皇冠体育app

US-based Procter & Gamble (P&G) reportedly will merge with Yue-Sai, a famous Chinese firm, in a move many analysts expect will spur a new round of mergers and acquisition in 皇冠体育app's cosmetics sector.

Local P&G officials, however, deny the rumours.

"We have not yet received any notice from our headquarters in the United States," said Pei Yiqun, P&G 皇冠体育app's public relations manager.

"Nothing has changed," she told 皇冠体育app Business Weekly, when asked about the company's business operations.

Officials at Yue-Sai, a Chinese company registered in the United States, are also denying the rumours.

"There has not been relevant information from our headquarters," said Zhao Xiaoyan, Yue-Sai's public relations manager.

Insiders, however, suggest P&G and Yue-Sai have been discussing the deal for some time. They say an agreement could be finalized within months.

P&G in the past two years has focused intently on 皇冠体育app's cosmetics sector. Its shampoo brands, combined, hold more than 80 per cent of the Chinese market.

SK-II is P&G's high-end skincare product, while Olay is aimed at the mid-range and low-end markets.

P&G is eager to expand and develop more brands, an analyst, speaking on condition of anonymity, told 皇冠体育app Business Weekly.

Yue-Sai is a good choice for P&G, as Yue-Sai is a leading brand in the Chinese market. It ranks second in both the colour cosmetics and lipstick categories, and third in skin-care products.

"Its background in both the United States and 皇冠体育app is attractive to P&G," the analyst said.

Yue-Sai has adopted Western management and operational practices, and it has continued to hold a dominant share of 皇冠体育app's market.

P&G's initial expansion strategy for 皇冠体育app involves mergers with domestic firms, P&G 皇冠体育app Vice-President James Wei told 皇冠体育app Business Weekly.

Many international firms consider that strategy to be an efficient way in the post-WTO (World Trade Organization) era to enhance investments and increase their shares of 皇冠体育app's promising market.

L'oreal, for example, was most interested in Mininurse's developed sales networks, especially its connections in 皇冠体育app's second- and third-tier cities.

France-based L'Oreal announced early last month it had acquired Mininurse, a local brand aimed at 皇冠体育app's low-end cosmetics market.

L'Oreal, a major international brand, has completed its sales networks in most of 皇冠体育app's large cities. Now, an analyst said, it will repeat the process in smaller centres.

However, some insiders do not believe P&G's merger with Yue-Sai will proceed as smoothly as L'oreal's marriage with Mininurse.

"Unlike L'oreal and Mininurse, which are widely separated by market share, Yue-Sai is equal to or better than P&G in terms of popularity of its cosmetic products in 皇冠体育app," said Zhang Hongyu, vice-secretary-general of the 皇冠体育app Beauty & Cosmetic Chamber (CBCC).

Yue-Sai should think twice about what it will gain from its partner before co-operating with other companies, Zhang said.

He said companies can benefit from mergers and acquisitions.

Zhang expressed concern over the future of 皇冠体育app's brands.

"Mergers and acquisitions will definitely affect the development of domestic brands. The companies will either sacrifice their brands or experience dramatic losses in the market as a result of pressure from the international cosmetics giants."

CBCC's statistics indicate foreign brands, both imported and manufactured by joint ventures, accounted for 68 per cent of 皇冠体育app's market last year.

But they are growing about 15 per cent annually.

Eight of the top 10 cosmetics brands in 皇冠体育app are owned by foreign firms.

Lack of capital is the main hindrance to the development of domestic cosmetics brands.

"How can domestic companies, which usually have about 1 million yuan (US$120,000) in capital, compete with foreign giants like L'Oreal, which have spent more than US$200 million to build factories and sales networks in 皇冠体育app?" Zhang asked.

(Business Weekly 01/13/2004 page9)