The Gillette Company

views updated May 11 2018

The Gillette Company

Prudential Tower Building
Boston, Massachusetts 02199
U.S.A.
(617) 421-7000
Fax: (617) 421-7123

Public Company
Incorporated: 1901 as American Safety Razor Company
Employees: 44,100
Sales: $9.70 billion (1996)
Stock Exchanges: New York Boston Midwest Pacific London Frankfurt Zurich
SICs: 2844 Perfumes, Cosmetics & Other Toilet Preparations; 2899 Chemicals & Chemical Preparations, Not Elsewhere Classified; 3421 Cutlery; 3634 Electric Housewares & Fans; 3843 Dental Equipment & Supplies; 3951 Pens, Mechanical Pencils & Parts; 3952 Lead Pencils, Crayons & Artists’ Materials; 5064 Electrical Appliances, Television & Radio Sets

The Gillette Company is the world leader in the men’s grooming product category as well as in certain women’s grooming products. Although more than half of company profits are still derived from shaving equipment—the area in which the company started—Gillette has also attained the top spots worldwide in writing instruments (Paper Mate, Parker, and Waterman brands) and correction products (Liquid Paper), toothbrushes and other oral care products (Oral-B), and alkaline batteries (Duracell products, which generate almost one-fourth of company profits). Gillette maintains 64 manufacturing facilities in 27 countries, and its products are sold in more than 200 countries and territories, with more than 60 percent of sales occurring outside the United States.

Entrepreneurial Beginnings

One summer morning in 1895, an ambitious traveling salesman found that the edge of his straight razor had dulled. King Gillette later said that the idea for an entirely new kind of razor, with a disposable blade, flashed into his mind as he looked in irritation at his dull blade.

King Gillette had been searching for the right product, one that had to be used—and replaced—regularly, around which to build a business. His innovation in shaving technology was just such a product. Another safety razor, the Star, was already on the market at the time but, like the straight razor it was meant to replace, its blade needed stropping before each use and eventually had to be professionally honed. Gillette envisioned an inexpensive, double-edged blade that could be clamped over a handle, used until it was dull, and then discarded.

Gillette spent the next six years trying to perfect his safety razor. Scientists and toolmakers he consulted were pessimistic, and thought the idea impractical. Gillette, 40 years old at the time and a successful salesman, inventor, and writer, did not give up. In 1901 he joined forces with William Nickerson, a Massachusetts Institute of Technology-educated machinist. Nickerson developed production processes to make Gillette’s idea a reality, while Gillette formed the American Safety Razor Company to raise the estimated $5,000 they needed to begin manufacturing the razor. Gillette became president of the company and head of a three-man directorate. Production of the razor began early in 1903.

The renamed Gillette Safety Razor Company began advertising its product in October 1903, with the first ad appearing in Systems Magazine. The company sold 51 razor sets at $5 each and an additional 168 blades—originally at 20 for $1—that first year.

In 1904 Gillette received a patent on the safety razor; sales rose to 90,884 razors and 123,648 blades that year. The following year the company bought a six-story building in South Boston. By 1906 the company had paid its first cash dividend. During the years before World War I Gillette steadily increased earnings through print advertisements, emphasizing that with his razor men could shave themselves under any conditions without cutting or irritation.

At the same time, Gillette was expanding abroad. He opened his first foreign office, a London sales branch, in 1905. By 1909 he had established manufacturing plants in Paris, Montreal, Berlin, and Leicester, England, and offices in France and Hamburg, Germany. By 1923, foreign business accounted for about 30 percent of Gillette’s sales.

In 1910 King Gillette decided to sell a substantial portion of his controlling share of the company to the company’s major investor, John Joyce. Gillette had succeeded in fighting off challenges for control of the company from Joyce in the past, but this time he took approximately $900,000 and bowed out. Gillette retained the title of president and frequently visited foreign branches, but he no longer played an active role in company management. Joyce was made vice-president, a position he used to manage day-to-day operations. When Joyce died in 1916, his longtime friend, Edward Aldred, a New York investment banker, bought out the Gillette shares left to Joyce’s estate and took control of the company. Aldred remained on Joyce’s management team.

Razors Supplied to Soldiers in World War I Increased Customer Base

During World War I the U.S. government ordered 3.5 million razors and 36 million blades to supply all its troops. In order to meet military supply schedules, shifts worked around the clock and Gillette hired over 500 new employees. Gillette thus introduced a huge pool of potential customers to the still-new idea of self-shaving with a safety razor. After the war, ex-servicemen needed blades to fit the razors they had been issued in the service.

In 1921 Gillette’s patent on the safety razor expired, but the company was ready for the change. It introduced the “new improved” Gillette razor, which sold at the old price, and entered the low-priced end of the market with the old-style razor, renamed the Silver Brownie razor, priced at only $1. Gillette also gave away razor handles as premiums with other products, developing customers for the more profitable blades. Expansion and growth continued.

The company also continued to expand abroad. In 1922 Gillette became royal purveyor to the prince of Wales and in 1924 to King Gustav V of Sweden. More favorable publicity followed when the Paris office gave Charles Lindbergh a Gillette Gold Traveler set the day after he completed the first transatlantic flight.

By the end of the decade, Gillette faced its first major setback. Auto Strop Safety Razor Company, owned by Henry J. Gaisman, filed suit for patent infringement after Gillette produced a new blade using a continuous-strip process similar to one originally presented to Gillette by Gaisman.

Gillette resolved the suit by merging with Auto Strop, only to face another problem. When Gaisman checked the company’s financial records, he found that Gillette had over-reported its earnings for the past five years by about $3 million. Confidence in Gillette fell, as did its stock. From a high of $125 early in 1929, the stock bottomed out after the disclosure, at $18.

