Gillette's Restructuring in India
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Case Code: BSTR129 Case Length: 15 Pages Period: 1984-2004 Pub Date: 2004 Teaching Note: Available |
Price: Rs.400 Organization: Gillette India Ltd. Industry: Consumer Products Countries: India Themes: Corporate Restructuring |
Abstract Case Intro 1 Case Intro 2 Excerpts
Excerpts
Segmentwise Information
In 1986, the Indian razor blade market was valued at Rs 2 billion. As per figures provided by GIL, the total razor blade market in India in 2003 was Rs 6 billion by value and 3.8 billion units by volume. India is the world's largest market for Gillette in terms of volumes. The double-edge segment formed 97 per cent of the Rs 6 billion Indian blade market. Half of this came from salon usage. Eighty per cent of Indian consumers used double-edged blades. However, the growth in value share of twin blades from three per cent of the total value (Rs 60 million) in 1986 to 28 per cent (Rs 1.68 billion) in 2003 showed that twin blades had made considerable inroads into the Indian market. Systems and disposables accounted for three per cent of the Rs 6 billion market. The triple blade segment, a segment charting growth, occupied two per cent of the market. 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...
Restructuring
In the mid 1990s, Gillette went into an acquisition mode to grow in the Indian market. It made two acquisitions in 1998 -- the oral care division of Parle and Geep non-alkaline batteries from the Geep Industrial Syndicate. Oral B was launched in India in the year 1996 and was targeted at the upper segment of the market. The oral care business was showing faster growth and therefore the company began exploring ways to increase its presence in the urban and rural market. The Indian arm of Gillette also felt the need to align its operating practices with global practices. Globally, Gillette had a two-brand strategy in the oral care segment. In 1998, Gillette acquired the Prudent brand from Parle. Customers had certain perceptions about the Prudent brand, which Gillette had to change. Prudent was known as a paste/mouthwash brand rather than a toothbrush brand. Parle had repeatedly repositioned Prudent, creating confusion in consumers' minds. Gillette revamped the entire product range by totally changing the package to make it look more contemporary...
Returns on Restructuring
In 2002, GIL posted a net profit adjusted for extraordinary items at Rs 65 million. Operating expenses went down by 24.6 per cent to touch Rs 3.39 billion and raw material consumption fell by 36.7 per cent to Rs 654 million. The financial year 2003 saw a 594 per cent growth in net profit, touching Rs 448.2 million. This was the highest growth for GIL in its 20- year history in India. In 2003, sales in the grooming business went up by 23 per cent to Rs. 2.81 billion, oral care sales and battery sales went up by 44 per cent and 20 per cent respectively. "Divestiture from non-core businesses, enhanced focus on core businesses, increased spends on marketing and strategic thrust towards functional excellence have borne fruits," said S. K. Poddar, Chairman, GIL. The company's net cash flow continued to increase through 2001-2003 (Refer Exhibit X). In Q1 2004, sales of the company's oral care business went up by 17 per cent (Refer Exhibit V). Oral-B contributed 12.66 per cent to Gillette sales...
Exhibits
Exhibit I: Company Financials
Exhibit II: Company Financials
Exhibit III: Cost Break-Up
Exhibit IV: Gillette Products
Exhibit V: Earnings & PBIT Margins in Business Segments (Rs. MN)
Exhibit VI: Dry Cell Battery Marketshare for 2000
Exhibit VII: Alkaline Battery Marketshare for 2000
Exhibit VIII: Key Financial Ratios
Exhibit IX: Stock Movement of GIL During July 2000 to June 2001
Exhibit X: Cash Flow for 2003, 2002 and 2001
Exhibit XI: Quarterly Financials
Exhibit XII: Half Yearly Financials
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