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Course: Strategic Marketing Management

Date of submission: 27/06/2009

INTRODUCTION

Gillette was incorporated on 9th February 1984 at Rajasthan, house of Poddar


enterprise(HOPE) and Gillette company, U.S.A promoted it.
Gillette has been a leading brand in men’s grooming industry in India and across the
globe. Gillette with its wide range of products caters to the premium segment of the
men’s grooming market.
Gillette is a brand of Procter & Gamble currently used for safety razors, among other
personal hygiene products. Based in Boston, Massachusetts, it is one of several brands
originally owned by The Gillette Company, a leading global supplier of products under
various brands, which was acquired by P&G in 2005. Their slogan is, "The Best a Man
Can Get". The original Gillette Company was founded by King C. Gillette in 1901 as a
safety razor manufacturer.
On October 1, 2005, Procter & Gamble finalized its purchase of The Gillette Company.
As a result of this merger, the Gillette Company no longer exists. Its last day of market
trading - symbol G on the New York Stock Exchange - was September 30, 2005. The
merger created the world's largest personal care and household products company. In
addition to Gillette, the company marketed under Braun, Duracell and Oral-B, among
others, which have also been maintained by P&G.
The Gillette Company's assets were initially incorporated into a P&G unit known
internally as "Global Gillette". In July 2007, Global Gillette was dissolved and
incorporated into Procter & Gamble's other two main divisions, Procter & Gamble
Beauty and Procter & Gamble Household Care.
Gillette faces intense competition in shaving preparations market
shaving/gel/foam/cream) whereas the competition in the razor market is not that intense.
With the intense competition Gillette has to cater to the various needs of the consumers.
BUSINESS PROFILE:

Gillette India Limited operates in three segments:

Grooming – Manufactures blades, razors and toiletries.


Oral Care – Manufactures toothbrushes and oral care products
Portable Power - Manufactures batteries, torches and lamps Some of the renowned
popular razors from Gillette used in India include:
Gillette Presto “Readyshaver” - Priced lowly thus targeting the low-income group of
consumers.
Gillette Sensor Excel – Targeted for the middle-income group
Gillette Mach 3 – Targeted for the high-income group

PRODUCT DETAILS:

Company manufacturers stainless steel razor blades. Gillette India has a wider portfolio
of core businesses of shaving products sold under Gillette, 7’O clock and Wilkinson
brands, battery and flashlights business and oral care products(Oral B)). Company has a
strong presence in shaving razor blades market. Blades manufactured by the Company
were of two types, the premium 7 O’clock, Ejtek Super Platinum and the stainless brand
7 O’clock Ejtek Super Stainless. Company took over Sharp edge Ltd., by acquiring the
entire share capital of that company. Company also merged Duracell (India) Pvt. Ltd. and
Wilkinson Sword India Ltd. with the company.

INDUSTRY ANALYSIS:
Due to increased awareness and rising income levels, the industry is expected to undergo
a major shift from traditional double-edged razors segment to twin and triple blades
razors segment. Razor blade market has tripled from Rs 2 billion in 1986 to Rs 6 billion
in 2006. In value terms, in 2003, double-edged blades comprised 78%, systems 15% and
disposables 7%. As per AC Nielsen/ORG's estimates, the domestic shaving preparations
market in 2003 was pegged at Rs 1.5 billion. Within the industry, cosmetics and personal
care industry has been growing at an average rate of 20 per cent for the last few years.
However, current consumption is still below many countries in Asia which shows that
there are further growth opportunities. In 2004, market size of men's personal care
segment is estimated at approximately Rs 750 crores, with Gillette having the largest
market share.
Thus, the industry is growing at a decent rate but still is at an infant stage and this offers
great opportunities to players like Gillette and Colgate Palmolive to expand their
customer base to include higher number of lower middle class people and thereby
increase their revenues and profitability.
GILLETTE’S STRATEGY IN INDIA:

The Indian shaving products market is characterized by a 97% share of double-edged


blades - a business dominated by the Malhotras, with brands like Topaz and Panama.
Instead of going head-on against them in this highly price-sensitive market, ISPL has
chosen to focus on premium products. The strategy has been to bring more people into
the twin-edged segment, and then gradually move them towards even more premium
products. Also, by segmenting the market with offerings at different price points - 7
O’clock, Sensor and Mach III, ISPL offers a continuing upgrade path for users.

