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P&G raises prices again! Imported beauty welcomes collective price hikes

Echemi 2021-06-16

Following the biggest increase in April, the international daily chemical giant Procter & Gamble once again revealed the news of price increases.


On June 10, Procter & Gamble's Chief Financial Officer Andre Schulten said at the meeting that as freight and bulk commodity costs far exceeded expectations, in order to ensure profitability, branded products including SK-II may increase prices again.

This price increase is actually foreseeable. Two months ago, there was a rumor from P&G that due to the increase in costs, "P&G will have a wider range of commodity price increases in the future."


High cost is the main reason for price increase


The high cost of logistics and transportation and the high cost of bulk commodities are the main reasons for the recent continuous price increases.


It is reported that the Procter & Gamble Group had predicted that in the 2021 fiscal year, the freight cost will exceed 200 million U.S. dollars (about 1.3 billion yuan), and the after-tax bulk commodity cost will be about 125 million U.S. dollars (about 800 million yuan). In a recent P&G meeting, Andre Schulten pointed out that P&G’s freight and bulk commodity after-tax costs for this fiscal year were approximately US$600 million (approximately RMB 3.8 billion), far exceeding expectations.


In this regard, relevant people said, “Rising costs will definitely be transmitted to the end of the product.” In fact, the global commodity prices are showing an accelerated upward trend, which has become the main reason for pushing up the price of cosmetics.


According to the data monitoring of the business agency, in February 2021, in the list of commodity prices, commonly used cosmetics such as ethylene glycol, ethanol, and 1,4-butanediol have ushered in the first wave of price increases this year. Among them, the price of 1,4-butanediol doubled in one month, rising by 16,025 yuan per ton, ranking first in the entire chemical raw material rise and fall list with an increase of 117.83%.


CCTV Finance has also reported that in the first quarter of 2021, some chemical raw materials, including PVC, soared, and the price once reached the highest peak in the past ten years.


In addition, the cold current in Texas in February of this year led to the closure of chemical plants, pushing the prices of polyethylene, polypropylene and other chemical products to their highest levels in many years.


Jon Moeller, chief operating officer of P&G, also said: “This is the largest increase in commodity raw materials in the 33 years since I joined P&G.”


In order to cope with this higher cost of commodities, P&G announced on April 20 as early as April 20 that it will increase the price of baby care, feminine care and adult care products in September this year, with a price increase of 5%-9%. Not waiting.


Logistics and transportation costs have also become a major factor pushing up prices. According to relevant sources, the cost of logistics and labor is rising, which also means that companies have to bear more cost pressures.


The news of the price increase is revealed again this time, which means that the price increase may have been inevitable and is accelerating.


According to Andre Schulten, the price increase will cover all brand products including SK-II. As the world's largest daily chemical group, P&G's brands include not only SK-II, but also Olay, Shufujia and other brands, covering men's personal care, women's personal care, personal health care, and baby care.


It is worth noting that the price increase of raw materials is also transmitted to the country, causing domestic beauty brands to increase prices. It is understood that Proya, Shanghai Jahwa and Marumei's average selling price for skin care products in the first quarter of 2021 increased by 21.91%/15.97%/35.41% year-on-year respectively. Some insiders analyzed that, in addition to the impact of rising prices on the raw material side, another part of the reason lies in the gradual transformation of the brand to the high-end direction.


Collective price increases for imported beauty


In addition to Procter & Gamble, beauty imports including Chanel, La Mer, Estee Lauder, Tom Ford, Jo Malone and Guerlain have ushered in several rounds of price increases in the past two years, and the reasons for the price increases are basically the same.


For example, in February of this year, Chanel announced an increase in the price of its skin care products. The original price of the camellia facial cleanser for 435 yuan rose to 460 yuan, but the product was priced at 420 yuan a year ago; in October last year, Lancome also announced The official retail prices of multiple products were adjusted, and the price adjustment range for a single product ranged from 5 to 30 yuan. Among them, lip makeup products topped the list with a 5.5% increase.

According to the latest data on imported cosmetics released by the General Administration of Customs of China, from January to May, the price of imported cosmetics this year has increased significantly, from 39,000 US dollars/ton in January to May last year to 53,000 US dollars/ton. That’s 36%.


Guo Yuxuan, a researcher at the Beijing Institute of Economic Research, once said in an interview with the media that cosmetics have a strong brand premium attribute, and the huge price difference between different brands is more due to the social attributes of the brand. Regarding the price increase of mid- to high-end brands, buyers are not very sensitive to small price fluctuations, and demand will remain stable.


Therefore, even if the price of imported products continues to rise, imported beauty brands still have a good performance this year.


According to relevant data from the General Administration of Customs of China, from January to May this year, the number of imported cosmetics was 187,000 tons, a year-on-year increase of 6.6%; the value of imports was US$99.9 billion (approximately RMB 63.9 billion), a year-on-year increase of 43.9%.


During the 618 pre-sale that just opened, imported beauty brands have achieved good results. According to ECdataway data, on the day of the 618 pre-sale, a total of about 10 brands had self-broadcast sales exceeding 100 million yuan. Among them, Estee Lauder, L'Oreal and Shiseido’s store live broadcast sales ranked the top three, respectively 349 million yuan, 328 million yuan and 328 million yuan. 216 million yuan. This shows that it has not been affected by price increases.

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