Businessweek Archives

How Gillette Is Honing Its Edge


The Corporation

HOW GILLETTE IS HONING ITS EDGE

When Colman M. Mockler Jr. died in early 1991, Gillette Co. was quick to reassure everybody that its strategy wouldn't change much under his successor, 22-year Gillette veteran Alfred M. Zeien. Understandably so. In his 15 years as CEO, Mockler had transformed Boston-based Gillette from a poorly focused, stodgy company into one of the world's most fearsome marketers, fending off four takeover attempts and making Gillette a darling of Wall Street. Zeien, an engineer and architect by training who had been vice-chairman for a decade, was widely seen as a safe pair of hands.

Safe, maybe. But hardly arthritic. After more than a year of relative quiescence, Gillette has become a blur of motion. This summer, it launched Sensor for Women, an attempt to replicate the success of the Sensor razor, launched in 1990. In August, Gillette took majority control of China's biggest razor blade maker, extending its reach into the world's most populous country. Then, on Sept. 10, the company announced it would pay $561 million for Parker Pen Holdings Ltd. Combined with its own Paper Mate and Waterman brands, that would make Gillette by far the world's largest maker of writing instruments.

OLD PATH. There's more. On Sept. 22, Zeien is scheduled to introduce a line of men's toiletries. Years in gestation, the new line represents a risky, perhaps final, attempt by Gillette to fix its flagging toiletries operation. The trouble: Despite its preeminence in razors and blades, Gillette has had difficulty persuading men to stock other Gillette goods in their medicine cabinets. In part, that's because its offerings, including Right Guard deodorant and Foamy shaving cream, have suffered from unfocused marketing and commodity pricing. The new line, which Zeien says will cost more than $100 million by the time it's rolled out, is supposed to fix all that.

Little of this hyperactivity represents a bold departure from the path set by Mockler. But analysts give the 62-year-old Zeien credit for seizing opportunities for long-term growth and for fine-tuning operations. "Zeien hasn't changed the strategy but enhanced it," says Andrew Shore, a consumer products analyst at PaineWebber Group Inc. Despite the global recession, Gillette's results show a steady improvement since Zeien took over. Net income in the first six months increased 20%, to $249.9 million, on sales up only 9%, to $2.4 billion. That follows a 16% net gain in 1991. The growth has been powered by Sensor and Oral-B, its toothbrush and oral care operation.

Of Gillette's recent moves, by far the riskiest is the toiletries line. Gillette's track record there is spotty, with successes in the 1960s and 1970s followed by a series of disappointments, such as a failed foray into European women's toiletries in the 1980s. But Gillette's strength is with men, and executives are convinced they can use their strong brand name as an umbrella for a wider range of men's products. Zeien won't detail the new offerings, but the line will likely include 14 items, notably pre- and after-shaves and a gel shaving cream. The most innovative product: a gel-based deodorant that will roll on using a patented, sievelike delivery system.

Mockler had been planning to roll out the line last year, but Zeien canceled the introduction two weeks after he took charge. "I decided we would only launch when testing showed consumers preferred all 14 mf our products, hands down, to the best-performing product on the market," says Zeien. With that condition met, at least in internal tests, the line will be rolled out late this year, with an ad blitz to start during the Super Bowl in late January--just like Sensor.

PEN PALL. Will it work? Many outsiders are skeptical, citing Gillette's sorry record in toiletries. Besides, competition has become very stiff in the once fragmented men's toiletries business. Procter & Gamble now owns Old Spice and Noxzema, Colgate bought Mennen, and Unilever grabbed Faberge's Brut brand. "You've now got some sophisticated worldwide marketers in this business," says Allan Mottus, a New York retailing consultant. But, he adds, "nobody has a better brand name than Gillette." If the line flops, some believe Gillette should simply abandon the whole field. Zeien says that won't happen.

The Parker Pen acquisition, on the other hand, has won nearly universal plaudits from analysts as a strategically sound move to expand a business in which Gillette is a world power. The only problem: possible antitrust difficulties. In the U.S. and some European countries, Gillette's share of the market for refillable pens would be quite high. Parker Chairman Jacques G. Margry figures the share in Britain and France would be 60%. The British Office of Fair Trading is checking into the merger, as are authorities in other countries.

Meanwhile, Gillette's main blade and razor business surges along. It reaps an amazing 32% operating margin on razors and blades, which accounted for 37% of sales and 62% of profits last year. Sensor ought to keep profits rising. In under three years, the cartridge system has taken 17% of U.S. blade sales, and 13% worldwide. Rival Schick's Tracer razor, which features a flexible cartridge rather than Sensor's spring-mounted blades, has just 2.4% of U.S. sales.

EASY SELL. If men like Sensor so much, Gillette figured, women should, too. The Sensor for Women employs essentially the same cartridge technology as its male cousin, which kept development and tooling costs down--under $10 million, says Zeien. The main difference is the superwide handle on the women's version, designed for easy gripping. Early signals are positive. Gillette shipped 3.5 million razors and 12 million blades in the first three months, about 50% ahead of its target. That was before Gillette's $14 million national advertising campaign kicked off in early September. But don't expect Sensor for Women to become a huge money-maker. For one thing, the U.S. women's blade market is barely one-third the size of the men's.

To keep its heady growth continuing into the next century, Gillette is counting on international sales. With about a 50% share of the developed world's razor and blade market, Gillette is moving strongly into the developing world and the former Communist bloc. In addition to the Chinese venture, it has taken control of a big blade maker in India, and a new factory in Russia should start pumping out blades this fall. The way Zeien figures it, Gillette's products are an easy sell: Men in all these countries already shave using indigenously produced blades. "Ours are technologically superior, and we can produce them at a very low cost," he says. Now, how do you say "Sensor for Women" in Urdu?Mark Maremont in Boston, with Paula Dwyer in London


Hollywood Goes YouTube
LIMITED-TIME OFFER SUBSCRIBE NOW

(enter your email)
(enter up to 5 email addresses, separated by commas)

Max 250 characters

 
blog comments powered by Disqus