Two to Tango

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Authors: Pradip Sinha & Sadhu Ramakrishna
Associate Consultant, Research Associate,
ICMR (IBS Center for Management Research).

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Abstract: P&G's mega deal with Gillette will add to its charm of becoming the biggest consumer and household goods producing firm with the addition of some super brands to its name. However, like all other mergers, this also has its own share of twists and turns to tell.

The merger is going to create the greatest consumer products company in the world. It's a dream deal.

- Warren Buffet, chairman and CEO of Berkshire
Hathway Inc and Gillette's largest share holder.

The Story So Far

A new year leaves behind her the old happenings and promises to bring with her new surprises and 2005 is no different in keeping this tradition of giving consumers all over the world one of its biggest surprise of the recent times. Two of American's largest consumer durable firms are getting intimated to each other in a short span of time.

Cincinnati-based, Procter & Gamble (P&G), the maker of Pampers, Tide, Ariel, Whisper, Pringles and many other popular consumer and household goods is going to acquire the Boston-based, world's leading and most stylish makers of Men's Shaving products firm Gillette in a deal estimated to be around $57 bn.

By acquiring Gillette, P&G will be adding to its portfolio the world's best shaving items which were missing in their kit. This is what P&G's CEO Alan Lafley thinks -It is quite necessary to surpass close competitors, particularly in the developing countries.

Procter & Gamble

Procter & Gamble was founded in Cincinnati in the year 1837, by William Procter an English candlemaker and James Gamble an Irish soapmaker. They sold candles and soaps under P&G's name and in 1859 the company achieved a sales figure of $1 mn. In 1879, P&G's popular soap brand 'Ivory' was produced for the first time, and by 1890 P&G was selling almost 30 different soaps. With an increase in demand for its soaps, in 1904, P&G started manufacturing outside Cincinnati. The company worked towards manufacturing innovative products and employed researchers for that task. It established its first manufacturing facility in Canada in 1915 and overseas subsidiary in UK in 1930 by purchasing Thomas Hedley & Sons Co., Ltd. Gradually, P&G expanded its business through acquisitions and new ventures.

It acquired several brands through which it was able to reach the top position. By 1937, P&G's 100th anniversary, its sales were $230 mn. In 1946, P&G introduced Tide, its most popular detergent powder and by 1950, Tide became the best laundry product in the US. Crest toothpaste was introduced in 1955 and gradually the company grew its business in the personal and health care segment. The company even entered other areas of business viz., paper products, coffee etc. Its acquisition spree continued as in 1985, it acquired Richardson-Vicks. In 1988, P&G entered into a joint venture with a Chinese firm, to manufacture products in China.

P&G later moved into women's cosmetics segment with the acquisition of Noxell and CoverGirl and men's personal care segment by acquiring OldSpice. In 1999, the Company acquired Iams to mark its entry into the global pet health and nutrition business. The same year, P&G suffered huge losses until Alan G Lafley stepped in as the CEO and helped P&G regain its past glory.

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