Gillete HiTech Edge

Hi-Tech Edge of the
King of Blades
Dr Amit
Rangnekar
Case Objectives
• How does Gillette continue to dominate the global market
thro’ technology & innovation in a mature market
• How does Gillette manage to persuade customers to
upgrade to higher priced products
• How does Gillette successfully extend its brands
• There are few companies with more powerful global
brands than Gillette, and there are even fewer companies
that have so successfully used innovation to increase the
market strength and consumer appeal of their brands.
• James M Kilts, Chairman and CEO
amitrangnekar@gmail.com
Innovation
• Gillette's stated goal is to achieve 40% of sales
from products launched in the L5Y
• Gillette presents the classic example of innovation
as product extension. Gillette used to make razors
with one blade, then it made them with two blades,
then with three blades, and now their razors have
5 blades – Gary Hamel
Blades and razors category
• Among the growing toiletries market sector
• Male grooming market, higher growth in N5Y
• Catalyst- fundamental change in men's attitudes to
grooming process over the last decade
• Popularity of 'lad mags' & influential sportsmen,
make men care consciously about their appearance
Growth in grooming
• Massive influx of male grooming products
• Dramatic increase in choice for male grooming
• In many cases, male bathroom cabinet now rivals
females, in size & choice
• Female grooming also maturing
• Higher growth in women razors
History
• 1901- Founded in Boston, USA
• Founder- Travelling salesman King Camp Gillette
• Founding thoughts- Frustration with traditional
cut-throat shaving, idea of disposable razor blade,
convenient for men shaving on their own
• Research- Men would pay $5 for a home shaving
kit, blades were cheap so cost of shaving at home
would reduce as more men start shaving daily
• William Nickerson, MIT engineer, joined King to
form the Gillette Safety Razor Company, Boston
(Changed to Gillette Company in 1952)
• Developed low cost blade production machinery
• Razor plus 1 blade priced @ $5, 20 blades @ $1
Progress
• 1903- Developed revolutionary Safety Razor
• Only 51 razors & 168 blades sold in first year
• 1904- US patent, 90,844 razors & 123,648 blades
• Gillette's strong technological foundations set
• The Safety Razor drove new processes for
tempering & hardening mass-produced steel
• Result- The 'wafer thin' metal blade for the razor
• Dubbed 'technically impossible' by Edison
• The Safety Razor made Gillette a household name
• Literally changed the ‘face’ of the US
Progress
• 1905- London & Paris plants, Overseas operations
• Pre WWI- Annual blade sales 40 million units
• "shave" and "save" plan- Gave away free razors
and boxes of Wrigley's gum through banks-
• Attracted potential customers to self-shaving
• 80% of US market for razors and blades
• WWI- US government ordered 3.5mn razors & 36
million blades for soldiers who self shaved
• Post- war ads to ensure self shaving continued
• 1925- EU, Asia, Kolkata- 30% sales international
• Slowly built brand image, through clear
association between shaving and Gillette
Innovations
• 1946- Razor dispenser
• 1949- Foamy shaving cream introduced
• 1963- Super Stainless Steel blades
• 1967- The Techmatic razor
• First system razor with a 'continuous
band‘-consumers do not have to touch the blade
• 1971- Trac II, first twin blade razor
• 1976- Good News, first twin blade disposable razor
• 1977- Revolutionary pivot headed razor, Contour
• 1960s & 1970s- developments focused on blades
Innovations
• 1980s & 1990s- improved features for a smoother,
more comfortable shave
• 1985- Contour Plus/ Atra Plus, + lubricating strip
• 1990- Sensor- spring-mounted blades & shell-
bearing pivot, introduced in 16 countries
• 1993- Sensor Excel- soft, flexible microfins to
sweep hair up, allowing the blade to cut closer
• 1998- Mach3, revolutionary triple blade razor
• 2003- Mach3Turbo, improved blade technology
• 2004- M3Power razor, manual razor + battery
power, new segment- power wet shaving
• 2007- Fusion 5 blades razor with rear trim blade
Female Razors
• Strong history of innovation
• 1915- First razor for women 'Milady Decollete‘
• 1975- Gillette Daisy, 1st disposable women’s razor
• 1992- Sensor for women
• 1995- SensorExcel for women
• 2000- Venus - a triple bladed razor for women
• 2002- Passion Venus, in vibrant pink colour
• 2004- Venus Divine
Key strategic decisions
• 1930- M&A Auto Strop Safety Razor, US
• 1948- Diversification to Personal care / toiletries
• 1967- M&A Braun, electric razors
• 1984- M&A Oral B, oral care
• 1996- M&A Duracell, long life battery cells
• 2005- Acquired by P&G
Gillette's portfolio
• Significant expansion since the safety razor
• Cater to diverse segments
• Grooming range meets all consumers needs
• Covers sensitive price points
• Fully integrated grooming solution for men
