Gillette Company

Gillette Company Jason Spranza Herbert Leung Randy Rotundo

History • King C. Gillette invented the safety razor in 1895 with backing from William Nickerson (MIT) • Sales of the safety razor grew from 51 (1903) to over 90,000 (1904) • Distributed free razors at banks and in packs of Wrigley’s Gum (1920s) • Gillette grew tremendously through government contracts (WWI & WWII)

Gillette Background • Culture of diversification • Stationary (Paper Mate, Parker Pen 1955) • Electric razors (Braun 1967) • White Out (Liquid Paper 1979) • Oral Hygiene (Oral B 1979) • Portable Power (Duracell 1996) • Teeth Whitening (Rembrandt 2004) • Is the world leader in most of its product categories (60% of sales from foreign markets)

Gillette Update • Worlds largest shaving supply company • Began downscoping • Sold stationary business to Rubbermaid • Sold hair-care line to Diamond Products • At the time of the case, Gillette had poor relations with Wal-mart. As of 2004 they’re Gillette’s largest customer (13% of sales) • Lost lawsuit for patent infringements on the Schick Quattro

Gillette Update • Proctor & Gamble will acquire Gillette for about $57 billion in stock • Shareholders will vote July 12th (voting delayed a month) • Will merge Gillette's savvy as a marketer to men and P&G's expertise marketing to women • Advertising up 5% (Early 2005), damaging Gillette’s bottomline

Strengths • Invests highly in Advertising • Strives to expand its product line • Has good relations with large retailers • Highly Globalized • Pack Center and Pack-to-Order operations.

Weaknesses • Gillette practiced “Trade Loading”, to meet sales goals. • High General and Administrative costs relative to peer companies.

Opportunities • Will soon be under Procter & Gamble Co.’s umbrella • The Metrosexual trend. • The new fast growing teen market.

Threats • Gillette is extremely vulnerable to exchange rate fluctuations. • Products are easily imitated by competitors.

Market Share • Shaving • Gillette  35% • Portable Power • Duracell  35% • Oral-care • Leader in toothbrush sales • 70% of electric toothbrushes (1999)

Issues • Made unrelated diversifications • Lacked growth strategy • Decrease in profits even though revenue is up • Lack of cash resources • Stock repurchase plan • Low receivable and inventory turnover

Change in Management • At the end of 2000, ex-CEO Michael Hawley replaced by James Kilts (Nabisco) • Increased revenue, as well as profit margin • Exceeded expectations • Stocks steadily rising

Financials (2001 – 2004) • Net profit margins continue to increase (16.1% in 2004 compared to 13.1% in 2000) • Higher quick and current ratios • Higher receivable and inventory turnover

Conclusions and Future Recommendations • Continue to focus on core competencies • Continue related diversifications • Maintain cost efficiency (high profit margin) • Maintain brand recognition and innovative product lines (Venus has 50 patents) • Increase advertising efforts • Combine efforts (use Duracell batteries in electric toothbrushes) • Capitalize on fast growing, new markets

Key Result Area:Downscoping • Gillette competes on too many fronts • Continue to divest unrelated product lines • Increases efficiency, cuts cost • Divesting helps relieve cash flow issues • Free up cash for: • R&D • Advertising • Acquisition costs • Sell off Oral B businesses that overlap with Crest

Sources • www.hoovers.com • http://www.equitymaster.com/detail.asp?date=5/6/2005&story=3 • http://finance.yahoo.com/q/pr?s=G • http://www.businessweek.com/1998/03/b3561093.htm • www.gillette.com • http://www.business.com/directory/retail_and_consumer_services/beauty_and_personal_care/gillette_company/ • http://www.oralb.com/aboutus/ • www.duracell.com • http://www.answers.com/topic/the-gillette-company-1

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Gillette Company