Exclusive Interview with Henry Karamanoukian: 12% Growth in China’s Market;

To win in China's booming and ever-changing daily chemical market, giants should move faster to adapt to the trends and rules in the Chinese market.

A few days ago, Henry Karamanoukian, Vice Chairman of P&G Greater China, revealed in an exclusive interview with CBO that P&G achieved a steady growth of 12% in the Chinese market in the most recent quarter. 

From the industrial era to the digital era, P&G, the colossus in the industry, has undergone rapid changes after experiencing birthing pains. Outsiders at one time believed that exceptional performance in China depended on the "formula" of e-commerce, and some people believe it was the “Ali formula”. However, in Henry Karamanoukian's view, the e-commerce platform is only one of elements that contribute to the company’s success. In fact, P&G has its own "formula" for the Chinese market. 

So what exactly is the “P&G formula”?

01

Innovation, creating value for consumers

“P&G is a big company that is composed of many small companies.” Henry Karamanoukian said that currently P&G has provided products in 10 categories in the Chinese market, which are operated in a flexible manner. "On the one hand, P&G has the scale of a large company and can learn within markets and categories. On the other hand, it also enjoys the flexibility of small companies, as the different categories and brands are operated independently." 

△ Henry Karamanoukian, Vice Chairman of P&G Greater China

The flexibility of the internal structure enables P&G to work effectively in the layout of new products, new brands and new categories. 

In the past few years, P&G has witnessed unprecedented product innovations in the Chinese market. According to partial statistics, P&G has introduced at least 40 new products in the Chinese market in the past five years. At the same time, from skin care and oral care products to hair care, women's hygiene and fabric care products, P&G has upgraded to premium the 10 categories of products in the Chinese market. In addition, e-commerce channels have also become trial fields for P&G to test new brands and categories. 

Using e-commerce as a breakthrough, P&G is quietly changing the status quo of only OLAY and SK-II as the two dominant skin care brands in Chinese mainland market. First Aid Beauty (FAB), a sensitive skin repair brand acquired by P&G in 2018 for 250 million US dollars (about 1.75 billion yuan), has achieved sales of 100 million yuan in Double 11 shopping festival only three months after opening its shop in Tmall. 

The retail price of FAB products ranges from 139 yuan to 564 yuan. FAB emergency cream, as a top seller of the brand, is recognized and recommended by scores of beauty bloggers for its "large volume, low price and great functions". In terms of brand positioning and product selling price, FAB is distinguished from OLAY and SK-II, improving P&G's skin care brand layout matrix. 

As a behemoth of daily necessities care products, P&G is well known to Chinese consumers for its skin care products, washing and care products, and home cleaning products. P&G also, in fact, has other little-known product categories. At present, P&G's personal health care category has reached the second place in the world with a market share second only to the joint venture of GlaxoSmithKline (GSK) and Pfizer. 

Through P&G's overseas flagship stores, its personal health care products have been subdivided into three categories of brands, namely: Metamucil, which focuses on intestinal health, ZzzQuil, which focuses on sleep health, and femibion Ivian, a pregnancy nutritional supplement, which have all entered the Chinese market. Meanwhile, JOY Platinum Dishwasher special condensation bead and Always Discreet adult absorbent towel have debuted as P&G's latest products in fields such as home care and female care.

In addition to introducing mature foreign brands into the Chinese market, the Innovation and Investment Department, a new business department established by P&G in 2018, also creates new products in the Chinese market. For example, Opté, a "face printer" that had emerged in Weibo Trend before it came to the market, is the outcome of the new department. In terms of major categories, it belongs to the existing skin care products of P&G. In terms of further subdivision, it can be regarded as the product in the field of beauty instruments that P&G has not ventured into before. 

"Meeting the needs of Chinese consumers and creating value for them has enabled P&G to have a significant and steady growth in its business in China in the past five years. We credit our innovation for this success. Innovation provides consumers with the best quality products, the best quality product packaging, the best shopping and retail experience, and optimizes the product line and the efficiency of product supply." He said. 

02

Digital technology drives universal change

In China the four generations of retail forms, namely traditional stores, modern chain stores, e-commerce and new retail co-exist at the same time. This means that the demand scenarios constructed by different channels, different sales modes and different categories are complex and diverse, with consumers in the center. That is an immense change in scale compared with the past. 

On the other hand, a slew of new marketing modes have emerged, such as social e-commerce, livestreaming e-commerce, private domain traffic and short video. New fragments of marketing resources also make brand marketing more challenging. 

P&G uses digital technology as a basic tool and a powerful driving force to prompt the overall changes in channels and marketing. 

Henry Karamanoukian believed that "through the sharing and cooperation of big data, P&G can improve the effectiveness of the entire supply chain. P&G can more precisely reach the consumers, service the consumers, and can more effectively create value with consumers.

