consumers place a great deal of trust in foreign brand-name products,
but as every western consumer goods company knows, trust can be lost
overnight and take years to rebuild.

So it is surprising to see Proctor & Gamble caught out by the
Chinese backlash against its products after it appeared to put
obstacles in the way of Chinese consumers who wanted their money back
following the recall of SK-II, one of its best-selling skin-care lines.

The SK-II line has been available for twenty years and is sold in 14
countries, including the US, China, Singapore, South Korea and

The story began in September when P&G said it was suspending sales of SK-II in China after Chinese authorities found chromium and neodymium in the Japanese-made cosmetic. Hundreds
of consumers then staged protests in Shanghai after being told there
would be a waiting period before refunds were be issued.

A month on, P&G said the scare was a false-alarm and Chinese
authorities confirmed that the levels of heavy metals found in the
product were harmless. The consumer giant said it would resume selling SK-II.

Storm in a tea-cup? Perhaps. But P&G knows should know better
than anyone the dangers of not taking seriously consumer scares and
product recalls. After the initial findings by the Chinese authorities
were vehemently denied, many industry experts believe that the company
could have handled the situation better, spending more time and
resources trying to reassure consumers over the scare, rather than just
denying it.

I suspect that if the recall had been ordered by a western
government, the company would have fallen over backward to inform
consumers with freephone numbers, extensive press advertising, etc.

For western multinationals, China can seem a long way away and its
easy to imagine the P&G boardroom adopting an attitude best summed
up with that famous newspaper headline: “Small earthquake, not many

But, as Shaun Rein of the China Market Research Group notes in this SeekingAlpha story, China is P&G's fastest growing market and among the top five markets in value worldwide.

With the speed that Chinese consumers can now band together using
blogs and forums on portals like Sohu, multinationals in China “cannot
underestimate the harm PR miss-steps can have on their bottom-lines,”
says Rein.

On an online survey run by Sina, in which approximately 20,000
people voted, over 80% felt P&G is lying in its public apology for
the SK-II debacle. Most importantly, nearly 96% of them say they will
not buy any SK-II products anymore.

One blogger wrote: “I never thought SK-II is good — you may get a
freak baby.” Another said: “They are so bad; we should ban them from
selling in China.”

In the past year, Yum Brands and Dell have also had to do major
product recalls in China, but they have handled them much better.

The one saving grace for P&G is that some Chinese consumers
apparently do not know that SK-II is a P&G brand. Because it is
made in Japan, some mistakenly believe SK-II is a Japanese brand. Oh,
that's alright then.

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