The crisis led to management reorganization. King Gillette resigned as nominal president, and died 14 months later at age 77. Gaisman became the new chairman of Gillette and Gerard B. Lambert, son of the founder of the Lambert Pharmacal Company—makers of Listerine—and a former manager there, came out of retirement to become president of Gillette. Lambert agreed to work for no salary with the guarantee of company stock if he could bring earnings up $5 per share.

Under Lambert, the Gillette Company made a bold advertising move: it admitted that the new blade it had brought out in 1930 was of poor quality. The company then announced what became its most recognizable product, the Gillette Blue Blade. Made under Gaisman’s strip-processing method, the Blue Blade promised uniformly high quality.

The Blue Blade kept Gillette the leader in the field, but profits remained disappointing throughout the Great Depression, as men increasingly turned to bargain blades. Lambert resigned in 1934 without meeting his goal of improving earnings and without receiving compensation from the company. He was replaced by a former Auto Strop executive, Samuel C. Stampleman, who had no more success. With profits at their lowest since 1915, the board of directors appointed Joseph P. Spang Jr. president in December 1938 in an effort to invigorate the company.

Sports Advertising Boosted Sales Beginning in the Late 1930s

Spang immediately restored the company’s advertising budget, which had been cut to save money. Under this policy, Gillette’s trademark sports advertising developed. Spang purchased radio broadcast rights to the 1939 World Series for $100,000. Despite a short series, in which the Cincinnati Reds lost four straight games to the New York Yankees, sales of Gillette’s World Series Special razor sets were more than four times company estimates.

This success encouraged more sports advertising. By 1942 the events Gillette sponsored were grouped together as the “Gillette Cavalcade of Sports.” Although it eventually included the Orange Bowl, the Sugar Bowl, and the Kentucky Derby, in addition to the World Series and the All-Star game, the “Cavalcade of Sports” became best known for bringing boxing to American men. Spang attributed Gillette’s continuing success to the sports advertising program, and sports programs remained an important vehicle for Gillette advertising.

Company Perspectives:

The Gillette Company is a globally focused consumer products company which seeks competitive advantage in quality, value-added personal care and personal use products. We compete in three large, worldwide businesses: personal grooming products, stationery products, and small electrical appliances. As a company, we share skills and resources among business units to optimize performance. We are committed to a plan of sustained sales and profit growth which recognizes and balances both short- and long-term objectives.

During World War II foreign production and sales declined, but domestic production more than made up for those losses. Almost the entire production of razors and blades went to the military. In addition, Gillette manufactured fuel-control units for military-plane carburetors. The backlog of civilian demand after the war led to consecutive record sales until 1957.

Diversification Began Following World War II

During the profitable postwar period Spang began to broaden Gillette’s product line. The company had introduced Gillette Brushless shaving cream, its first, nonrazor, nonblade product, in 1936. In 1948 Spang began to diversify by acquiring other companies when he bought the Toni Company, a firm that made home permanents. In 1955 Spang purchased Paper Mate Company, a manufacturer of ballpoint pens.

When Spang retired in 1956, Carl Gilbert became CEO. During the 1960s Gillette faced a threat to its bread-and-butter product, the double-edged blade. In 1962, the English Wilkinson Sword Company began to export stainless-steel blades to the United States. Wilkinson had developed a polymer coating that made it possible to put an edge on stainless steel, which resists corrosion, increasing the number of shaves from a blade.

Two of Gillette’s domestic competitors—Eversharp, which made Schick blades, and American Safety Razor—rushed versions of the stainless-steel blade onto the market. Gillette, the market leader, was left behind without a stainless-steel blade of its own to compete, and profits slumped in 1963 and 1964. Gillette recovered much of its market share through a simple strategy: developing a better blade and initiating an aggressive advertising campaign that emphasized quality. After its own blade hit the market, Gillette’s market share stabilized at 60-65 percent, compared to 70-75 percent before the challenge.

Vincent C. Ziegler, head of the company’s North American razor operation, had developed the razor-marketing strategy, and when Gillette reorganized on a product line basis in July 1964, Ziegler was named president. He took over as chairman of the board in 1965. The stainless-steel blade controversy taught Ziegler not to rely on one product. He saw Gillette as “a diversified consumer products company,” and promoted both internal development of new product lines and acquisition of other companies.

During the later 1960s Gillette pursued this strategy actively, but with mixed results. A new line of Toni hair-coloring products failed, as did Earth Born shampoos, luxury perfumes, and a line of small electronic items such as digital watches, calculators, smoke alarms, and fire extinguishers. Many of the companies Gillette acquired, such as Eve of Roma high-fashion perfume, Buxton leather goods, Welcome Wagon, and Hydroponic Chemical Company—which produced Hyponex plant foods— never found the fit with Gillette comfortable. The acquisitions led to shrinking profit margins.

Gillette did have some successes. The Trac II twin-blade shaving system introduced in 1971 was a success, and the 1970 acquisition of the French S.T. Dupont gave Gillette the disposable Cricket lighter, which Gillette introduced to the U.S. market. By 1971 Gillette had four domestic divisions: the Safety Razor Division; the Toiletries Division, which featured Right Guard deodorant and antiperspirant; the Personal Care Division; and the Paper Mate division.

By the mid-1970s Ziegler was ready to retire, and began to groom outsider Edward Gelsthorpe to succeed him, but Gelsthorpe left Gillette to join United Brands, now Chiquita Brands, 15 months after his appointment as president. Ziegler next tapped Colman M. Mockler Jr. to replace him when he retired in 1975. Mockler had been at Gillette since 1957 and had an entirely different background and style than Ziegler. He had come up from the financial end of the business rather than through sales.

