Consumer China

Bawang – long road to recovery

  • Published 22 Sep 2011

Recovery from a media attack in 2010 when Bawang was accused of having a carginogenic chemical in its shampoos is still elusive, with further losses expected in 2H11.

Herbal hair product specialist Bawang (1338:HKG) is struggling to come back from a media attack in July 2010, when the company was accused of having high levels of dioxine, a carcinogenic chemical, in its shampoos. Losses grew bigger in 1H11 as revenues from hair products fell further, inventory was written down and marketing and promotion costs grew larger on Bawang's attempts to win back customers. Faltering confidence has given way to competitors such as Procter & Gamble's (PG:NYSE) Rejoice and Pantene. Bawang's market share in the herbal shampoo market had already fallen to 36% in 2010, from 52% in 2009 and has likely fallen further this year. We expect revenues to recover marginally in 2H11 as growth in drinks and skincare segments help to offset falling shampoo sales. However, the new product mix is weighing on margins, and although marketing and distribution expenses are expected to improve as the company shifts to cheaper mediums online, further losses are forecast in 2H11.

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