Procter & Gamble Downplays Recent Product Issues in China

During Procter & Gamble's (PG) quarterly earnings call earlier today management appeared to downplay the effects of the recent SK-II skincare brand blowup in China. This seems strange considering the recent comments of China Market Research Group's Shaun Rein who in a post last week wondered about the future of the SK-II brand in China after the outcry voiced in the blogosphere. The following are excerpts from P&G's earnings call:

John Goodwin - Treasurer

The skincare business grew double digits, despite the temporary voluntary suspension of SK-II shipments in China. We have recently received confirmation on SK-II product safety in China, and expect to re-enter the market in the next few weeks.

Pampers posted solid growth in the quarter, led by mid-teens volume growth in developing markets. The brand had particularly strong results in China, Russia, Poland and Saudi Arabia.

Amy Chasen - Analyst, Goldman Sachs

I was hoping you could give us an update on developing markets. You usually tell us, in the quarter how much developing markets were up. I was hoping you could do that, both including and excluding Gillette, and then specifically if you could give us an update on China.

A.G. Lafley - Chairman, President, CEO

Okay, Amy, developing markets are up double-digits, which is what we target for. In China, we were up double-digits, excluding the impact of SK-II, which obviously hit us a little bit in the first quarter. Clayt and I just came back from two weeks in Asia, and I would say we continue to be pretty positive on Asia. We think it is still going to be a growth engine for us. We were in Central and Eastern Europe and in Russia in September. Our CEMEA markets, which are Central and Eastern Europe and the Middle East and Africa, look like they are going to be engines of growth.

Last but not least, we are on our third year in a row of strong growth in Latin America. We are running high single-digits on the top line there. So we are feeling pretty good about developing markets. We have strong innovation programs going in developing markets, and frankly, we have more opportunities than we can take advantage of.

Clayt Daley - CFO

Of course, that double-digit growth, excluding SK-II, is organic. Obviously, with Gillette, these numbers are huge.

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