Diversification Moderated Starting in the Mid-1970s

Mockler moderated Ziegler’s diversification policy. He concentrated on a limited number of promising markets, particularly high-volume, repeat-purchase consumer items, selling Ziegler’s least successful acquisitions—including Buxton in 1977, Welcome Wagon in 1978, and Hyponex and the Autopoint mechanical pencil business in 1979—and pumping money into promising companies compatible with already-existing manufacturing or distribution capabilities. Mockler stuck with the Cricket disposable lighter even though high introductory marketing costs and a costly price war with the Bic Pen Corporation, owned by the French Societe Bic, kept it from showing a profit.

Mockler also held on to the West German Braun company. Ziegler had bought the family-owned business in 1967 to gain entry to the European electric-shaver market and for the quality and style of its small-appliance designs. Mockler pared Braun’s less profitable lines and rode out a Justice Department antitrust suit against the acquisition. The suit eventually prevented Gillette from introducing Braun shavers in the U.S. market before 1984. Mockler also increased Gillette’s advertising budget and undertook company wide cost-cutting measures in all other divisions. Before the results of those policies could be seen, Mockler faced other problems. Growing fear of fluorocarbons, which deplete the earth’s ozone layer, affected sales of products in aerosol cans during the 1970s.

Gillette eventually developed new product-delivery systems to replace aerosol cans, such as nonaerosol pumps and roll-ons, for Gillette’s already-established product line, and he put advertising dollars behind the products, which included Right Guard and Soft & Dri deodorants and Adorn and White Rain hair sprays. He also started development of a new deodorant product, Dry Idea, which feels dry when applied. Dry Idea was launched in 1978 after two years of development at a cost of $118 million. It quickly recovered a quarter of the deodorant market for Gillette.

Gillette faced a more serious threat from Bic. In the 1960s Bic came to the United States with a 19¢ disposable pen, which made dramatic cuts into sales of Gillette’s 98¢ Paper Mate pens. In the 1970s Bic attacked Gillette’s Cricket disposable lighter with its own disposable lighter. Since the Cricket was more expensive to make—it had more moving parts than the Bic— Gillette was losing the price war. Lighters and pens, however, produced only 15 percent of Gillette’s pretax profits; razor blades accounted for 71 percent of profits. When Bic began producing disposable razors and purchased American Safety Razor, with its 13 percent of the blade market, from Personna and Gem blades, Gillette had to respond. Gillette countered by competing with Bic on price while emphasizing the higher quality of its products. Gillette brought out the Eraser Mate pen despite marketing studies that questioned demand for an erasable pen, and sales soared. By 1980 Gillette had improved profitability despite the attack by Bic.

Takeover Threats Dominated 1980s

Mockler’s policies led to a higher profit margin and a surplus of cash. Some of this cash was used in 1984 when Gillette added oral care products to its product mix with the $188.5 million purchase of Oral-B Laboratories, Inc.—the leading maker of toothbrushes in the United States—from Cooper Laboratories, Inc. The excess cash, however, also led to a new threat in the mid-1980s: the threat of takeover. In 1986 Ronald O. Perelman, head of Revlon, offered $4.1 billion for Gillette. He was attracted by Gillette’s well-known personal-care brands, the possibility of combining the sales and distribution systems of the two companies, and Gillette’s expertise in marketing abroad.

Gillette rejected Revlon’s offer of $65 a share and bought back stock from Perelman at $59.50 a share and paid some expenses, for a total of $558 million. Revlon made two other unsolicited requests to buy the company in 1987, both of which were refused by the Gillette board of directors.

In response to the takeover threats, Gillette reorganized top management; thinned out its workforce through layoffs; modernized its plants while shifting some production capacity to lower-cost locations; and sold many smaller and less profitable divisions.

That was not the end of the takeover threats. In early 1988 Coniston Partners announced that it had acquired approximately 6 percent of the company and was determined to replace four members of Gillette’s 12-member board so it could influence company policy. Members of the partnership said they would actively seek offers to sell or dismantle Gillette if they managed to get representation on the board. Coniston Partners’ battle to get shareholders’ proxy rights was intense, but in 1988 Gillette came out on top with 52 percent of the votes for directors to Coniston’s 48 percent. The matter was finally resolved when Gillette instituted a stock repurchase for all shareholders, which included 16 million of Coniston’s 112 million shares at $45 a share.

Finally, in August 1989, Warren Buffett’s Berkshire Hathaway bought $600 million of Gillette convertible preferred shares. The deal potentially placed 11 percent of Gillette’s stock with Buffett, who had agreed to give the company the right of first refusal on the block, should he wish to sell it. The friendly agreement decreased the threat of takeover, though it tightened up cash flow at the company. Buffett’s dividend was $52.5 million a year.

With takeover threats behind it and restructuring completed, Gillette returned to emphasizing its powerful brand names and its bread and butter, shaving products. While toiletries and cosmetics represented low-margin items and profitable stationery products accounted for only 9 percent of the company’s total profits, razors and blades still accounted for a little over 70 percent of profits. Gillette brought in a new head of shaving operations, John W. Symons, formerly head of European operations, and developed new ad campaigns to emphasize the more profitable shaving systems over disposable shavers such as its own Good News.

In October 1989, Gillette unveiled the Sensor shaving system, which featured thinner blades mounted on springs by lasers so they could follow contours. The blades, to be used in a permanent shaving system, cost close to $200 million to develop and were launched simultaneously in the United States and Europe, backed by a $100 million advertising budget. Sensor’s touted superior shave was a huge success with consumers, and the product garnered several awards. The Lady Sensor soon followed in 1992, with sales for both products exceeding $500 million that year.

