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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Gillette

In 1901, King Gillette and William Nickerson established Gillette Safety Razor Co. King Gillette had an idea to manufacture disposable razor which would be safer, but experts opined such idea would not materialize. But, Gillette worked on this with Nickerson, a machinist from Massachusetts Institute of Technology and in 1904 they built a machine for double-edged safety razor and obtained a patent for the same. Since then, Gillette has been considered an innovative company. The company started its first overseas operation in London in 1905.

In 1920, the company offered free razors and thus gained millions of customers. By then Gillette's overseas business accounted for 30% of the company's sales. Gillette stepped down from the Company President's seat in 1931. The company began to advertise its products and in 1939 it spent $100,000 on advertising during the World Series sports events. In 1955, the company's name was changed to 'The Gillette Company'. Gillette introduced its shaving cream in 1953 and in the later years went on expanding its product line with Right Guard deodorant, Cricket lighters and Eraser Mate pens.

In 1967, Gillette acquired Braun, manufacturer of electric shavers and appliances and in 1971 it entered personal care division with the acquisition of Toni Home Permanent Kits. Oral-B, the popular tooth-care brand was acquired by Gillette in 1984. During the late 1980s, Gillette successfully defended a few takeover attempts by big companies like Revlon and Coniston Partners. Gillette acquired the No. 1 battery maker Duracell in 1996. P&G also made a futile attempt to takeover Gillette. Gillette maintained its innovative history with the introduction of Mach3, a triple-blade razor, which went on to become the No. 1 razor in the US. But, with sales figures declining in the overseas markets, Gillette resorted to price cuts and job cuts. In 2001, James M Kilts was named the Chairman and CEO of the company. He was successful in changing the fortunes of Gillette and by the year 2004, Gillette saw huge profits.

Business for the Times

With the recent move of P&G to acquire 100% stake in Gillette, it seems the era of corporate mergers and acquisitions is back in the business, where companies used to get merged or acquire other companies in order to grab a better market share and stay ahead of their competitors. Just a couple of months ago, Kmart and Sears got themselves engaged and later it was Nextel and Sprint who announced their wedding of $35 bn. The most recent one is that of P&G and Gillette. The trend is set to continue with Johnson and Johnson proposing to buy Guidant in a $35 bn deal.

Figure 1 gives a clear picture of the sales, profits, and leading brands of both the companies involved in this mega merger.

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