The retail industry as a leading consumption industry is undergoing the changes in consumer demand and consumer behavior. This directly affects the reconstruction of the consumption system and the development pattern of the industry. Driven by digitalization, consumers' consumption psychology and behavior are also experiencing great changes as shopping channels have become more diversified. For this reason, P&G, while continuously increasing its investment in product innovation, has utilized aspects of the business such as big data, marketing, supply chain and brand management to support their total retail development. P&G has worked with partners to co-create value in products sales, profit, cash flow and services.

For example, the AI big data product Wind Vane independently developed by P&G is based on consumers. Through big data and intelligent algorithms, it enables retail products to be more forward-looking, shelf space more reasonable, and promotion more accurate thus helping the retail industry to open up the whole link of consumption innovation. 

With slowing down of traffic on various e-commerce platforms, and increasingly fierce competition in the industry, P&G and JD.com have joined hands to create a technology featuring Thousand People Thousand Faces to deliver accurate matching of products after customers enter the store. They also have united flagship stores and launched brand membership operations and social marketing, thus excelling during the pandemic and in the face of competition.

For offline retailing, changes in consumer behavior have caused a considerable amount of challenges in consumer traffic; but opportunities also exist in challenges. 

Henry Karamanoukian said: "There are worries about the decline of offline consumers in the post-pandemic era. P&G is doing its best to help retail partners attract more consumers and increase orders. We need to not only attract more consumers to the store and improve the conversion rate, but also build a three-kilometer service circle and expand the business coverage. At the same time, through home service, community, cloud shopping guide, livestreaming and other means, it can reach and serve more consumers in the 3-kilometer living circle."  

Apart from the retail end, P&G has highly automated labor-intensive processes based on the development of artificial intelligence technology and big data for business process change. Also artificial intelligence can be used to optimize budget allocation and predict effects in highly complex processes, such as media planning or pricing and promotion planning. It should be noted that P&G has hundreds of millions of contacts with Chinese consumers every day. Digitalization can make every contact an interaction between consumers and brands. From products to services, from traditional channels to new smart retail, new interaction and flexible and efficient new supply chains, the intelligent application of data has brought about changes in business models. 

03

"Chinese employees" are part and parcel of the success formula of P&G

The reason why P&G can quickly adapt to the changes in China's daily necessities care products market is human capital which is the perpetual motion machine behind the scenes.

“Chinese employees are the key to our success formula.” Henry Karamanoukian said. 

P&G is the incubator of entrepreneurs in the daily chemical industry. Those who established Perfect Diary, Nattitude, ClorisLand, PMPM, usmile and Softie's electric toothbrushes, HomeFacial, a home beauty platform in the daily chemical industry, as well as those who established cross-industry brands such as Babytree, mobike, fresh e-commerce U Fresh, Haose Salad, and MO glasses had all worked in P&G to accumulate experience.  

Henry Karamanoukian told CBO’s reporter that P&G will look for certain characteristics during recruitment. "You will find that P&G employees have many common characteristics, mainly concentrated in five aspects: leadership, initiative, innovation, learning ability and cooperation ability. The cooperation here refers to not only internal cooperation, but also external cooperation." 

He said excitedly that after P&G recruits such people into the company, it will strengthen their growth in four aspects. 

1. One-on-one coach training and group training. Each year, every P&G employee will have various training courses. 

2. P&G will make a career development plan to accelerate their growth to ensure that every employee is successful in his or her position. “For example, we have a rotation system. In the sales team, employees will be placed in different positions to experience and communicate with different customers or to be responsible for the internal operation of the company. In short, there will be changes in position.” Henry Karamanoukian said. 

3. P&G respects its employees very much and hopes to make them feel that it is a company worthy of all their energy. "We hope that when employees work in the company, they feel that they add value to the company and that they are valuable." 

4. P&G communicates with employees all the time. "We also have the 'first moment of truth' for employee communication, that is - we should make employees feel that P&G is a great company all the time, and it deserves our contribution." 

In the face of former "teammates" becoming "rivals" after leaving P&G, Henry Karamanoukian also showed great respect. 

"P&G respects competition to the greatest extent. Benign competition will promote more innovation and business growth, so competition is positive." He said, "P&G is not only a company with strong curiosity about the inside and outside of the company. The good news is that this market has given us many opportunities to learn. We can learn not only from our competitors, but also from our business partners, clients and consumers." 

In his view, while learning from competitors, it is more important to keep up with consumer demand. "Thousands of new brands may appear every year, but the same amount of brands will leave the market every year. We need to constantly innovate to meet the needs of Chinese consumers and learn from them to get inspiration." 

"China is home to the most important and the best growth opportunity for P&G in the future. I think highly of China's future. Our company's commitment to China is also long-term. We will continue to invest in production facilities, factories, brands, customers and partners in China. This is P&G's commitment to the Chinese market. " Henry Karamanoukian emphasized.