1990s and Beyond

Gillette made another effort to expand its presence in shaving when it attempted to buy the U.S. and non-European operations of its old competitor, Wilkinson Sword, early in 1990. The Justice Department blocked the sale of Wilkinson’s U.S. interests since Gillette controlled about half the U.S. market and Wilkinson was number-four in the market with about 3 percent. Also in 1990, as part of a realignment of its shaving and personal-care units in North America and Europe, Gillette sold its European skin and hair care operations to Nobel Consumer Goods AB, a division of Nobel Industries of Sweden, for $107 million.

Despite the Wilkinson setback, the 1990s proved to be extremely fruitful years for Gillette thanks to an aggressive program of new product development coupled with the pursuit of targeted acquisitions. Mockler, who had had a very successful term as CEO and chairman and who planned to retire at the end of 1991, died unexpectedly in January of that year. Alfred M. Zeien, Mockler’s heir apparent who was president and chief operating officer, replaced Mockler in both of his positions. Also in 1991 Gillette launched another award-winning product, the Oral-B Indicator toothbrush, which had bristles that change color to show when a new toothbrush is needed. This popular feature was added to all Oral-B toothbrushes the following year.

Significant new product introductions and a major acquisition highlighted 1992. Gillette’s personal-care product division launched the Gillette Series line of men’s toiletries, which included 14 “high-performance” products in the deodorant/antiperspirant, shaving cream, and aftershave categories. The company announced the acquisition of Parker Pen Holdings Limited for £285 million ($484 million), with the deal being consummated in May 1993. The addition of the Parker brand to Gillette’s Paper Mate and Waterman brands moved the company into the top position worldwide in writing instruments.

Late in 1993 Gillette took an after-tax charge of $164 million for a reorganization of its overseas operations, including the integration of Parker Pen facilities into Gillette’s structure. About 2,000 jobs were eliminated as a result of the reorganization.

Just four years after the debut of Sensor, Gillette in late 1993 launched in continental Europe and Canada its next-generation shaving system, SensorExcel, which promised even closer and more comfortable shaving based on its skin guard made of “five soft, flexible microfins.” After its successful debut, Sensor-Excel was rolled out in Japan, England, and the United States in 1994. Other 1993 and 1994 product introductions included Braun’s FlavorSelect coffeemaker; the Oral-B Advantage toothbrush, which was designed to remove plaque better than other toothbrushes; and Custom Plus men’s and women’s disposable razors with pivoting heads.

Gillette returned to acquisition mode in 1995 and 1996. In late 1995 Oral-B’s position in Latin America was bolstered with the purchase of the Pro oral care line. Near the end of the year Gillette acquired Thermoscan Inc., a leader in infrared ear thermometers. Thermoscan promised to provide a base for Gillette to expand into the rapidly growing personal home diagnostic products area. Then in late 1996 the company made its largest acquisition ever when it paid $7.1 billion for Duracell International Inc., the world leader in alkaline batteries. Gillette thus added its first major product line since the purchase of Oral-B; in fact, batteries immediately became the company’s second-leading product line in terms of sales, trailing only razors and blades. Duracell batteries had been underdistributed outside the United States, so Gillette planned to achieve sales growth by leveraging its existing marketing channels, which reached more than 200 countries by the mid-1990s. More immediately, the Duracell merger led Gillette to record a fourth quarter 1996 charge to operating expenses of $413 million to eliminate overlap between Gillette and Duracell operations.

In 1996 the company also launched more than 20 new products, including SensorExcel for Women. That year, a whopping 41 percent of Gillette sales came from products that debuted during the previous five years, a testament to the company’s new product development strength. And an improvement on the SensorExcel was already in the works. Sales neared the $10 billion mark, as 1996 revenues were $9.7 billion, and net income—despite the Duracell charge—was a healthy $949 million. The company’s commitment to developing innovative new products, to supporting those products through heavy advertising, and to seeking out appropriate acquisitions, all seemed certain to keep Gillette on ¿he cutting edge of consumer products.

Principal Operating Units

Gillette North Atlantic Group; International Group; Duracell North Atlantic Group; Diversified Group.

The Gillette Company

views updated May 21 2018

The Gillette Company

Prudential Tower Building
Boston, Massachusetts 02199
U.S.A.
(617) 421-7000
Fax: (617) 421-7123

Public Company
Incorporated: 1917 as Gillette Safety Razor Company
Employees: 30,400
Sales: $3.82 billion
Stock Exchanges: New York Boston Midwest Pacific London Frankfurt Zürich

The Gillette Company offers a wide range of personal-care products for men and women, including deodorants, shampoos, and hair spray. Acquisitions of other companies have added pens, stationery supplies, and small appliances to its product line. Shaving equipment, however, still accounts for slightly over 70% of Gillette’s profits, and the company’s ability to compete effectively in that area will determine if it will look sharp into its second century.

One summer morning in 1895, an ambitious traveling salesman found that the edge of his straight razor had dulled. King Gillette later said that the idea for an entirely new kind of razor, with a disposable blade, flashed into his mind as he looked in irritation at his dull blade.

King Gillette had been searching for the right product, one that had to be used—and replaced—regularly, around which to build a business. His innovation in shaving technology was just such a product. Another safety razor, the Star, was already on the market at the time but, like the straight razor it was meant to replace, its blade needed stropping before each use and eventually had to be professionally honed. Gillette envisioned an inexpensive, double-edged blade that could be clamped over a handle, used until it was dull, and then discarded.