SALES:
Gillette India's sales jumped 106 per cent to Rs 516.80 crores after the addition of new
businesses from the merged companies. But operating profit margins of the merged entity
has dropped to 12.9 per cent in 2000, from 19.3 per cent in 1999. As a result, Gillette
India's operating profits rose by a lower 38 per cent to Rs 67.16 crores. This suggests that
the merging companies have far lower levels of profitability than Gillette India. Gillette
India Ltd announced 36.6 per cent higher net profit at Rs 61.22 crores for the 12 months
ended December 31, 2004 on 9.73 per cent growth in sales at Rs 446.57 crores.

FINANCIAL ANALYSIS :
Since its entry into India market in 1984, Gillette has been following a strategy of
inorganic growth by acquiring domestic companies in oral care, battery, blades and razors
and stationery business. The company witnessed tremendous growth during the later half
of 1990s. Net sales increased from Rs 107 crores in 1997 to Rs 477 crores in 2000
representing a growth rate (CAGR) of 45 %. Similarly, CAGR for net profits over the
same period was over 50%. However, operating margin declined from 19.8% in 1997 to
14.0% in 2000. This further declined to less than 1% in the year 2001. Further, negative
sales growth and increased expenses led to a net loss of Rs 28 crores in 2001. This poor
financial performance forced the company to undertake a major restructuring program.
Over the next 2 years, Gillette concentrated on reducing overheads and better working
capital management to increase profitability. As a result of its restructuring program, the
company reported net profit of Rs 44.82 crores in 2003. Since then, company has been
growing at a steady rate which has resulted in increased valuation of the company

The company is also focusing on exploring ways to capture the expanding oral care
segment in the near future. Oral care segment contributed approximately 13% of
company’s revenues in 2006 as against only 7% a year ago.

PROFIT & LOSS ANALYSIS :


Net sales of the company grew at a CAGR of 45% during the period 1997-2000. After
that there was a downfall in the company and for the first time, Gillette India ended the
year with a net loss of around Rs 28 crores. This was primarily due to significant increase
in employee cost and other miscellaneous expenses. In 2001, revenues declined to Rs 453
crores from Rs 477 crores a year earlier. Revenue figures further reduced by around 18%
in 2002 to approximately Rs 385 crores. Although due to IIM Indore Group 6 Section B
restructuring, the damage was controlled to some extent in 2003, yet there was a further
fall of 3% in the revenue figures. Since it‟s restructuring in 2003, company has recorded
double digit growth rate in revenues. However, the growth rate was moderate in 2005 as
compared to the figures in 2004.
Chart showing Revenue growth over last 5 years

Despite higher revenue growth in late1990s, operating margin of the company declined
from 20% in 1997 to 14% in 2000. Similarly, net profit margin almost remained constant
at around 5% over the time period. The situation worsened further in 2001, and company
reported a net loss of 6%.

In 2002, Gillette undertook restructuring initiatives and it took the company two years to
revive its operations. In 2003, company recorded a net profit of Rs 44.82 crores. It
entered into contracts with new suppliers for better raw material prices and also brought
about a significant reduction in wastages. As a result of which, raw material cost as
percentage of net sales declined from 46% in 2001 to 31% in 2003. Further,
miscellaneous expenses reduced to just Rs 15.57 crores in 2003 from Rs 82.68 crores in
2001. The net profit margin increased to 12.45% in 2003 and the operating margins stood
at 25.90%. Improved financial performance led to an increase of almost 120% increase in
share prices over the year 2003.
Chart showing profitability margins over last 6 years

The market capitalization of the company has increased from Rs 845 crores in 2001 to Rs
2695 crores in 2007.
SHARE HOLDING PATTERN

There has been a great shift in the shareholding pattern of the company since its entry
into Indian market in 1984. Gillette entered India through a joint venture as a minority
shareholder. Its share increased to around 75% in 2002. In 2006, almost 88% of the
company was owned by the promoters (foreign and Indian). Out of the remaining 12%,
10% is owned by non-institutional investors and thus, only 2% lies in the hands of
institutional investors.