• Acknowledged master in persuading men to trade
up to more expensive shaving systems
Shaving range
• Entry level disposables
• BlueII, basic twin blade razor
• Sensor Excel
• Mach3Turbo
• Fusion
• Gillette series- shave gel, foam, after-shave,
cooling gel, after-shave balm & splash, anti-
perspirants, deodorants and shower gels
Mach3
• World's first triple blade razor, most successful
• Technological breakthrough, set the benchmark
• DLC coating allows thinner and stronger blades
• 3 progressively aligned blades allow a close, closer,
closest, shave
• Advanced Indicator Lubricating strip, fades away to
indicate less than optimal performance
• 5 rubber Microfins assist the blades by stretching
the skin & lifting the hairs
• Single point docking ensures error free blade
loading
• Globally 90 million men use a Mach3 family razor
Mach3Turbo
• 2003- launch
• Extension built on the Mach3 heritage
• Better shaving performance due to new anti
friction blades
• 2004- Mach3 family extended to include Mach3
Turbo Champion, in vibrant red variant
• Key innovations & improvements to the Mach3
design to produce the Mach3Turbo
Mach3Turbo innovations
• Anti-friction, comfort coat blades, reduce
force required to cut through hair
• Low irritation & allow shave against the
grain
• Indicator Lubricating Strip releases more
lubrication, improves razor glide
• Microfins doubled from 5 to 10, twice
Mach3- allows more effective skin stretching
• Blades can shave evenly and effortlessly
• Razor handle with textured rubber grips
• Metal grooves to improve sureness of grip
• Better overall handling & control
Gillette Fusion
Gillette Fusion Launch
• Own- Last NPL- Mach3 manual & M3Power battery,
1998, @25% premium, but 34% US share
• Rival- Quattro from Schick, 4 blades, 3% US
• NPL- 5blade Fusion, 30% premium, both versions
• Own male-grooming range including shave gel
• Compelling technology- blades spaced 30% closer
than before, closer shave, reduced irritation
• Smooth blade coating, "Lubrastrip" with VitE & aloe
• MR 9,000 men- 2:1 superior shaving xp over Mach3
& Quattro
• NPL estimate -US, EU, Top $1 billion sales in N3Y
Gillette Fusion Marketing
• Competition- least worry- 5 blade razor possible,
but not with comparable technology & expertise
• Key to Gillette’s 100 year domination
• Can improve male-grooming biz’ 30% share
• Attention on Fusion will generate many trials
• P&G support can ensure major player status
• Affordable luxury- $10 for razor+ 2 blades, $12
more for 4-blades replacement pack initially
• Future cost will be 20 cents/shave or $50/year,
value wrt to a Starbucks/ Big Mac/ bottled water
• Father's Day campaign, Walmart- buy Fusion get
$6 credit on other products
• “Pushing handle sales is the key to success”
Gillette Fusion Results
• King of Blades- enhanced power in a mature biz
• 2005- Blades & razor biz- $4.3bn, profits $1.63bn
• Developed Fusion & Fusion Power for < $680 mn
spent on Mach3 (1998)
• Efficiency gains in recent years
• "Fusion will be accretive to our earnings from day
one. It could become Gillette's most successful
razor ever "
• “The Mach3 name conveyed the power & benefit
of 3 blades which Fusion doesn't convey. If the
brand idea is not simple, it is extremely difficult &
expensive to execute in the market“ Landor Asso.
Venus Divine
• 2004- Venus brand extended to Venus Divine
• Closer & safer shave, with soft, moisturised skin
• Comfort coated blades enhanced with 2 new
coating layers to ensure a more comfortable glide
• First time Lubrastrip before the blades, to prepare
the skin and soften the hair
• 2 Lubrastips follow the shave to moisturise and
replenish skin
• Elastomeric cushions surround the blades, gently
stretching the skin and lifting the hair
Promotion
• Strong and sustained investment in advertising
• Gillette brand- incredibly high recognition rate
• 1980s- 'The Best A Man Can Get' campaign,
hugely successful
• Massive influence, recalling & salience
• New wave of advertising for Mach3 launch
• Focus- brand values, innovation & cutting edge
technology
• Aim- educate consumer on product advancements
and improved shaving performance
Strategic shift
• 2004- back to 'The Best A Man Can Get' ads
• Original, emotive campaign but with a new &
enhanced look
• Strong black & white imagery, updated song
• Combination creates a far more emotional connect
between consumer and the Gillette brand
• Product specific advertising to run alongside the
campaign, communicating technological product
superiority
Sports Marketing
• Used sport as a major promotional vehicle
• Strong ‘sports’ association continues
• 1910- Major league baseballers endorsed Gillette
razor, relationship lasting a century
• 1939- US World Series radio broadcast- first
sponsorship
• World Cup Soccer, longest running sponsor
• Global car racing
• Cricket in the UK
• 2004- 'Gillette Soccer Saturday’ on Sky Sports
• Sponsorship, major part of Gillette's IMC strategy
