• Ad Age, Tuesday, August 1, 2006 1 PM

China is still one of the hottest markets on earth. But it's beginning to cool off for two pioneers that participated in the early days of market expansion, but now face the threat of aggressive competition. Consumer product behemoths Procter & Gamble and Colgate had enjoyed double-digit sales growth for years, but those days are fading fast. P&G, Colgate, and smaller rival Avon Products have all posted disappointing results in China--due to mounting competition from L'Oreal, Unilever, and Kao, which have made acquisitions and generally improved their market positions in China. In addition, competition from local marketers has been tougher than ever. Colgate, after reporting flat China volume in the first quarter compared to 18 percent growth a year earlier, reported that sales were up last week to a modest 4 percent in the second quarter. P&G's China results will be closely watched when the company reports its fiscal fourth-quarter earnings Aug. 2. It already acknowledged an end to double-digit growth rates in China the prior quarter. "China's retail sector is more developed now," says Alfonso De Dios, associate director-media, Greater China for P&G in Guangzhou. "Customers are demanding more now, and they have more power over pricing."

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