.3% decline in sales in the first three quarters of fiscal year 2023, while the performance of the Asia Pacific market was also not ideal. Behind this acquisition, Han Gao values Sha Xuan's layout in the Chinese market. Han Gao publicly stated on its official website that its Sha Xuan business holds a strong position in the Chinese market. Wolfgang Koenig, Executive Vice President of the Consumer Brand Business Department at Henkel, stated to the public, "We are delighted to have the opportunity to incorporate the powerful brand Sassoon into Henkel's product portfolio. It fully aligns with Henkel's strategic focus of expanding its presence in the hair care industry beyond its existing professional and retail brands."
Performance pressure and brand aging issues to be resolved
From the past development history of Procter&Gamble, the sale of Sassoon is just one part of its "slimming" plan.
In recent years, Procter&Gamble has been pushing the group to slim down. Around 2015, Procter&Gamble announced plans to gradually divest nearly a hundred inefficient brands through sales, production shutdowns, and natural elimination. In mid-2015 alone, Procter&Gamble sold 43 beauty, hair, and fragrance brands under its umbrella, including Mister Buddha, Wiener, and Cover Girl, to the Cotty Group.
Subsequently, in 2017, Procter&Gamble announced a continued reduction in the total number of brands, from over 200 at the time to around 65. At the end of 2022, Procter&Gamble will shut down its pure beauty brand Snowberry; In 2023, Procter&Gamble will no longer fulfill new product or repurchase orders for its OPTE AI makeup equipment.
On one hand, it keeps selling and shutting down, while on the other hand, it keeps buying and selling. Between 2017 and 2018, Procter&Gamble acquired the natural deodorant and skincare brand Native Deodorant, as well as the niche medical skincare brand First Aid Beauty in the United States, which focuses on repair and functional skincare. In 2022, there are reports that Procter&Gamble is acquiring the high-end skincare brand Tula Skincare; In 2023, Procter&Gamble announced the acquisition of the hair styling brand Mielle Organizations.
Behind the extreme turmoil lies the less than ideal performance data of Procter&Gamble. Although Procter&Gamble's overall performance achieved some growth in the fiscal years 2022 and 2023, it stated in its financial reports that the price increase contributed 9% to the growth in the fiscal year 2023, but the shipment volume decreased by 3% during the same period. Meanwhile, Procter&Gamble's Greater China region has been in a downward trend in the past two years. In the 2024 fiscal year, Procter&Gamble lowered its full year profit forecast by one percentage point to 5-7%.
Under pressure from performance, Procter&Gamble has to continue to "slim down" and focus more resources on core products. "Selling the Sha Xuan business is also to focus more on the core product line, optimize resources and investment, and promote the development of Procter&Gamble's hairdressing category business in Greater China," said the relevant person in charge of Procter&Gamble.
In Wu Daiqi's view: "For Procter&Gamble, it is indeed greatly impacted by local domestic brands in the Chinese market, and due to the aging problem of brands, it is not easy to change this situation. However, according to the business cycle of the enterprise, after the 'collection period', the enterprise may also achieve its business expansion and development through various means, such as acquiring new brands, focusing on developing high-end brands, etc." Wu Daiqi added.
"P&G's dilemma is mainly the intensification of market competition and changes in consumer demand. On the one hand, the emergence of new competitors, such as local brands and Internet brands in emerging markets, makes P&G face greater competitive pressure; on the other hand, consumer attitudes and behaviors are also changing, and they pay more attention to factors such as personalization and environmental protection, which challenges P&G's traditional production and sales model. To solve this dilemma Procter&Gamble needs to make strategic adjustments, such as strengthening research and development, improving product quality and innovation capabilities, and meeting new consumer needs; Meanwhile, Procter&Gamble also needs to change its market strategy to better adapt to the new market environment Jiang Han, senior researcher at the Pangu Think Tank Research Institute, added.