Gillette spent the next six years trying to perfect his safety razor. Scientists and toolmakers he consulted were pessimistic, and thought the idea impractical. Gillette, 40 years old at the time and a successful salesman, inventor, and writer, did not give up. In 1901, he joined forces with William Nickerson, a Massachusetts Institute of Technology-educated machinist. Nickerson developed production processes to make Gillette’s idea a reality, while Gillette formed the American Safety Razor Company to raise the estimated $5,000 they needed to begin manufacturing the razor. Gillette became president of the company and head of a three-man directorate. Production of the razor began early in 1903.

The renamed Gillette Safety Razor Company began advertising its product in October 1903. The company sold 51 razor sets at $5 each and an additional 168 blades—originally at 20 for $1— that first year.

In 1904, Gillette received a patent on the safety razor and bought a six-story building in Boston. By 1906 the company had paid its first cash dividend. During the years before World War I Gillette steadily increased earnings through print advertisements, emphasizing that with his razor men could shave themselves under any conditions without cutting or irritation.

At the same time, Gillette was expanding abroad. He opened his first foreign office, a London sales branch, in 1905. By 1909 he had established a small manufacturing plant in Paris and offices in Germany, Austria, Scandinavia, and Russia. By 1923, foreign business accounted for about 30% of Gillette’s sales, and today the company earns about half its profit abroad.

In 1910 King Gillette decided to sell a substantial portion of his controlling share of the company to the company’s major investor, John Joyce. Gillette had succeeded in fighting off challenges for control of the company from Joyce in the past, but this time he took approximately $900,000 and bowed out. Gillette retained the title of president and frequently visited foreign branches, but he no longer played an active role in company management. Joyce was made vice president, a position he used to manage day-to-day operations. When Joyce died in 1916, his longtime friend, Edward Aldred, a New York investment banker, bought out the Gillette shares left to Joyce’s estate and took control of the company. Aldred kept on Joyce’s management team.

During World War I the U.S. government ordered 3.5 million razors and 36 million blades to supply all its troops. In order to meet military supply schedules, shifts worked around the clock and Gillette hired over 500 new employees. Gillette thus introduced a huge pool of potential customers to the still-new idea of self-shaving with a safety razor. After the war, ex-servicemen needed blades to fit the razors they had been issued in the service.

In 1921, Gillette’s patent on the safety razor expired, but the company was ready for the change. It introduced the “new improved” Gillette razor, which sold at the old price, and entered the low-priced end of the market with the old-style razor, renamed the Silver Brownie razor, priced at only $1. Gillette also gave away razor handles as premiums with other products, developing customers for the more profitable blades. Expansion and growth continued.

The company also continued to expand abroad. In 1922 Gillette became royal purveyor to the prince of Wales and in 1924 to King Gustav V of Sweden. More favorable publicity followed when the Paris office gave Charles Lindbergh a Gillette Gold Traveler set the day after he completed the first transatlantic flight.

By the end of the decade, Gillette faced its first major setback. Auto Strop Safety Razor Company, owned by Henry J. Gaisman, filed suit for patent infringement after Gillette produced a new blade using a continuous-strip process similar to one originally presented to Gillette by Gaisman.

Gillette resolved the suit by merging with Auto Strop, only to face another problem. When Gaisman checked the company’s financial records, he found that Gillette had overre-ported its earnings for the past five years by about $3 million. Confidence in Gillette fell, as did its stock. From a high of $125 early in 1929, the stock bottomed out after the disclosure, at $18.

The crisis led to management reorganization. King Gillette resigned as nominal president, and died 14 months later at age 77. Gaisman from Auto Strop became the new chairman of Gillette and Gerard Lambert, son of the founder of the Lambert Pharmacal Company—makers of Listerine—and a former manager there, came out of retirement to become president of Gillette. Lambert agreed to work for no salary with the guarantee of company stock if he could bring earnings up $5 per share.

Under Lambert, The Gillette Company made a bold advertising move: it admitted that the new blade it had brought out in 1930 was of poor quality. The company then announced what became its most recognizable product, the Gillette Blue Blade. Made under Gaisman’s strip-processing method, the Blue Blade promised uniformly high quality.

The Blue Blade kept Gillette the leader in the field, but profits remained disappointing throughout the Depression, as men increasingly turned to bargain blades. Lambert resigned in 1934 without meeting his goal of improving earnings and without receiving compensation from the company. He was replaced by a former Auto Strop executive, Samuel C. Stampleman, who had no more success. With profits at their lowest since 1915, the board of directors appointed Joseph P. Spang Jr. president in December 1938 in an effort to invigorate the company.

Spang immediately restored the company’s advertising budget, which had been cut to save money. Under this policy, Gillette’s trademark sports advertising developed. Spang purchased radio broadcast rights to the 1939 World Series for $100,000. Despite a short series, in which the Cincinnati Reds lost four straight games to the New York Yankees, sales of Gillette’s World Series Special razor sets were more than four times company estimates.

This success encouraged more sports advertising. By 1942, the events Gillette sponsored were grouped together as the “Gillette Cavalcade of Sports.” Although it eventually included the Orange Bowl, the Sugar Bowl, and the Kentucky Derby, in addition to the World Series and the All-Star game, the “Cavalcade of Sports” is perhaps best known for bringing boxing to U.S. men. Spang attributed Gillette’s continuing success to the sports advertising program, and sports programs remain an important vehicle for Gillette advertising.

During World War II foreign production and sales declined, but domestic production more than made up for those losses. Almost the entire production of razors and blades went to the military. In addition, Gillette manufactured fuel-control units for military-plane carburetors. The backlog of civilian demand after the war led to consecutive record sales until 1957.

