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 Wrigleys 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 theyre Gillettes 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 Gillettes 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%
Shaving
Other, 7% Gillette, 35% Colgate, 58%

Portable Power
Duracell 35%

Oral-care
Leader in toothbrush sales
70% of electric toothbrushes (1999)
Rayovac, 19% Energizer, 30%

Portable Power

Other, 16% Duracell, 35%

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)

2004 Annual Sales ($ mil.) Annual Net Income ($ mil.) 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

 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)

Conclusions and Future Recommendations

Capitalize on fast growing, new markets

 Gillette competes on too many fronts

Continue to divest unrelated product lines Increases efficiency, cuts cost

Key Result Area: Downscoping

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