STRATEGIC PRIORITIES:

This step involves portfolio analysis of company’s products in the market. Company
derives almost 80% of its revenues and 90% of its profits from Personal Grooming
division. Within this particular division, majority of the sales come from its razors
division. Gillette is an undisputed leader in this sub segment. Similarly, company leads in
the market for gel and foam products. Thus, Today’s business is driven by this two sub
segments.
In the future, Gillette still needs to concentrate on its two major sub segments for regular
cash flows. However, the new product in the shavings cream market can also become
tomorrow s breadwinner for the company. Oral Care business has shown volatile
performance over the years and thereby, has led to irregular cash flows. Gillette’s
portable power business has been facing stiff competition from the alkaline batteries in
the market. This division grew by only 4% in terms of revenues in the year 2005-06. And
in fact, there was decline in the profit figures from this division by approximately 60%.
The company can consider divesting this segment to direct its investments to Oral Care
and the new shavings cream product.

GILLETTE SERIES:

GILLETTE SHAVING GEL - AN INSIGHT :

The Gillette shaving gel/foam series has been developed as a technologically superior
product. Gillette is the only company to have 10 product variants in this category. No
other competitor has even more than 5 variants. So, Gillette has the deepest product line
and the widest product width. Gillette Series has many firsts to its credit in the Indian
market:
First to introduce Shaving gel in the Indian market

First to include ingredients like Aloe vera and Vitamin E in its gels and foams.

First to introduce foams with no fragrance in “Pure and Sensitive”

Brand Development Index and Category Development Index Gillette has the highest
brand equity in the men’s grooming industry. The brand Gillette is more of a life style
product than just a grooming product.
SWOT ANALYSIS:

STRENGTHS:

STRONG BRAND EQUITY:

Gillette’s portfolio contains well establish brands such as Gillette and Braun, oral-B line
and Duracell. It eases the introduction of new products, as consumers are already well
acquired with the names and more receptive to promises of improved user experiences.
The strength and quality image of these brands allows the company to charge higher
process and achieve high margins.

MARKET LEADERSHIP:

The company’s product are well known with a reputation of quality are also market
leader in their perspective segment.

Strong parental support in advertising and promotion:


• During the 2002 FIFA World Cup, Gillette India announced a promotion
scheme offering a unique opportunity to win a trip to Yokohama, Japan, to
see the finals, live.
• To promote its products directly to consumers, Gillette India Limited has
launched “Gillette Grooming Centres” along with 50 salons. These centres
provide specific tips on shaving etc. and also help in promotion of
company products.
• Gillette has localised its advertisements as per Indian culture. For example
the promotion campaign for “Vector” was related to an Indian marriage
party.
WELL DIVERSIFIED PROTFOLIO:

Gillette has a well diversified portfolio in terms of product diversification and market
diversification. Diversification of this nature helps the company avoid the risk of
overdependence on any one source for its revenue stream.

BRAND ENDORSEMENT:
Gillette India is investing heavily in advertisement in order to create awareness among
Indian rural and urban population. They are also endorsing their brands through
champions or role models of different sports.

STRONG R&D TEAM:

WEAKNESS:
PROFITABILTY HIGHLY DEPENDENT ON CORE BUSINESS:
Gillette profitability is highly reliant on the performance of its razors and blades business.
A substantial portion of its revenues come from this sector. Any downturn in the sector or
in Gillette’s competitive position within it could have a serious negative effect on the
company.
OPPORTUNITIES:

NEW PRODUCT LAUNCHES:

Gillette is known for constantly introducing new products in the market with better
technology and performance. This new product launches will help the company to gain
competitive advantage over its competitors.

GROWING DISPOSABLE INCOME:

INCREASED AWARENESS:
Cable television has penetrated into the smallest of Indian towns and has taken with it
awareness of latest lifestyle trends and trends.

PRICE INCREASES IN PREMIUM SHAVING SEGMENTS:

Gillette has been increasing the price of its razors and blades at an average rate of around
4% per year over the last ten years. This price increase will help the company to
accumulate more profits from the present level of sales.

THREATS:

LIMITATIONS/DISPOSABLES ARE A THREAT TO THE MACH3


OFFERING:

Gillette ability to sustain a price premium and earn an attractive return on its extensive
investment three-blade platform is threatened by the numerous imitators of the
mach3/mach3 turbo franchise, including disposables and private label systems and even
including Gillette’s own three-blade disposable. This numerous imitations are threat to
the company in the long term as they are going to reduce the sales of the original
products.