During the profitable postwar period Spang began to broaden Gillette’s product line. The company had introduced Gillette Brushless shaving cream, its first, non-razor, non-blade product, in 1936. In 1948 Spang began to diversify by acquiring other companies when he bought The Toni Company, a firm that made home permanents. In 1955 Spang purchased Paper Mate Company, a manufacturer of ball-point pens.

When Spang retired in 1956, Carl Gilbert became CEO. During the 1960s Gillette faced a threat to its bread-and-butter product, the double-edged blade. In 1962, the English Wilkinson Sword Company began to export stainless-steel blades to the United States. Wilkinson had developed a polymer coating that made it possible to put an edge on stainless steel, which resists corrosion, increasing the number of shaves from a blade.

Two of Gillette’s domestic competitors—Eversharp, which makes Schick blades, and American Safety Razor—rushed versions of the stainless-steel blade onto the market. Gillette, the market leader, was left behind without a stainless-steel blade of its own to compete, and profits slumped in 1963 and 1964. Gillette recovered much of its market share through a simple strategy: develop a better blade and initiate aggressive advertising campaign emphasizing quality. After its own blade hit the market, Gillette’s market share stabilized at 60% to 65%, compared to 70% to 75% before the challenge.

Vincent C. Ziegler, head of the company’s North American razor operation, had developed the razor-marketing strategy, and when Gillette reorganized in July 1964, Ziegler was named president. He took over as chairman of the board in 1965. The stainless-steel blade controversy taught Ziegler not to rely on one product. He saw Gillette as “a diversified consumer products company,” and promoted both internal development of new product lines and acquisition of other companies.

During the later 1960s Gillette pursued this strategy actively, but with mixed results. A new line of Toni hair-coloring products failed, as did Earth Born shampoos, luxury perfumes, and a line of small electronic items such as digital watches, calculators, smoke alarms, and fire extinguishers. Many of the companies Gillette acquired, such as Eve of Roma high-fashion perfume, Buxton leather goods, Welcome Wagon, and Hydroponic Chemical Company—which produces Hyponex plant foods—never found the fit with Gillette comfortable. The acquisitions led to shrinking profit margins.

Gillette did have some successes. The Trac II twin-blade shaving system introduced in the 1970s was a success, and the 1970 acquisition of the French S.T. Dupont gave Gillette the disposable Cricket lighter, which Gillette introduced to the U.S. market.

By the mid-1970s Ziegler was ready to retire, and began to groom outsider Edward Gelsthorpe to succeed him, but Gelsthorpe left Gillette to join United Brands, now Chiquita Brands, 15 months after his appointment as president. Ziegler next tapped Colman M. Mockler Jr. to replace him when he retired in 1975. Mockler had been at Gillette since 1957 and had an entirely different background and style than Ziegler. He had come up from the financial end of the business rather than sales.

Mockler moderated Ziegler’s diversification policy. He concentrated on a limited number of promising markets, particularly high-volume, repeat-purchase consumer items, selling Ziegler’s least sucessful acquisitions and pumping money into promising companies compatible with already-existing manufacturing or distribution capabilities. Mockler stuck with the Cricket disposable lighter even though high introductory marketing costs and a costly price war with the Bic Pen Corporation, owned by the French Société Bic kept it from showing a profit.

Mockler also held on to the West German Braun company. Ziegler had bought the family-owned business in 1967 to gain entry to the European electric-shaver market and for the quality and style of its small-appliance designs. Mockler pared Braun’s less profitable lines and rode out a Justice Department antitrust suit against the acquisition. The suit eventually prevented Gillette from introducing Braun shavers in the U.S. market before 1984. Mockler also increased Gillette’s advertising budget and undertook companywide cost-cutting measures in all other divisions. Before the results of those policies could be seen, Mockler faced other problems. Growing fear of fluorocarbons, which deplete the earth’s ozone layer, affected sales of products in aerosol cans during the 1970s.

Gillette eventually developed new product-delivery systems to replace aerosol cans, such as non-aerosol pumps and rollons, for Gillette’s already-established product line, and he put advertising dollars behind the products, which included Right Guard and Soft & Dri deodorants and Adorn and White Rain hair sprays. He also started development of a new deodorant product, Dry Idea, which feels dry when applied. Dry Idea was launched in 1978 after two years of development at a cost of $118 million. It quickly recovered a quarter of the deodorant market for Gillette.

Gillette faced a more serious threat from Bic. In the 1960s Bic came to the United States with a 190 disposable pen, which made dramatic cuts into sales of Gillette’s 980 Paper Mate pens. In the 1970s Bic attacked Gillette’s Cricket disposable lighter with its own disposable lighter. Since the Cricket was more expensive to make—it had more moving parts than the Bic—Gillette was losing the price war. Lighters and pens, however, produced only 15% of Gillette’s pretax profits; razor blades accounted for 71% of profits. When Bic began producing disposable razors and purchased American Safety Razor, with its 13% of the blade market, from Personna and Gem blades, Gillette had to respond. Gillette countered by competing with Bic on price while emphasizing the higher quality of its products. Gillette brought out the Eraser Mate pen despite marketing studies that questioned demand for an erasable pen, and sales soared. By 1980 Gillette had improved profitablity despite the attack by Bic.

Mockler’s policies led to a higher profit margin and a surplus of cash. That in turn led to a new threat in the mid-1980s: the threat of takeover. In 1986 Ronald O. Perelman, head of Revlon, offered $4.1 billion for Gillette. He was attracted by Gillette’s well-known personal-care brands, the possibility of combining the sales and distribution systems of the two companies, and Gillette’s expertise in marketing abroad.

