The Indonesian government increased the factors (actually, the most important one) understands the extent of the

rstands the extent of the problem they

minimum wage of blue collar workers from causing the year-on-year decrease in operating have in China right now. With the speed that
4,600 to 5,200 Indonesian rupiah earlier this income was a more than 40 billion Yen ($385 consumers can now band together by using
year. The increase, however, was heavily million) impact from the decline in the blogs and BBS on portals like Sohu (SOHU) or
criticized by businessmen, arguing that it is a Japanese stock market on the Financial Services [Link] (TOMO), MNCs in China cannot
financial burden. segment. underestimate the harm PR missteps can have
on their bottom-lines. I wrote how blogs and
Some executives of middle and small Another reason is the fact that the various BBS damaged Dell’s (DELL) brand value in
companies even refused to obey the minimum ventures the company is involved in haven't China, but at least Dell has been trying to
wage regulation, creating tension between fared so good, either. Thus, Sony recorded rebuild its image by pumping up customer
labor activists, the government and the equity in net loss of 1.6 billion Yen ($15 million) service initiatives.
business community in Indonesia, which hosts for Sony Ericsson, compared to equity in net
the largest Moslem population in the world. income of 21.1 billion Yen in the same quarter With the lack of concern coming from Ohio, will
of the previous fiscal year, primarily due to a P&G be able to implement the proper PR and
Nababan, however, questioned the analysis, shift of the product mix to lower priced phones. strategies to regain the trust of Chinese
saying that he works and has a lot of contacts in consumers? Particularly worrisome, will
the working areas. "They work and live like Furthermore, Sony also recorded equity in net consumer angst and ire spill over into P&G’s
slaves, you know that!" he said. loss of 3.1 billion Yen ($30 million) for SONY other blockbuster product lines like Olay and
BMG, a deterioration of 2.6 billion Yen year-on- Head & Shoulders that thus far have been
A Jakarta-based international labor observer year, reflecting the impact of the timing of new relatively insulated from the furor?
also confirmed the report, saying that they releases, the continued decline of the
have "boxes of reports" on Nike abusing worker worldwide physical music market and higher On an online survey run by Sina (SINA) in which
rights in Indonesia which include "child laborers restructuring costs. However, every cloud has a approximately 20,000 people voted, over 80%
or workers earning 20 to 24 cents an hour, less silver lining, and in Sony's case, that silver lining of respondents feel P&G is lying in its public
than two dollars a day." is represented by S-LCD, a joint-venture with apology for the SKII debacle. Most importantly,
Samsung Electronics, which has recorded an nearly 96% of them say they will not buy any
The observer, who asked to remain equity in net income of 2.6 billion Yen ($25 SKII products anymore.
anonymous, said that Nike does not employ the million), compared to equity in net loss of 0.5
workers directly. "They form partnership with billion Yen in the same quarter of the previous One blogger blogged, ““I never thought SKII is
companies with ties to the military and the First fiscal year. good -- you may get a freak baby”. Another
Family [of President Suharto] as well as Chinese blogged, “They are so bad; we should ban them
businessmen. They are the one who handle the However, Sony points out that its sales of from selling in China”.
workers." electronic products have recorded just a slight
decrease, at least for now, of just around 0.6%, What happened that caused one of the most
The American shoe maker, however, has a most of the losses in this area being caused by trusted brands in China to inflame public
representative here which oversees the the appreciation of the yen against the U.S. opinion and cause P&G to pull all SK II products
management of their subcontractors, as other dollar despite higher sales of certain products, in China from retail locations on September
multinational corporations also do. He doubted primarily BRAVIA LCD televisions and VAIO PCs. 22nd, closing 96 sales counters?
the effectiveness of the office.
In the Gaming segment, sales increased 10.3% Chinese consumers typically place a great deal
As an example, the observer pointed to the San year-on-year primarily as a result of a rise in the of trust in foreign products, and P&G has for
Francisco-based Levi Strauss jeans number of PLAYSTATION 3 and PSP consoles many years enjoyed a sterling reputation in
manufacturer, which ended some of their sold, while in the Pictures segment, there was a China – amongst the highest of all foreign
contracts with local garment companies 3.4% increase in sales year-on-year due to brands for quality in China according to surveys
following the breaching of the American higher motion picture revenues. conducted by my firm.
corporation's code of conduct.
All in all, Sony's financial results reflect what's The initial recall stemmed from pressure from
The observer, however, said that he has no going on in the entire world, and it remains to the government and consumers relating to
proof of the child labor, adding he believes such be seen just how the Japanese company will studies that showed some SK II products
a practice exists because it is quite usual to end this year, and whether the approaching contained traces of neodymium and chromium,
employ uneducated children in rural areas. Christmas shopping spree will actually boost its substances that above trace levels may pose
sales. health risks such as eczema and allergic
"It costs $5 to make the shoes here and [they] dermatitis. The scandal might have only been a
sell them at the United States at more than P&G minor speed bump a few years ago, pre-Web
$125," he said. 2.0 and if P&G had reacted appropriately in the
As Ezra Marbach pointed out last week, Procter immediate aftermath.
