The company ingeniously marketed its self-shaving products by selling shaving kits to the US military during WWI. When the war ended, Gillette strategically used advertisements to ensure the soldiers did not lose the habit. The company’s advertisements slowly built the brand image and established a clear association between shaving and Gillette.
During the 1930’s Gillette decided it was time to expand its product mix. They introduced lather shaving cream and pioneered the electric razor. Gillette began to diversify in 1948 with the purchase of Toni (beauty/personal care division). In 1955, Gillette purchased the ballpoint pen company, PaperMate and later would later purchases the prestigious French pen company, Waterman. During the 1960’s and 70’s, Gillette acquired Sterilon Company (hospital equipment), Right Guard and Braun (electric razors, hair dryers, small appliances). In 1984, it purchased Oral-B and in 2004 Rembrandt Tooth Whitening in an aggressive attempt to pursue the oral care industry. In 1996, Gillette entered the battery market by purchasing Duracell Batteries. However, by 2000, Gillette had sold off the majority of these acquisitions – its stationary sector and its hair products division. Gillette continued to focus its attention on the razor, personal hygiene, oral care, and small appliance industries.
Proctor and Gamble was founded by Candlemaker William Procter, an English immigrant and soap maker James Gamble, an Irish Immigrant. In 1837, the immigrants two joined forces and launched a new enterprise in Cincinnati, Ohio; Procter & Gamble gradually transformed into a billion dollar industry. During the war, P&G was awarded several contracts to supply soap and candles to the union army, which kept the factories incredibly busy during this period. Once a domestic staple, after the advent of the electric light bulb, the demand for candles declined dramatically and the product line was discontinued in the 1920’s. Soap, however, is still one of the company’s staple products and was the first company to advertise nationally direct to consumers (Ivory soap in the 1880’s) and it basically created the concept of the ‘soap opera’, by sponsoring daytime radio and television shows targeting women. Some of P&G’s subsidiary companies include: the Iams Company (pet supplies/food), Clairol (beauty), and Wella (beauty). Unlike Gillette, P&G’s products are incredibly diversified. However, with products like Tampax tampons, Panteen Pro-V hair care products, and Revlon and Max Factor cosmetics; in contrast to Gillette, P&G’s personal care sector is considerably female oriented. This, as aforementioned, makes for the perfect partnership.
Product Line:
Gillette
Razors: Gilette is best know for its male and female oriented electric and disposable razors: Sensor, Sensor Excel, Mach-3, Mach Turbo, Trac II, Good News!, Daisy, Sensor for Women, and Venus.
Batteries: Duracell is the top selling battery in the world. The Company’s range of alkaline batteries includes the Duracell CopperTop, Duracell primary lithium, zinc, air, and metal rechargeable nickel-metal hydride batteries.
Oral Care: The Gillette Company offers manual and electric toothbrushes under the Oral-B brand and sells whitening toothpaste under the name of Rembrandt.
Small Appliances: Gillette sells electric shavers under the Braun brand and hair Epilators under the Silk-Epil brand. It also sells small household and personal care appliances under the Braun brand.
Personal Care: The Company sells shaving complements that include after-shave and shaving cream. It also markets anti-per spirants under the Right Guard, Soft & Dri, and Dry Idea brands.
P & G
Baby Care – P&G sells diapers, wipes and other baby products under the name Pampers, Luvs, and Bibsters.
Beauty Care – P&G sells cosmetics, fragrances, hair care, deodorants/antiperspirants, personal hygiene, and skin care products under the names Old Spice, Cover Girl, Max Factor, Head & Shoulders, Pantene, Oil of Olay, Vidal Sassoon, Pert Plus, Circ, Secret, Zest, Hugo Boss, and Laura Biagotti.
Feminine Care – P&G sells sanitary pads and tampons under the names Always and Tampax.
Food and Beverage – P&G markets cat food, snacks, shortenings, oils, beverages and peanut butter under the names Crisco, Jif, Sunny Delight, Pringles, and Iams.
Health Care – P&G sells over the counter gastrointestinal medicines, oral care products, and cold & flu products under the names Crest, Iams, Dantrium and Vicks.
Tissues & Towels – P&G sells facial, toilet tissues, and paper towels under the brand names B ounty, Charmin, and Puffs.
