Beauty and the Beast: Proctor & Gamble’s SK-II Incidents

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SK-II is Proctor & Gamble’s (P&G) high-end skincare product line, made in Japan and exported to China. It entered the Chinese market in 1999 after taking off in neighboring Japan, and became a top premium cosmetics brand within a few years. Two consecutive product safety scandals in 2005 and 2006 stopped its growth momentum, however. In March 2005, a Chinese consumer sued SK-II for false advertising. Although P&G won the case despite a fine, the incident generated much publicity and scrutiny. In September 2006, after discussions of SK-II quality issues subsided, the Chinese government announced that the product line contained toxic ingredients harmful to the skin. P&G’s denial and repeated emphasis on own technical expertise as well as its meeting international safety standards inflamed Chinese consumers. The scandal made Chinese newspaper headlines and Internet front pages. Angry at this American multinational’s arrogance, many speculated that the incident was Japan’s retaliation against China in their ongoing political and trade disputes. Facing vehement official and public denunciation, P&G had to suspend sales of SK-II just 8 days after the crisis broke out. Although the Chinese government declared SK-II’s innocence shortly after, SK-II’s negative brand image stuck. Almost a billion-dollar brand in 2006, SK-II has dropped off P&G’s key product as of 2007. Despite being one of the most socially responsible companies in Asia, P&G suffered serious reputation damage. The company is determined to rebuild SK-II’s brand name. While actively promoting SK-II products and patiently waiting for the scandal to fade from public memory, it might ask what it could have done to avoid disaster, and what it should now do to regain Chinese consumer trust.

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