SONY and Gamble’s (PG) senior management
downplayed the effect on its earnings from Initially, P&G offered refunds to consumers
even if it's one of the world's largest cosmetic line SK II’s implosion in the China worried about the harmful effects of the skin
corporations and among the most important market. China International Business estimates creams. However, in order to receive a refund,
manufacturers of consumer electronics, Sony's that SK II in China accounts for 7% of its total consumers had to sign a waiver stating that
taken quite a beating at the hands of the global sales. they recognized the products presented no
economic crisis that's ravaging our world as we harmful effects. They also were not given a
speak. And that's because the company's It is also P&G’s fastest growing market and refund immediately even if they had to return
second quarter results, which have just been among the top 5 markets in value worldwide. their unused product.
announced, indicate the fact that Sony's Clearly, China is a market that FMCG companies
income has decreased with as much as 71.8 like P&G or Estee Lauder (EL) cannot approach
percent, compared to the similar period of lightly as China’s aspiration classes allocate
2007. more and more disposable income for products Consumers were outraged, posted on blogs and
and services. BBS and became physical in stores. To further
As the company's statement reads, after taking complicate SK II’s situation this is not the first
into account all the taxes, the operating income The lack of concern outlined in the recent time that the brand has made a misstep in
decreased 78.1% year-on-year. One of the earnings call makes me wonder if P&G China. In 2005 SK II ran afoul of Chinese
consumers when a woman purchased an anti thinking that the weak category growth in hair McDonald’s had a busy Q2 2009. Following a
wrinkle cream only to find that she had a strong care may stretch out over a longer time horizon few notable activities the retailer undertook.
allergic reaction. SKII and Procter and Gamble than we had anticipated. As we've said
were taken to court and eventually settled for a previously, Unilever is paying a full price for * Announced plans to open 1,200 McCafe
sum of approximately $24,000 USD. Alberto, and today's middling results certainly locations inside and next to existing European
support this view. Given that growth is restaurants this year. McDonald’s has also
The real issue in all of this was not the bad languishing in the US, an integration piloted stand-alone McCafe stores in Australia
ingredients – it was P&G’s lawyerly response to aggressively focused on finding synergies and and will pilot in-store McCafes at an unspecified
the situation that made consumers lose trust in cost savings opportunities within Alberto also number of its approximately 1,400 Canadian
SKII. P&G’s response that ignited the real anger, won't be much of a surprise once the deal is locations later this year.
which could indeed harm P&G’s bottom-line. In finally done.
my firm’s interviews, respondents were angrier * Announced plans to expand its assortment
with P&G’s response than with the ingredient Lauren DeSanto is an equity analyst with of fountain and bottled beverages to drive
issue. P&G should have learned from Yum Morningstar. beverage sales beyond the morning, when
Brands (YUM) who acted immediately last year most coffee is sold.
when concerns arose about Red Sudan found in MCDO
their products. * Began participating in a commercial-scale
oreign Currency Keeps Hurting McDonald’s study of alternative housing for egg-laying hens
Going forward, companies need to understand in the U.S., including cage-free housing.
the role blogs and BBS as well as nationalism Published on July 24, 2009 | Comments: 1
plays in China. Companies can be more * Partnered with film studio Twentieth
proactive in harnessing the power of blogs for Fast food retailer McDonald’s, whose Century Fox to promote selected movies
their benefit like Pepsi (PEP) and Nike (NKE) consolidated Q1 2009 revenues were through 2010.
have innovatively for their benefit. They should negatively impacted by foreign exchange rates,
also be honest and quick in acknowledging any took another hit to its consolidated revenues in * Avoided a potential shareholder resolution
mistakes and go out of their way to show Q2 2009 due to the effect of foreign currency. criticizing its use of pesticides in its American
contrition as Yum did. It is true, bad news Unlike the previous quarter, the effect of potato supply chain by agreeing to conduct a
spreads faster than good news and, with RSS foreign currency also reduced consolidated net survey in 2009 to more formally summarize
feeds, bad news literally spreads at the speed income but did not stop consolidated operating best pesticide practices share the key findings
of light. income from rising. from that survey with global potato suppliers.

