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 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) 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 Annual Sales ($ mil.) 10, , , , Annual Net Income ($ mil.) 1, , ,

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

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