Gillette Company

1
Gillette Company

• Jason Spranza
• Herbert Leung
• Randy Rotundo

2
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
  Wrigleys Gum (1920s)
• Gillette grew tremendously through government
  contracts (WWI WWII)

3
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)

4
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 theyre
  Gillettes largest customer (13 of sales)
• Lost lawsuit for patent infringements on the
  Schick Quattro

5
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 PG's expertise marketing to women
• Advertising up 5 (Early 2005), damaging
  Gillettes bottomline

6
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.

7
Weaknesses

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

8
Opportunities

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

9
Threats

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

10
Market Share

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

11
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

12
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

13
Financials (2001 2004)
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

• 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

14
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

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Key Result AreaDownscoping

• 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
• RD
• Advertising
• Acquisition costs
• Sell off Oral B businesses that overlap with
  Crest

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Sources

• www.hoovers.com
• http//www.equitymaster.com/detail.asp?date5/6/20
  05story3
• http//finance.yahoo.com/q/pr?sG
• http//www.businessweek.com/1998/03/b3561093.htm
• www.gillette.com
• http//www.business.com/directory/retail_and_consu
  mer_services/beauty_and_personal_care/gillette_com
  pany/
• http//www.oralb.com/aboutus/
• www.duracell.com
• http//www.answers.com/topic/the-gillette-company-
  1

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Questions