Gillette and Procter & Gamble Products
Market Structure:
Both Gillette and Procter and Gamble conduct business within established market sectors. The nature of the market structure makes it incredibly difficult for new firms to enter into the business. Recently, the new kids on the block have been the private labels which are able to offer low cost products. However, due to the high entrance barriers, new companies attempting to enter the market have quickly gone bankrupt, unable to generate enough sales and capture the necessary amount of market share needed to stay afloat in the sea of mutual competition. Gillette and Procter and Gamble conduct business in a market where there are many competing substitute products and beneficial complement products. Looking at both companies laundry list of brand names most likely conjures up images of similar products: Bic Razors, Neutrogena Make-up, Huggies diapers, etc. The main substitutes are upgrades from the existing product, like Luvs leakage protection diapers vs. Huggies ultra super mega-promise-to-never-leak diapers. This is a never-ending problem these firms are faced with, the entrance of superior products stealing their market share.
Lastly, both companies operate in an environment where a wide-variety of products are offered, there are many unique buyers that included general consumers, the US government, hospitals, day spas, beauty salons, schools, etc. The typical consumer is concerned with price and quality of a certain good. However, regardless of the product’s quality, if there is another product at half the price, of course the cost conscious consumer will select the inexpensive product. Moreover, many consumers swear brand allegiance and once they find a product that completely satisfies them, they will stick with the product unless persuaded another is far superior to their current product. Product loyalty also applies to Warehouse purchasers like Costco, Sam’s Club, and Wal-Mart. When they discover that a certain brand is selling better than another, they will buy more of that item and decrease their orders of the less popular item, eventually eliminating it from their shelves. Basically, this put Gillette and P&G in a rather precarious position because they must inexpensively produce the highest quality goods in an effort to appease the entire marketplace.
Proctor & Gamble and Gillette must strive to understand consumer needs in order to transform these wants and desires into product innovations. Creating demand and developing clever marketing strategies is a significant part of the industries in which they operate.
Corporate Governance/Conduct:
Product Honesty:
Proctor and Gamble’s juice drink “Sunny Delight” is marketed as ‘the great stuff kids go for.’ In the supermarket, the drink is even stored next to the dairy products in an effort to highlight the freshness of the product. The last category Sunny D should be marketed under is “healthy beverage”. However, savvy parents and informed consumers are beginning to see past the smoke and mirrors Proctor and Gamble have surrounded their juice drink with. Concerned parent Katyhryn Flett claimed that Sunny Delight’s health claims were overrated, “there is only 5% juice in each bottle, that leaves 95 percent Other Weird Shit pretty much unaccounted for.”
P&G produced a controversial fat substitute olestra, marketed under the name Olean. In 1995 the FDA approved olestra for testing in several states, despite many complaints about the fat substitute. In all, about 800 consumers had reported mild to moderate side effects, including diarrhea, according to the FDA, “More alarming is olestra's ability to wash out of the body certain nutrients believed important for preventing disease. While P&G will fortify Olestra with vitamins A, D, E, and K, it will not add back a controversial class of nutrients known as carotenoids, which many believe, protect against cancer. This nutrient depletion "could potentially produce a large number of deaths annually and major morbidity in the US population." P&G says evidence for that is lacking.
Pollution and Animal Rights:
Gillette and Procter and Gamble have been attacked by environmentalists regarding excessive product packing and in 1993, P&G was accused of “dumping millions of gallons of dioxin-contaminated water into the Fenholloway River.” Both companies have been confronted by PETA, as well as several other animal right groups, concerning their alleged animal abuses. At a shareholder meeting, a P&G stakeholder voiced his disgust over his company’s complete neglect towards animals, “Every year thousands of rabbits, ferrets, guinea pigs, hamsters, rats and mice are killed to test cosmetic and household products. P&G engages in these tests despite the fact that they are not required by law and despite the fact that more reliable and more humane alternatives do exist.”
Future:
The merger between P&G and Gillette will allow for the company to take on Wal-Mart. P&G is already the world’s largest consumer products company, with sales of $51.4 billion last year. According to Financial Times, the deal between the two companies means that bargaining power will be enhanced with big retailers such as Wal-Mart, putting it in a particularly strong position to penetrate harder into emerging markets such as Eastern Europe and Asia. However, the acquisition of Gillette with estimated sales of $10.3 billion gives it more sway negotiating sales contracts with large retailers. The merger is also expected to put pressure on competing firms, such as Bic, Unilever, Kimberly Clark, Nestles, and Colgate-Palmolive. Furthermore, the merger between the two powerhouses is likely to promote international expansion. The Companies expect to save $14 billion, but t the merger will force the Companies to eliminate of 6,000 jobs.
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