Article by Jin Cuo Dao Channel Dik If you want to learn management, go to FedEx as a management trainee; if you want to excel in marketing, it's best to go to P&G... This was a popular saying in the job market a decade or so ago, and being able to work at these big foreign companies was enviable. P&G has long been known as the "Whampoa Military Academy" of the FMCG industry. At its peak, it had over 300 brands under its umbrella, more than 18,000 patents, factories in over 80 countries, products sold in more than 160 countries, and over 3 billion users. However, after several years of significant decline, with performance falling back a decade and over 200 brands cut, P&G has become a prime target for pessimism. Despite still being an industry giant, P&G's current situation remains worrying. The reasons behind its decline are worth pondering. 1 "P&G alumni" are numerous, the "Whampoa Military Academy" title is well-deserved P&G has a history of 181 years and has been in China for exactly 30 years. Its household and personal care brands are all familiar names: Head & Shoulders, Rejoice, Pantene, Tide, Ariel, Olay, Vidal Sassoon, SK-II, Whisper, Pampers... P&G is the master of dominating TV advertising. P&G's success can be summarized by two major matrices: the product matrix (spanning cleaning products, food, paper products, pharmaceuticals, and more) and the brand matrix (one product can have multiple brands, opposite to the strategy of "one brand, multiple products" used by many world-renowned companies). It is precisely for this reason that anyone with P&G work experience possesses strong ability to work independently. A large number of people who have left P&G in China have become business elites in various industries. Here are some familiar examples: former JD.com CMO Xiong Qingyun, Suning Cloud Commerce Group Executive Vice President Guo Dongdong, Liepin.com founder and CEO Dai Kebin, Babytree founder Wang Huainan... And more recently, Wang Xiaofeng, former CEO of Mobike. No one knows exactly how many big shots are "P&G alumni," but the title of "Whampoa Military Academy" is well-deserved. 2 Performance falls back a decade Has the big brother encountered a "Waterloo"? As early as 1937, when P&G celebrated its centennial, its sales had already reached $230 million, while the US GDP was only $92 billion and Japan's was just $6.66 billion. At its peak, annual sales were nearly $90 billion. However, in recent years, it has suffered consecutive sales declines, and performance has fallen back a decade. Public data shows that in fiscal year 2006, P&G's annual sales were $68.2 billion, operating income was $13.9 billion, and net profit reached $8.68 billion. In fiscal year 2016, sales were $65.3 billion, and operating income was $13.4 billion. In fiscal year 2017, sales were $65.1 billion, roughly flat with 2016. Recently, P&G's net profit decline has become more pronounced. In February, P&G's second-quarter report for fiscal year 2018 showed net profit of $2.495 billion for the period (October-December 2017), down 68.3% year-over-year—a terrifying rate of decline. P&G has experienced many ups and downs in its history, but it always overcame difficulties with its strong adaptability and gradually became a market giant. But now, this industry aircraft carrier appears quite passive in China. 3 No one moved his cheese, P&G is losing to the times China is one of P&G's most important markets. At its peak, P&G had over 300 brands. To become more agile, P&G began a brand slimming plan. The most radical and aggressive period was in 2014, when P&G decided to divest or exit 90 to 100 non-core brands with annual sales below $100 million through sales, discontinuation, or natural attrition. In 2017, it again announced it would cut over 100 brands, ultimately reducing the global brand count to 65. But clearly, these actions have had limited effect. P&G's share of the Chinese beauty and personal care market has fallen from 15.2% in 2009 to around 6%. What exactly caused P&G to lose its cheese? 1. Consumer segmentation P&G has a mass-market positioning. However, with the development of the internet, especially mobile internet, information dissemination channels and product retail channels have entered an era of fragmentation, and consumer groups have also begun to rapidly differentiate. Some lesser-known niche products and special-function products quickly enter consumers'视野, and they often dig deeper into consumer needs. In marketing, they focus more on highlighting the strong value points of the product itself. Consumers no longer perceive the flashy and catchy advertising slogans of Head & Shoulders or Pantene. The market has entered a model of refinement and precision, no longer blindly pursuing comprehensiveness, cleverly avoiding the market areas where mass-market brands reside. Consumer choices have rapidly diversified; for example, when choosing a skincare product, they will focus on a specific function of a product for purchase. 