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GILLETTE INDIA LTD.: FIGHT FOR DOMINANCE
The Best a man can get?
When P&G bought Gillette for $57 billion in 2005, it earned Criticisms galore. Six years later, The Brand has already added $32 billion to P&G’s kitty. If Gillette’s India Market Performance improves fast, the coffers will only swell further. And there are signs of that happening.
Issue Date - 18/08/2011
 
The electric shaver and the safety razor have cut deep into the American and European markets but many Indians still strop their own razors or visit a barber for a shave. In fact, as per a CII official, over 50% of India’s 600 million males shave outside their homes in salons. Naturally, for Gillette, the world’s top razor-blade maker, India is a highly attractive market with a vast potential. Indian men on an average shave only 2.5 times a week, far lower than, say, Koreans and Japanese. But cracking this market, especially the mass segment, is not proving to be easy for Gillette. Years of conventional marketing and advertising have won it a premium brand image, but Gillette lags behind rivals in India because consumers can’t afford to buy its flagship products. So while it dominates the Rs.10 billion blades and razors category at the top-end of the market, family-owned Indian companies such as the Houses of Malhotra and Vidyut dominate the mass market.

Gillette India’s revenue of Rs.8.52 billion for FY2009-10 (July ‘09 to June ‘10) looks healthy given that it contributes to 19.4% of its parent Procter and Gamble’s India business (which amounts to Rs.44 billion). But Gillette’s India glory-tale is chicken-feed when compared to the brand’s global revenue of roughly $8 billion! Understood that the brand globally contributes to a much lower 10.13% of the total sales of P&G, but the fact that India contributes just 2.37% of Gillette’s total revenue invites nothing less than shame for a 28 year-old brand. Across the world, Gillette accounts for about 70% of the razors and blades sales, but in India, it has failed to live up to its spectacular global performance. And even though it is currently the market leader in the five billion-units-a-year razors and blades market in India with roughly 40% share, its performance here pales in significance to its global dominance. Just 10% of Indian men who shave use Gillette blades, compared with about 50% worldwide.

Gillette’s personal care products – shaving systems and cartridges, razor blades, toiletries, and shaving brushes – represent what the company is all about in India. The category accounts for a little over Rs.6 billion in sales – 70.42% of all that the company rustled up sales-wise during its last accounting fiscal (ended June 2010). Next in the pecking order is oral care, comprising toothbrushes and other oral care products. This division brought in sales of Rs.2.2 billion or 25.82% of all sales. Then there is the portable power products division, made up of battery sales, which rang in 3.76% of its sales.

 
Gillette’s run reads good so far. But read deeper and you realise why the P&G acquired entity’s tale cannot be tagged superlative yet. Gillette has been in India since 1984, but its revenues are no match to what some other late-entrant MNCs are earning in the Indian market. For a quick comparative analysis, take for instance, Perfetti Van Melle (PVM). The Italian global leader in candies, entered the Indian market in 1994, with its first branded product in the form of Center Fresh. It became a runaway hit and was followed-up with the launches of Big Babol and Alpenliebe in 1995 – two more brands that have done justice to PVM’s trust in India’s consumerism. During the financial year which ended in December 2010, PVM recorded a topline of Rs.12 billion in the Indian market. Interestingly, PVM’s target audience – kids – have a far lower purchasing power than Gillette’s adult males, for whom shaving is not an indulgence but a necessity. Clearly, Gillette hasn’t been aggressive enough to expand its Indian market.

For its less-than-extraordinary show in India, critics often blame Gillette’s premium positioning, its reluctance to innovate with low-priced products and its singular focus on developed markets, especially its home market, the US. In fact, it introduced razors quite late in India, and was initially present in the blades segment, selling brands like 7 O’Clock and Wilkinson’s Sword, where the likes of Topaz made its living tough in the mass market.

Around 1993-94, Gillette started launching its innovative and differentiated shaving products like Gillette Presto Readyshaver in 1993, 7 O’Clock Ready II and Oral-B toothbrush in 1995, and aerosol shave gell and Gillette Sensor & Sensor Excell shaving systems in 1996. These launches helped it become the leader in the-then Rs.30-billion branded men’s grooming market. But its razors were priced too high to be widely accepted. Trying to be niche & premium made it bleed.

But things have been changing for Gillette in recent years, especially after global FMCG goliath P&G acquired it for $57 billion in 2005. Today, Gillette contributes almost 10% of P&G’s global revenue of $79 billion. But, clearly it has more to offer in emerging economies like India and China, which are still under-penetrated. According to a 2009 company report, India’s per head spend on P&G’s products is just about $1 per head, while it is $3 in China. If that was seemingly high, here is how much an average American spends on P&G products every year – $112! For starters, Gillette and P&G want to take China and India’s consumption levels of its products to that of Mexico, where the average consumer spend is $20. It looks like a target well within reach, but it will take some years of toil and careful planning getting there. If that happens, P&G might be able to add an additional $40 billion in revenue to its kitty, and increase its India sales by 50% to touch Rs.66 billion. And Gillette will be key to delivering that fortune.

          

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