Gillette rejected Revlon’s offer of $65 a share and bought back stock from Perelman at $59.50 a share and paid some expenses, for a total of $558 million. Revlon made two other unsolicited requests to buy the company in 1987, both of which were refused by the Gillette board of directors.

In response to the takeover threats, Gillette reorganized top management; thinned out its workforce through layoffs; modernized its plants while shifting some production capacity to lower-cost locations; and sold many smaller and less profitable divisions.

That was not the end of the takeover threats. In early 1988 Coniston Partners announced that it had acquired approximately 6% of the company and was determined to replace four members of Gillette’s 12-member board so it could influence company policy. Members of the partnership said they would actively seek offers to sell or dismantle Gillette if they managed to get representation on the board. Coniston Partners’s battle to get shareholders’ proxy rights was intense, but in 1988 Gillette came out on top with 52% of the votes for directors to Coniston’s 48%. The matter was finally resolved when Gillette instituted a stock repurchase for all shareholders, which included 16 million of Coniston’s 112 million shares at $45 a share.

Finally, in August 1989, Warren Buffett’s Berkshire Hathaway bought $600 million of Gillette convertible preferred shares. The deal potentially placed 11% of Gillette’s stock with Buffett, who had agreed to give the company the right of first refusal on the block, should he wish to sell it. The friendly agreement decreased the threat of takeover, though it tightened up cash flow at the company. Buffett’s dividend was $52.5 million a year.

With takeover threats behind it and restructuring completed, Gillette returned to emphasizing its powerful brand names and its bread and butter, shaving products. While toiletries and cosmetics are low-margin items and profitable stationery products account for only 9% of the company’s total profits, razors and blades still account for a little over 70% of profits. Gillette has brought in a new head of shaving operations, John W. Symons, formerly head of European operations, and developed new ad campaigns to emphasize the more profitable shaving systems over disposable shavers such as its own Good News.

In October 1989, Gillette unveiled the Sensor shaving system, which features thinner blades mounted on springs by lasers so they can follow contours. The blades, to be used in a permanent shaving system, cost close to $200 million to develop and commanded about $100 million in advertising.

Gillette made another effort to expand its presence in shaving when it attempted to buy the U.S. and non-European operations of its old competitor, Wilkinson Sword, early in 1990. The Justice Department blocked the sale of Wilkinson’s U.S. interests since Gillette controls about half the U.S. market and Wilkinson is number-four in the market with about 3%. The company is still investing about $150 million in an attempt to enhance its position in shaving products.

Gillette’s reorganization indicates that the company is willing to take the necessary steps to remain highly profitable. The company is emphasizing traditional strengths in shaving equipment through technological development and acquisitions. The company is also returning to a heavy use of advertising in support of its shaving products. If these trends continue, Gillette should remain on the cutting edge of the personal-care business.

Principal Subsidiaries

Compañia Gillette de Argentina; Gillette (Australia) Pty. Ltd.; Braun Inc.; Gillette Beteiligungs— GmbH (Germany); Gillette do Brasil, Inc.; Rio Manufacturing Co.; Gillette Canada Inc.; Gillette de Colombia S.A.; Colton Development, Inc.; Colton Gulf Coast, Inc.; Colton East, Inc.; Colton North Central, Inc.; Colton West, Inc.; Gillette Capital Corporation; Gillette Direct Response Group, Inc.; Gillette Española, S.A. (Spain); Gillette Foreign Sales Corporation Ltd. (Jamaica); Gillette France S.N.C. (99.9%); Compañía Giva, S.A.; Compania Interamericana Gillette, S.A. (Panama); Gillette Internile S.A.E. (Egypt, 80%); Inversiones Gilco (Chile) Limitada; Gillette Italy S.p.A.; Jafra Cosmetics, S.A. de C.V. (Mexico, 74%); Gillette (Japan) Inc.; Gillette de Mexico, Inc., Mexico Manufacturing Co.; Gillette del Peru, Inc.: Lima Manufacturing Co.: Gillette (Philippines), Inc.; Gillette South Africa Ltd.; Gillette (Switzerland) A.G.; Gillette Industries Ltd. (U.K.); The Gillette Company.

The Gillette Company

views updated May 23 2018

The Gillette Company

Prudential Tower Building, Suite 4800
Boston, Massachusetts 02199
U.S.A.
Telephone: (617) 421-7000
Fax: (617) 421-7123
Web site: http://www.gillette.com

Public Company
Incorporated: 1901 as American Safety Razor Company
Employees: 29,400
Sales: $9.25 billion (2004)
Stock Exchanges: New York London Frankfurt Zurich
Ticker Symbol: G
NAIC: 325620 Toilet Preparation Manufacturing

The Gillette Company is the world leader in the men's grooming product category as well as in certain women's grooming products. Although more than half of company profits are still derived from shaving equipment—the area in which the company started—Gillette has also attained the top spots worldwide in writing instruments (Paper Mate, Parker, and Waterman brands) and correction products (Liquid Paper), toothbrushes and other oral care products (Oral-B), and alkaline batteries (Duracell products, which generate almost one-fourth of company profits). Gillette maintains 64 manufacturing facilities in 27 countries, and its products are sold in more than 200 countries and territories, with more than 60 percent of sales occurring outside the United States.

Entrepreneurial Beginnings

One summer morning in 1895, an ambitious traveling salesman found that the edge of his straight razor had dulled. King Gillette later said that the idea for an entirely new kind of razor, with a disposable blade, flashed into his mind as he looked in irritation at his dull blade. King Gillette had been searching for the right product, one that had to be used—and replaced—regularly, around which to build a business. His innovation in shaving technology was just such a product. Another safety razor, the Star, was already on the market at the time but, like the straight razor it was meant to replace, its blade needed stropping before each use and eventually had to be professionally honed. Gillette envisioned an inexpensive, double-edged blade that could be clamped over a handle, used until it was dull, and then discarded.