2. Channel differentiation The biggest change the internet era has brought to the world is in channels, including information dissemination channels and sales channels. A large part of the reason for consumer segmentation comes from the breaking of information dissemination boundaries; the limitations of time and space no longer exist under the influence of the internet. Buying foreign products across the ocean is no longer difficult; e-commerce has long opened that door, and mobile internet can directly deliver countless foreign products that are not even sold in the domestic market to consumers. Even in remote small counties, people can quickly learn about various information from thousands of miles away through mobile networks. It has also become much easier for foreign brands to enter the Chinese market. Even overseas purchasing agents can make an unknown foreign small brand popular in China. (Illustration unrelated to text) Traditional promotional channels no longer have advantages in the era of information explosion and highly fragmented mobile internet. P&G's overwhelming advantage in traditional promotional channels has disappeared because people's reading and viewing habits have changed. Small brands, through relatively low-cost communication channels like mobile internet, can find their own consumer groups faster. Just like the Spring Festival Gala, it is the biggest carnival for all Chinese people, but its ratings will never return to the past. Instead, some web dramas with poor production quality are being enthusiastically received. 3. Falling into the mid-to-low end Let me tell two short stories. In 2017, an article appeared online titled "So Conscientious! These Things' Prices Haven't Changed in Ten Years," which included Head & Shoulders. A 200ml bottle of Head & Shoulders now sells for about 21 yuan, compared to about 19 yuan ten years ago. In 2016, P&G CEO David Taylor came to China and visited the home of a typical first-tier consumer for a home visit. The feedback he received was: P&G products are outdated, not high-end enough, and basically no longer used. Of course, the increase in residents' income levels does not necessarily correlate with buying expensive things, but it is clear that with increasingly rich choices and rising consumption capacity, the appeal of mass-market P&G products has declined. Moreover, there are more and more mid-to-low-end products that are cheaper and more distinctive than P&G's. People will no longer agonize over price for products that meet their segmented needs, high-quality high-end products, and fresh products with distinct personalities, especially young consumers. On the contrary, P&G is increasingly regarded by young Chinese consumers as "outdated and boring." Not raising prices for ten years is not a reason for "me" to buy it. High-end products, on the one hand, satisfy the mainstream consumers' pursuit of higher-quality products, and on the other hand, they also meet the spiritual needs for social status and class, giving consumers an "extra sense of satisfaction." Take SK-II as an example. Although the price is not cheap for many wage earners, as long as it is within their economic means, many women will still choose to buy it. Yunnan Baiyao, Shiseido, and other brands have also replaced Pantene's position in consumers' minds as high-end shampoo products. This is also a common characteristic of current Chinese consumers, but P&G clearly has a brand gap in the high-end product segment. From another perspective, P&G has aggressively slimmed down its brands, but it now faces insufficient replenishment of new brands that meet new consumer demands. In its era, P&G conquered the market with scale, but in the internet era, what is needed more is intensive cultivation. Brands are important, but now product-first and meticulous cultivation are more important. A comparison with Xiaomi, a company in a different industry, makes it easy to see: Traditional companies' approach is to capture a group of users and continuously provide more products or services to this group. Internet companies, on the other hand, do one product or service well and then continuously acquire more users. Many companies emphasize the impact of the internet era in their failure reasons, but Brother Dao wants to say that the internet era only provides an additional new path for small brands that have not achieved economies of scale, but it does not make the production technology and business philosophy brought by the industrial age disappear. In a broad sense, as Haier CEO Zhang Ruimin once said: "There are no successful enterprises, only enterprises of the era." The more a company captured consumers in the previous era, the harder it is to survive in the new era. Does your company have obvious characteristics of the times? Source: Jin Cuo Dao (ijincuodao) -END-