General

On January 28, the seventh day of the Chinese New Year, the first working day after the Spring Festival holiday, the Guangdong Provincial Party Committee and the Guangdong Provincial Government held the provincial high-quality development conference to draw a blueprint for the high-quality development of the province, and more than 500 enterprises participated in the conference.

At the meeting, as a representative of a foreign-funded enterprise, Xu Min, the global executive president of P&G (China), chairman and CEO of Greater China, delivered a speech, introducing the development of P&G's business in China and its high-quality development plan. Xu Min mentioned that P&G International Trade Supply Chain Control Center will move from Europe to Guangdong.

In recent years, P&G's investment in China has continued to increase. It has the largest production base and headquarters management team in Asia in Guangdong. It has invested in and established digital innovation center, new intelligent manufacturing center, and Greater China intelligent technology innovation center in Guangdong. Today, P&G's sales contribution in Greater China has increased from 8% in FY15 to 10% in FY2022.

P&G has experienced a slowdown in the Chinese market in recent years. After a series of discussions and adjustments, the importance of the Chinese market for P&G has been raised to a higher level internally, and the business strategy has also changed significantly. From the model of transplanting global experience to the Chinese market in the past, it has changed to feed the global market with Chinese experience.

P&G invests more in China

At the Guangdong Provincial High-Quality Development Conference, Xu Min said that since entering the mainland market in 1988, P&G has set its Greater China headquarters in Guangdong, which leads the national business development in terms of products, supply chain, channels and consumer services. Over the past 35 years, P&G has brought more than 20 brands and products into thousands of households in China, and China has become the second largest regional market of P&G.

In the speech, Xu Min put forward three key tasks for P&G in the future around high-quality development: first, to meet demand and create demand with high-quality product innovation; Second, improve brand power, omni-channel operation capability and supply chain level; Third, vigorously promote green and low-carbon development.

Among them, in terms of improving the level of supply chain, Xu Min said that P&G's international trade supply chain control center would move from Europe to Guangdong, responsible for the import and export business management services of RCEP (Regional Comprehensive Economic Partnership Agreement), countries along the "the Belt and Road" and other markets, and laying the strategic layout of taking the Greater Bay Area as the core and further radiating the Eurasian market.

This strategic layout has been mentioned since last year. During the 2022 Guangzhou International Investment Conference, P&G signed a cooperation agreement with the government of Guangzhou Development Zone and announced the establishment of "P&G China Live E-commerce Innovation Center" and "P&G International Trade Supply Chain Control Center".

In the past few years, P&G's investment in China has continued to increase. In 2017, P&G invested US $100 million to set up the China Digital Innovation Center in Guangzhou; In 2019, P&G invested 600 million yuan to build a new intelligent manufacturing center project; In 2021, the P&G Greater China Intelligent Technology Innovation Center was officially launched, becoming one of the three largest intelligent technology innovation centers in the world, and the first research and development institution in Asia specializing in intelligent manufacturing and supply chain full-chain technology innovation.

P&G China's innovation feeds back the international market

In fact, P&G's performance in the Chinese market has experienced some twists and turns. As an international fast consumer giant, P&G has enjoyed the dividend of reform and opening up since entering the Chinese mainland market in the last century, "educating" a generation of Chinese consumer goods. Around 2010, with the rise of domestic brands, P&G had to face more severe and complex market competition. In the past, the strategy of opening up the Chinese market with global products has also become increasingly incompatible with the trend of China's consumption grading and upgrading.

Before 2014, P&G's R&D centers for most products were located in the United States and Singapore, and delivered new products to consumers in various countries with global formulas. The then global CEO of P&G also publicly said: "P&G has always regarded China as a developing market, but in fact China has become the most critical market for consumers in the world. P&G is unprepared for the shift of consumer demand to higher-end products."

Under the dual promotion of external pressure and internal reflection, P&G Greater China has put forward three "D" criteria: Design for China and Decision in China; Deliver at China speed (develop products according to the actual needs of Chinese consumers, make decisions based on the actual needs of the Chinese market, and build a supply chain system suitable for the Chinese environment), emphasizing the importance of the Chinese market.

In the annual report of fiscal year 2015 (the year ending at the end of June of that year is one fiscal year, the same below), P&G listed the sales of Greater China separately for the first time, and the sales of Greater China accounted for 8% at that time. The latest annual report released in August last year showed that in the 2022 fiscal year, Greater China contributed 10% of P&G's global sales, and the share of the Chinese market gradually increased.

In addition to adjusting measures to local conditions and serving the Chinese market, P&G also brings products developed in China to the global market. During the Expo in November last year, Xu Min said in an interview with the media: "Most of today's P&G innovations are developed in China's R&D centers, which can fully meet the needs of Chinese consumers. At the same time, these innovations also start to feed back the international market."

When delivering a speech at the Guangdong Provincial High-quality Development Conference on January 28, Xu Min also mentioned again the importance of China's innovation to P&G's global market, and said that he would "combine the ability of China's R&D Center to support more than 100 new products each year, accelerate the launch of popular products, lead consumption upgrading, and build a new pattern of consumer-oriented innovation and China's innovation leading the world".

However, P&G's development in the Chinese market still needs to overcome many challenges in the short term. According to the 2022 financial report, P&G's sales in Greater China fell slightly in the middle single digits. Specifically, in view of product innovation and market growth, P&G's sales of skin and personal care products in Greater China increased; The decline was mainly concentrated in hair care, shaving, oral care and baby care products, due to the closure of the epidemic, the slowdown of the traditional retail market, and commercial competition.

So, with the trumpets of fighting for the economy and promoting consumption this year, is P&G ready for the recovery of China's consumer market?