Gillette Case Study [ppt]

The Razor Wars Continue :

Gillette is a brand of Procter & Gamble currently used for safety razors, among other personal hygiene products. Based in Boston, Massachusetts, it is one of several brands originally owned by The Gillette Company, a leading global supplier of products under various brands, which was acquired by P&G in 2005. Their slogan is, "The Best a Man Can Get". The original Gillette Company was founded by King Camp Gillette in 1895 as a safety razor manufacturer.

You can download the presentation Gillette case in Gillette Case.ppt

On October 1, 2005, Procter & Gamble finalized its purchase of The Gillette Company. As a result of this merger, the Gillette Company no longer exists. Its last day of market trading - symbol G on the New York Stock Exchange - was September 30, 2005. The merger created the world's largest personal care and household products company. In addition to Gillette, the company marketed under Braun, Duracell and Oral-B, among others, which have also been maintained by P&G.

In 1917, during WWI ,U.S. Government requests Gillette supply razors and blades for the entire U.S. Armed Forces. Between 1939 and 1945 during WWII, Gillette had gained more than half of the entire razor and blades market, Gillette's manufacturing efficiency allowed it to implement marketing programs in a large scale, which propelled Gillette forward in profits and it market leadership. Riding this tide if good fortune, the company was able to weather the storm bought on by WWII and emerged in a very healthy condition.

The Razor Wars Begin :

1. Most Significant Launch.

Gillette is rolling out two versions of its new razor at once -- a manual and battery-powered model. Plus, it's introducing a line of male-grooming products under the Fusion name, including a shave gel, which should boost a business that has long lagged behind.

These are rosy predictions. But consider Gillette's history. It last introduced a major new shaving system in 1998, when it rolled out Mach3, the world's first three-bladed razor. At the time, skeptics scoffed that men would never trade up to the triple-bladed wonder, especially since it was priced some 25% higher than Sensor Excel, which had been Gillette's top system. But Mach3 had afterburners. Today, these razors -- including the battery-powered M3Power -- dominate the U.S. market, with a 34% share, even though they're the most expensive.

2. Profit Surge.

Gillette - Mach3 has also eclipsed Schick's Quattro (Competitor), even though it has one fewer blade. Gillette estimates Quattro commands just 2.5% of the market.

In sharp contrast, Gillette's sales of blades and razors surged 11%, to $1.2 billion, in the second quarter. Even more telling, while Gillette's operating profits in its core division jumped 16%, to $488 million, in the second quarter, Energizer earned just $20 million from its blade and razor business.

3. Test Shavers.

For starters, it offers compelling technology. Like Mach3, it incorporates multiple innovations -- not just more blades. By spacing the blades 30% closer than before, Gillette says it has created a new "shaving surface" that reduces irritation.

Fusion also features a smoother coating on its blades, and an enhanced "Lubrastrip" infused with vitamin E and aloe.

Gillette maintains that the combination of these improvements produces a shaving experience that most men find significantly superior.

Fusion was tested on some 9,000 men, who compared it to both Mach3 products and Quattro. "They preferred Fusion by a 2-to-1 margin over its rivals," says Hoffman. That's the same kind of overwhelming preference men showed for Mach3 over its rivals back in 1998.

4. Turbo marketing.

Another company might be able to put five blades on a razor. But no one else has the technology, expertise, or money to produce a truly comparable razor. That's a key reason why Gillette has dominated the shaving business for decades now.

Fusion is also an affordable luxury. When men will have to shell out $10 for an introductory set of a Fusion razor and two blades, and $12 or more for a four-pack of replacement blades. But over time, Fusion will cost only about 20 cents a shave, "or about $50 a year." That's fairly reasonable compared to the cost of Starbucks coffee, bottled water, and other increasingly common everyday luxuries.

5. Trimming Costs.

As Fusion hits the market, it should further increase the extraordinary earning power of the King of Blades. As an activity, shaving is about as mature a business as you can find -- few, if any men or women, are shaving more often. But since Gillette introduced the higher-priced Mach3 in 1998, its sales of blade and razors have jumped about 50%, to $4.3 billion, last year, while profits hit a record $1.63 billion.

Combined with other efficiency gains Gillette has made in recent years, "Fusion should be accretive to Gillette earnings from day one”. If so, it could become Gillette's most successful razor ever