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

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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

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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

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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

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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

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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

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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

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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
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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

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Female Razors

Strong history of innovation

1915- First razor for women 'Milady Decollete
1975- Gillette Daisy, 1st disposable womens 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
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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

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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

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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, antiperspirants, deodorants and shower gels

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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

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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
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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 Mach3allows 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

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Gillette Fusion

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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
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Gillette Fusion Marketing

Competition- least worry- 5 blade razor possible, but not with
comparable technology & expertise
Key to Gillettes 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

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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.

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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
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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
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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
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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

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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

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Gillette Soccer idents

Gillette ads in a football context ensure attention
Football club officials lay out players kit pregame
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
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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
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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
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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

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Gillette Geography
Geography

Contribution %

North America

40

Western Europe

33

Asia Pacific

10

Africa/Middle East/Eastern Europe

10

Latin America

7
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P&G M&A 2005- $57 billion

For P&G

For Gillette

Strategic fit, Scale

More trade muscle
Hi-growth market entry
Significant EM presence
Added a Colgate to sales
No Unilever presence
21 bn$ brands, $200 bn mkt cap

Part of a FMCG giant

Consummate marketer
Adds Innovation skills
Gillete global reach
Mens grooming synergy

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
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Pre M&A
Sales
Profits
R&D Spend
Leading
Brands
Employees

P&G
$51.4 bn
$6.5 bn
$1.8 bn

Gillette
$10.3 bn
$2.3 bn
$0.2 bn

Tide, Bounty, Crest,

Mach3,Gillette,
Ariel, Pampers, Pringle,
Oral-B, Duracell,
Wella, Olay, Head &
Braun
Shoulders
110,000
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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

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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
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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

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India

2007- 454 Cr
Own Plant at Bhiwadi, Haryana
One of Gillettes 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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