Gillette Soccer Saturday 1996
• Campaign objectives: Build a brand property for
Gillette to reach target, communicate information,
and ensure awareness, trial, loyalty of NPD
• Target audience- Men aged 18-34
• Budget: £1-£2m (per season)
• Channel- Sponsor Soccer Saturday (Sky Sports),
link to a must-see program for core target group
• TV usage: 5/10/15 second sponsorship credits
• Aim- Associate Gillette with high performance
• Keep target updated on NPD/Soccer
• Success- SensorExcel, Mach 3, turbo & M3 Power
Gillette Soccer idents
• Gillette ads in a football context ensure attention
• Football club officials lay out players’ kit pre-
game
• Include essential Gillette grooming products
• The idents end with “Gillette, part of the ritual”
• 2006, the show averaged monthly audience of
1.3mn men aged 16-34
• Gillette effectively communicated with 24% of its
target audience and over the whole season, had a
reach of 46% among the target group
Gillette Soccer Results
• Soccer Saturday sponsorship effectively launched
Mach3, Turbo and M3Power
• 2003- Turbo series 15% market share as launch
idents integrated a football theme
• 2004- M3Power- Power shaving message added to
the idents, sales rise 26% ahead of expectations
• 2005 Independent qualitative research- match
between Soccer Saturday and Gillette, widely
perceived to share similar brand attributes
including, market leaders, innovative, respected,
up-to-date, established and magnitude
Overcoming Challenges
• Post 1990s- Unravelled innovations to grow
• But schemes & incentives ensured high inventory
• Recovery blocked, profits erode, discount expected
• 1998- sales flat and profits decline
• Performance- pay to reward results than effort
• Strategy-link innovator past & value creator future
• Disciplined marketing, central to revival
• Communication & collaboration essential
• Cross-functional team meetings, progress reviews
Create total brand value
• New team, fresh ideas
• NPL successes-shaving system, oral/personal care
• "Our powerful marketing programs are fueling
new sales & consumer trade-up to premium
products, even in the face of competitive offers of
steep discounts and product giveaways” Kilts
• Sales up 13%
• Creditable in a fairly mature, packaged goods
products
Gillette Geography
Geography Contribution %
North America 40
Western Europe 33
Asia Pacific 10
Africa/Middle East/Eastern Europe 10
Latin America 7
P&G M&A 2005- $57 billion
For P&G For Gillette

• Strategic fit, Scale • Part of a FMCG giant
• More trade muscle • Consummate marketer
• Hi-growth market entry • Adds Innovation skills
• Significant EM presence
• Gillete global reach
• Added a ‘Colgate’ to sales
• Mens grooming synergy
• No Unilever presence
• 21 bn$ brands, $200 bn mkt cap
“Extra 20% premium P&G paid for Gillette's stock will make it 20%
more difficult for the deal to pay dividends to stock holders" Al Ries
Pre M&A
P&G Gillette
Sales $51.4 bn $10.3 bn
Profits $6.5 bn $2.3 bn
R&D Spend $1.8 bn $0.2 bn
Tide, Bounty, Crest,
Mach3,Gillette,
Leading Ariel, Pampers, Pringle,
Oral-B, Duracell,
Brands Wella, Olay, Head &
Braun
Shoulders
Employees 110,000 30,000
Why P&G acquired Gillette
• “Getting men to spend more money than they ever
dreamed possible on razor blades is a specialty at
Gillette. Starting with the 2 bladed Sensor in
1990, the company has devoted immense scientific
& marketing resources to what was once, one of
the most humble products in the medicine cabinet.
And it has raked in unprecedented profits with
each increase in price & blade count. Between
1997 & 2004, Gillette's overall blade & razor
sales soared nearly 50%, though underlying
demand barely budged, increasing in line with
population. That's a big reason why P&G paid a
premium price of $57 billion to buy Gillette”
BusinessWeek
Brand values
• “Dedicated to drive innovative technology to
develop & produce hair removal products that
deliver superior shave performance, both in
closeness and comfort”
• Male image- masculine, confident & wellgroomed
• Female image- fun, youthful & energetic
• Positioning- Premium, offering superior quality
products that set the grooming industry standard
• Essence- Celebrating world class products, world
class brands & world class people
• Committed to grow through innovation to
maintain global consumer products leadership
LKD
• Facial hair is 70% easier to cut if soaked in warm
water for 2-3 minutes before shaving
• The average man spends 3,500 hours of his life
shaving
• Removes about 30ft of facial hair
India
• 2007- 454 Cr
• Own Plant at Bhiwadi, Haryana
• One of Gillette’s lowest cost producing plants
• 20% lower than Gillette plants, at par with China
• Robust local vendor development program
• 90% locally sourced material
• Global cost reduction opportunity for sourcing
from Indian vendors
• 20% production exported

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