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)

Shaving

Colgate, 58%

Gillette, 35%

Other, 7%

Portable Power

Duracell, 35%

Energizer, 30%

Rayovac, 19%

Other, 16%

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

2004 2003 2002 2001

Annual Sales ($ mil.) 10,477.00 9,252.00 8,453.00 8,961.00

Annual Net Income ($ mil.) 1,691.00 1,385.00 1,216.00 910

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&st

ory=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

Questions