In this whole debacle, the one thing that can Selected financial highlights and analysis of McDonald’s operates more than 31,000
save P&G in China is that many consumers do McDonald’s second quarter 2009, ended June restaurants globally.
not realize that SKII (originally a Japanese 30, 2009, follow:
brand) is part of the P&G group of companies. McDonald's Says Currency Issues Will Hurt
As one consumers posted, “I hate Japanese Foreign Currency Unkind to Consolidated Profit
brand, we should tell more people about SKII Revenues and Net Income
scandal”. Published: September 15, 2000
McDonald’s consolidated quarterly revenues
P&G has announced that it will bring SK II back declined 7%, from $6.07 billion to $5.64 billion. Shares of the McDonald's Corporation tumbled
into China this month. It will be interesting to In addition, consolidated net income fell 8%, today after the company warned that foreign
see how consumers react. from $1.19 billion to $1.09 billion. McDonald’s currency problems would hurt its third-quarter
cited the impact of foreign currency exchange earnings.
CMR analysts Ben Cavender and Allen Lee rates and said on constant currency terms,
contributed to this article. consolidated revenues would have increased Shares in the restaurant chain dropped $1.06,
4% to about $6.31 billion and consolidated net or 4 percent, to $26.94 on the New York Stock
UNILIVER income would have remained flat. Exchange in a decline that largely reflected the
effect of the euro's slide. The stock traded at
Total first-quarter sales at Albert Culver (ACV) Consolidated Operating Income Changes barely half its 52-week high of $49.56.
increased 11.7% compared to the year-ago Course
period, but organic sales growth was much McDonald's, which is based in Oak Brook, Ill.,
lower, at 4.4%. For the firm's US segment, sales In Q1 2009, McDonald’s posted a 4% decline in informed securities analysts about the currency
were up 2.8% from a very weak base period consolidated operating income, although the woes in a series of phone calls Wednesday,
when sales in the region declined 2.5%. retailer said on a constant currency basis it saying they would take a bite out of quarterly
International sales increased a healthy 25.3% would have increased 5%. McDonald’s had profits. But company officials also noted that
during the current quarter, with sales from the better luck in Q2 2009, as consolidated systemwide sales rose 8 percent in August.
acquisition of the Simple brand, and positive operating income rose 2%, from $1.65 billion to
foreign currency trends providing a boost of $1.68 billion. On a constant currency basis, ''Importantly, the fundamentals of our business
18.3%. Higher input costs clipped 20 basis consolidated operating income would have haven't changed,'' Jack M. Greenberg, chairman
points from gross margins, but selling, general increased 11%, to about $1.83 billion. and chief executive, said in a statement issued
and administrative costs declined to 20.4% late Wednesday. ''Our global business remains
from 21.5% during the year-ago quarter, which Comparable Store Sales Keep Shining solid and growing.''
kept operating margins healthy. The first and
second quarters last year marked a very bumpy Comparable store sales remain a bright spot for Several analysts lowered their estimates of
period for Alberto from an operations McDonald’s, as they continue to rise globally. third-quarter earnings on Wednesday to reflect
standpoint, as the firm encountered SAP and Consolidated comparable store sales increased the currency situation, starting the stock's slide
inventory troubles while ramping up its new 4.8%. In the U.S., they jumped 3.5%, and rose late in the session. But most did not budge
manufacturing facility in Jonesboro, Arkansas. 6.9% in Europe and 4.4% in Asia/Pacific, Middle from their positive overall rating of the
East and Africa. company's stock.
Generally speaking, Alberto's results weren't
surprising, and we see nothing that would Notable Quarterly Activity
derail the pending acquisition by Unilever
(ULVR). If anything, the results reinforced our
McDonald's goes green - but not all customers a very competitive market and it is very appointment of Stuart Rose as chief executive
are lovin' it important that we make sure we're appealing in 2004, gathered pace with another revamp of
to our customers, and that when they see a its stores, a change in the clothing range, and
The global fast food chain, tired of being McDonald's restaurant, it is inviting to them." the use of Your M&S as an advertising slogan.
vilified, is hitting back with revamps, recycling
and new menus John Holton, a partner at brand consultancy Mr Holton says it takes a lot of time for
Figtree, adds: "There is also a stigma attached customers to change their opinions. "People
* The Guardian, Thursday 5 July 2007 14.56 to having a McDonald's in your high street. were saying that M&S had lost their way, that
BST They are trying to sweeten the places up so stores looked appalling... It's only now that
they feel less like a carbuncle on the high people are starting to say better things about
* Article history street." M&S."