PRESSURE ON PRICING POWER:

Gillette pricing power is being further eroded by channel migration and increasing
consumer resistance to paying significantly higher prices for innovation. Pricing power is
hey to revenue growth in a mature category especially when Gillette’s strategy has
historically been to drive revenue growth per consumer and not volume growth.

COMPETITIVER ENVIRONMENT:
Gillette faces intense competition in most markets. Its products compete with widely
advertised, well known, branded products, as well as private label products, which
typically are sold at lower prices. The company’s survival depends upon its ability to
adopt itself in this kind of competitive environment.

COMPETITOR ANALYSIS:

COLGATE PALMOLIVE :

Colgate-Palmolive has three products in the shaving cream/gel/foam segment. Palmolive


shaving creams are enriched with revitalizing sea minerals, this rich formula refreshes
skin and protects against razor irritation.
They are formulated with soothing Aloe-Vera, this rich foam is mild on skin and helps
guard against irritation.
One variant is a creamy formula featuring palm extract to hydrate and moisturize skin.
This cream in a long thin tube is very easy to use. As you just put onto your face and use
your shaver and it will get all your stubbles of your face leaving it nice and smooth
The Price of each of these products is mentioned with size of the pack in the table below

HINDUSTAN LEVER LIMITED (HLL ):

Hindustan Lever Limited is the biggest player in the Indian FMCG market. It has two
brands in the shaving cream segment. Axe and Denim.
HLL has extended its brand „Axe‟ which is a success in the deodorant market to the
shaving creams.
The Axe shaving cream has very good awareness scores among the consumers. It comes
in various fragrances, colors and its packaging also has many variants.
Denim is another shaving cream from the house of HLL. This is almost in the same
segent as that of Axe in terms of price and product attributes.
The pricing of shaving products by HLL for both Axe and Denim is almost same. It is
also very similar to that of Old Spice shaving cream. But HLL does not have any product
in the gel or foam category to compete brands like Old Spice and Gillette
GODREJ:

Godrej is the domestic brand of shaving cream for Indian market. Recently Godrej has
invested heavily for the expansion in this market. They have bought a shaving cream
manufacturing and marketing company in South Africa and are looking forward to some
other alliances for the presence in global market.
The shaving cream from Godrej is among the lowest priced shaving cream in the market.
It is targeting the price sensitive customer in the Indian market. But the quality of the
product is satisfactory in spite of its near about half the price than its competitors.
Although, variants are few in terms of size, fragrance and packaging, it is still in the
shopping list of many consumers.
Godrej is a domestic brand of shaving cream and now it is looking to expand in the
global.
STRENGTHS (S):
S1: STRONG BRAND
EQUITY:
S2:MARKET WEAKNESSES (W):
LEADERSHIP PROFITABILTY HIGHLY
DEPENDENT ON CORE
BUSINESS
S3:Investing heavily in
Advertisement and Promotion
schemes

WO STRATEGIES:
They should focus more on R&D,
aesthetic, design and packaging in
order to explore new segments of the
SO STRATEGIES: market.
OPPORTUNITIES (O):
Use S1, S2 & S3 to capture O1
O1: GROWING
Gillettee India should focus on They should also focus on marketing
DISPOSABLE INCOME
producing shaving products like concept in order to meet the needs of
O3: INCREASED shaving cream for the middle different segments of market.
class of India as their disposable
AWARENESS
income is growing. They should make their distribution
system more effective by attracting
mega dealers and retailers by giving
them special promotions and
incentive schemes.

ST STRATEGIES:
Use S2 to cater T1:
They should use competitive
edge of their brand name and WT STRATEGIES:
THREATS (T): image to take the lead from their Various designs, distinct features
competitors. and products with the touch of some
T1: COMPETITIVER
As they have good industrial innovation should be made available
ENVIRONMENT relations so they should go for to the consumer market in order to
joint venture with an established cope-up with the competition.
partner which is capable of
providing good leadership and
direction to the company.
TOTAL MARKET CAPTALIZATION

100000

80000

60000

40000

20000

0
1 2 3 4 5 6 7 8 9 10
GILLETE COMPETITOR

100
1
90
2
80
3
70
market share

4
60
5
50
6
40
7
30
8
20
9
10
10
0
1 2 3 4 5 6 7 8 9 10
gillette competitor