Where next for gillette?
January 30, 2005
Analysts are busy trying to determine what the end result of P&G’s acquisition of Gillette could be. Influx decided to add to the speculation with some of our own ideas.
P&G have managed to be one of the few consumer goods companies that have thrived in the era of Wal-Mart power. They’ve achieved it through innovation and smart brand management.
So what’s going to happen with Gillette?
Procter will evaluate Gillette’s portfolio to see what fits
Shaving-Gillette owns this profitable category. It’s the jewel of the acquisition and we can expect Procter to work closely with Gillette’s innovative R&D team to maintain Gillette’s edge. In additon, it will look for opportunities for innovation transfer to other Procter brands
Oral B– obvious addition to the Procter’s strong dental care line, but it will need to clearly differentiate its positioning from Procter’s powerhouse Crest.
Male skincare- again, the Gillette brand is an obvious fit, so Procter can build and expand on the Gillette name
Toiletries– Right Guard could receive investment and innovation, perhaps even move directly into shaving, the other weaker female deodorants could be sold
Braun doesn’t from first glance look like an obvious fit, but Procter has been moving more into electronics recently, so its departure is not certain
Duracell batteries don’t really fit in the portfolio and could be sold
Create a Service Business
At the same time Procter announced the acquisition, they also moved to test market a hotel cleaning business. This innovative step takes the company’s cleaning brands into the higher margin service business.
An obvious move for Procter and Gillette would be to go into the barbershop business, not to take on Supercuts, but to use the retail environment as a product showcase center and for new product trial.
Unilever did try this in the UK in 2001 with the Lynx/Axe brand. They opened two trial stores, but quickly closed them after the stores failed to meet expectations. Unilever had problems because they didn’t know retail well enough. Procter would need a partner to help.
The Gillette deal will see Procter drive for economies of scale by consolidating manufacturing resources, supplies and probably media buying and advertising.
Much has been made of Procter trying to strengthen its position against Wal-Mart, this might be the case, but the companies have been working closely together for years and the relationship is already strong. It should also be noted that the combined entity would still account for only around 8% of Wal-Mart’s sales.
Influx expects this aquisition to be a catalyst for others in consumer goods who will to look to strengthen their position through acquisition, as more consolidation appears likely in the category, one obvious aquistion target is Heinz.Next post Previous post