McDonald's is a company on a mission. Tired of To gauge the impact of the redesign, analysts He adds: "The look and feel of the stores is an
being held up as an example of corporate evil point to the US, where the programme began important draw and it's not a surprise that you
and greed, the fast food chain has been hitting in 2003. Since then, 6,500 restaurants have see that reflected on the bottom line."
out at critics with a series of environmental and been changed.
social initiatives designed to prove that it cares. 'Ethical policies don't change with a lick of
McDonald's will not give specific indications as paint'
Not content with that, the company is also to how redesigned restaurants have fared
going through a full makeover, redesigning compared with the old-style ones, but overall, Some changes gained approval and some did
some of its restaurants in a way that it hopes same-store sales in the US seem to indicate not even register with customers in the restyled
will revitalise the sites and attract more that the makeover has worked. At the branch in Chancery Lane, London:
customers. beginning of 2003, same-store sales in the US,
which compare sales of sites that have been · Salesman Stephen James, 34, has noticed the
On Monday, the group announced its latest open for a year or more, were down compared changes McDonald's has made to the
initiative: to turn its spent cooking oil into with the previous year. By April, they had restaurant. "I thought it looked very different,"
biodiesel fuel to power its vans in the UK. reversed that trend and by September of that he says, "but the food is still the same." He
year were up 10%. Same store sales have been believes that becoming more environmentally
This is the latest in a series of environmental positive ever since. friendly is a "really good thing to do".
and health moves. Recently, for example, the
group swapped over to non-hydrogenated The same applies in Europe, where the big · Consulting engineer Stephen Winkworth, 48,
cooking oil in its restaurants. redesign was launched last year. In 2004 and says the food is no better, and adds the
2005, there were some negative trends. But redesign has not had any effect on him. "You
The menus have changed to varying degrees since February last year, same-store sales have only go in there for a snack. You don't really go
over the past few years, with the introduction been positive. in there for a meal."
of sustainably grown coffee, organic milk and
toasted deli sandwiches. Mark Basham, a restaurants and hotels analyst · Banker Peter McKinnon, 41, thinks the
at Standard & Poor's, said: "The revamped appearance of the restaurant has been changed
In the UK, a sheet of paper on customers' trays menus, the rebranded stores, the company's merely for marketing reasons, but the food
shows a photo of George Horton, a 43-year-old more progressive stance on the environment seems exactly the same. "It seems worthwhile
farmer in Wiltshire and a McDonald's supplier, have all had a positive influence on because the tables used to be too crowded in.
who produces the food they eat. Even consumers." He says the redesign "entices The space is the main impact but it's a nicer
Greenpeace, which has worked with people to spend more time there and therefore environment too." He adds that he now goes
McDonald's on making sure the soya they spend more money, and it encourages people into the restaurant more.
source from Brazil is produced by companies to go at different times of the day than they
that do not destroy the rainforest, says the normally would". · Georgina Petrucci, 31, who works in business
company has been progressive. Pat Venditti, travel, said: "It's a plus trying to be more
forest campaigner at the charity, says: "What Still, customers in the UK seem doubtful that environmentally friendly, but the changes are a
we've seen is that they have taken a very good the rebranding exercise will work. A lot of bit tongue in cheek really, a bit tasteless.
leadership role in terms of how they approach people concede that the restaurants look nicer, They're just doing it so that they look better to
environmental issues." but argue that it still sells the same type of fast everybody but really their food is still junk."
food that Morgan Spurlock vilified in his
Others are not so sure of their initiatives. documentary Super Size Me. · English tutor Matt Trayler, 39, noticed that
Sustain, the food and agriculture charity, for McDonald's is making an effort with its
example, is concerned about its advertising to Ingrained appearance. He had also heard about its efforts
children. But the group has started to change to be environmentally friendly. "I think that
the appearance of its cafes - so much that the Tim Lyley, a goldsmith from London, is one of they're aware of the agenda and are obviously
staunchest critics of fast food are now in the cynics. He says: "It's just a marketing thing trying to relaunch themselves. I started going
danger of inadvertently stumbling into a isn't it? What McDonald's do is so ingrained in there in the 70s and it was like Wonderland.
restyled restaurant. people's psyche that no amount of rebranding But the quality seemed to go down in the 90s.
is going to change what people think about it." Now they're trying to relaunch themselves in
Some of the group's sites have been completely The group's financial results seem to disprove the noughties."
redone. A dark green or black facade replaces that sentiment. In April the company reported
the trademark bright red and yellow one, an 11% rise in global first quarter sales to · Graphic designer Tom Barnes, 29, says he likes
armchairs, low-hung trendy lights, quirky $5.5bn, and a 22% increase in net profits to the new look. But he adds: "I don't think their
designs and different types of seating areas are $762.4m. This was put down to surging sales in ethical policies have changed much with a coat
all an attempt to attract a more discerning Europe and strong demand for new menu in of paint."
customer. the US.

The group plans to revamp 100 sites by the end Mr Holton argues that the power of rebranding
of the year. So far, it has re-designed about 60 should never be underestimated. He cites M&S
out of the 1,000-plus restaurants. A as an example. The retailer launched a
spokeswoman for the company said: "We are in rebranding exercise in 2000 which, with the