Gillette Company Jason Spranza Herbert Leung Randy Rotundo History

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

Questions