What happened
SK-II was singled out again in the latest quarterly report of its parent company, Procter & Gamble (P&G).
P&G posted revenue of $21.44 billion from October to December 2023, its 22nd consecutive quarter of growth.
However, the figure slightly fell short of analyst estimates of $21.48 billion, which the company attributed to slowing demand for various products, including a significant 34 percent revenue drop at its premium beauty brand, SK-II, primarily in the Chinese market.
As a result of this sharp decline, the multinational’s beauty category posted modest 1 percent revenue growth. The skin and personal care subcategory, to which SK-II belongs, recorded a single-digit revenue decline.
The Jing Take
P&G’s CFO, Andre Schulten, attributed SK-II's sharp sales decline in China to Chinese consumers’ continued safety concerns for J-beauty brands. Japan’s decision to discharge treated radioactive wastewater into the sea in June 2023 ignited a consumer backlash.
According to Schulten, the company’s consumer surveys indicate a potential improvement in the negative sentiment towards SK-II in the second half of 2024, which bodes well for a return to growth.
Beyond broader consumer sentiment towards J-beauty, SK-II has been grappling with sluggish sales in China for a couple of years. P&G’s financial report in early 2023 flagged “lower sales” guidance for the brand Additionally, during the 2023 Tmall International Women’s Day shopping festival, SK-II’s sales fell 25 percent compared to its performance during 2022’s festival.
In response to the news, Chinese netizens expressed various opinions about SK-II on Xiaohongshu.
Kumajiang (@Kuma酱) wrote: “After using SK-II for 10 years, I decided to abandon it. One reason was the nuclear pollution issue, but the main reason was the continuous and exorbitant price increases.”
Another user, Xixihainengyong (@洗洗还能用), posted: “SK-II was already struggling before the nuclear wastewater issue. Their products have hardly been upgraded, and I lost interest in purchasing them. Even their promotional gifts were stingy.”
However, as noted in WeArisma’s monthly Beauty Leaderboard tracker, SK-II still enjoys a solid reputation in China – this January, it ranked fifth in a top ten most influential international beauty brand ranking, measured by social media value. But perhaps it is finding out that relying on brand heritage is not a long-term solution in China. Besides addressing its safety concerns, SK-II could diversify its product offerings.
In China, SK-II heavily relies on its star Facial Treatment Pitera Essence product, nicknamed ‘miracle water’ by some Chinese beauty shoppers, thanks to its perceived results. But how will the brand adapt to Chinese consumers’ ever-changing needs? With the rapid ascent of homegrown competitors, SK-II will need to refine its strategy to better navigate the shifting dynamics of China’s beauty industry.
The Jing Take reports on a piece of the leading news and presents our editorial team’s analysis of the key implications for the luxury industry. In the recurring column, we analyze everything from product drops and mergers to heated debate sprouting on Chinese social media.