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 (1920 s) • 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 12 th (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) Annual Sales ($ mil. ) Annual Net Income ($ mil. ) 2004 2003 2002 2001 10, 477. 00 9, 252. 00 8, 453. 00 8, 961. 00 1, 691. 00 1, 385. 00 1, 216. 00 910 • 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/b 3561093. 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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