Public anger in China over a popular skin-care line has become a public relations headache for Procter & Gamble , underlining the challenges foreign firms face as they contend with increasingly discriminating consumers.

The U.S. company suspended sales of its SK-II cosmetics line in China last Friday after the country's quality watchdog said it found traces of potentially harmful chemicals in the products.

Windows have been smashed at the company's Shanghai office and one of its Web sites have been hacked at the weekend after the firm went back on an undertaking to give customers their money back pending further word from the watchdog, said a P&G spokesman, Charles Zhang.

In Wuhan and Harbin, there were incidents where there was some physical contact between our beauty consultants and consumers, Zhang said, adding no one had been hurt.

In another incident reported by Chinese media last week, counters in Shanghai selling the Japan-made products were forced to close after police broke up an angry crowd demanding refunds.

The case echoed a row last June, when Swiss food giant Nestle had to recall all milk powders with high iodine content after Beijing's food safety office said its infant milk powder 1+ contained more iodine that permitted.

This is a major issue for the premium brands, not only for SK-II itself. Consumers are starting to question the quality of other premium brands, said Sylvia Mu, research manager with research firm Euromonitor International.

Previously, almost all Chinese consumers thought that the higher the price, the better the quality.

SWIFT ACTION FROM KFC

P&G has acknowledged that the scare would harm sales in China, while insisting the products were safe. They remain on sale elsewhere, except in some stores in South Korea.

Mu said P&G's competitors in China, including Japan's Shiseido Co. Ltd and France's L'Oreal , might benefit from their bigger rival's problems.

Yum Brands Inc.'s Kentucky Fried Chicken restaurants were also under scrutiny early last year after a possibly carcinogenic food dye was found in some of its chicken products.

Yum apologized swiftly and promised that the chemical had been removed from all its food processing.

KFC treated the situation better than Procter & Gamble. They came out fast and explained what had happened and their brand recovered quickly, said another Shanghai-based analyst with a major European investment bank.

The SK-II product line includes skin whiteners, face creams and sunblocks. Items retail for $35 to $300 and are on sale in 14 countries.

P&G initially offered direct refunds to purchasers in mainland China but reversed that decision last Friday and said it would instead set up a hotline to handle refund requests.

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