Gillette spent the next six years trying to perfect his safety razor. Scientists and toolmakers he consulted were pessimistic, and thought the idea impractical. Gillette, 40 years old at the time and a successful salesman, inventor, and writer, did not give up. In 1901 he joined forces with William Nickerson, a Massachusetts Institute of Technology-educated machinist. Nickerson developed production processes to make Gillette's idea a reality, while Gillette formed the American Safety Razor Company to raise the estimated $5,000 they needed to begin manufacturing the razor. Gillette became president of the company and head of a three-man directorate. Production of the razor began early in 1903.

The renamed Gillette Safety Razor Company began advertising its product in October 1903, with the first ad appearing in Systems Magazine. The company sold 51 razor sets at $5 each and an additional 168 blades—originally at 20 for $1—that first year.

In 1904 Gillette received a patent on the safety razor; sales rose to 90,884 razors and 123,648 blades that year. The following year the company bought a six-story building in South Boston. By 1906 the company had paid its first cash dividend. During the years before World War I Gillette steadily increased earnings through print advertisements, emphasizing that with his razor men could shave themselves under any conditions without cutting or irritation.

At the same time, Gillette was expanding abroad. He opened his first foreign office, a London sales branch, in 1905. By 1909 he had established manufacturing plants in Paris, Montreal, Berlin, and Leicester, England, and offices in France and Hamburg, Germany. By 1923, foreign business accounted for about 30 percent of Gillette's sales.

In 1910 King Gillette decided to sell a substantial portion of his controlling share of the company to the company's major investor, John Joyce. Gillette had succeeded in fighting off challenges for control of the company from Joyce in the past, but this time he took approximately $900,000 and bowed out. Gillette retained the title of president and frequently visited foreign branches, but he no longer played an active role in company management. Joyce was made vice-president, a position he used to manage day-to-day operations. When Joyce died in 1916, his longtime friend, Edward Aldred, a New York investment banker, bought out the Gillette shares left to Joyce's estate and took control of the company. Aldred remained on Joyce's management team.

Wartime Production

During World War I the U.S. government ordered 3.5 million razors and 36 million blades to supply all its troops. In order to meet military supply schedules, shifts worked around the clock and Gillette hired over 500 new employees. Gillette thus introduced a huge pool of potential customers to the still-new idea of self-shaving with a safety razor. After the war, exservicemen needed blades to fit the razors they had been issued in the service.

In 1921 Gillette's patent on the safety razor expired, but the company was ready for the change. It introduced the "new improved" Gillette razor, which sold at the old price, and entered the low-priced end of the market with the old-style razor, renamed the Silver Brownie razor, priced at only $1. Gillette also gave away razor handles as premiums with other products, developing customers for the more profitable blades. Expansion and growth continued.

The company also continued to expand abroad. In 1922 Gillette became royal purveyor to the prince of Wales and in 1924 to King Gustav V of Sweden. More favorable publicity followed when the Paris office gave Charles Lindbergh a Gillette Gold Traveler set the day after he completed the first transatlantic flight.

By the end of the decade, Gillette faced its first major setback. Auto Strop Safety Razor Company, owned by Henry J. Gaisman, filed suit for patent infringement after Gillette produced a new blade using a continuous-strip process similar to one originally presented to Gillette by Gaisman.

Gillette resolved the suit by merging with Auto Strop, only to face another problem. When Gaisman checked the company's financial records, he found that Gillette had over-reported its earnings for the past five years by about $3 million. Confidence in Gillette fell, as did its stock. From a high of $125 early in 1929, the stock bottomed out after the disclosure, at $18.

The crisis led to management reorganization. King Gillette resigned as nominal president, and died 14 months later at age 77. Gaisman became the new chairman of Gillette and Gerard B. Lambert, son of the founder of the Lambert Pharmacal Company—makers of Listerine—and a former manager there, came out of retirement to become president of Gillette. Lambert agreed to work for no salary with the guarantee of company stock if he could bring earnings up $5 per share.

Under Lambert, the Gillette Company made a bold advertising move: it admitted that the new blade it had brought out in 1930 was of poor quality. The company then announced what became its most recognizable product, the Gillette Blue Blade. Made under Gaisman's strip-processing method, the Blue Blade promised uniformly high quality.

The Blue Blade kept Gillette the leader in the field, but profits remained disappointing throughout the Great Depression, as men increasingly turned to bargain blades. Lambert resigned in 1934 without meeting his goal of improving earnings and without receiving compensation from the company. He was replaced by a former Auto Strop executive, Samuel C. Stampleman, who had no more success. With profits at their lowest since 1915, the board of directors appointed Joseph P. Spang Jr. president in December 1938 in an effort to invigorate the company.

Spang immediately restored the company's advertising budget, which had been cut to save money. Under this policy, Gillette's trademark sports advertising developed. Spang purchased radio broadcast rights to the 1939 World Series for $100,000. Despite a short series, in which the Cincinnati Reds lost four straight games to the New York Yankees, sales of Gillette's World Series Special razor sets were more than four times company estimates.

This success encouraged more sports advertising. By 1942 the events Gillette sponsored were grouped together as the "Gillette Cavalcade of Sports." Although it eventually included the Orange Bowl, the Sugar Bowl, and the Kentucky Derby, in addition to the World Series and the All-Star game, the "Cavalcade of Sports" became best known for bringing boxing to American men. Spang attributed Gillette's continuing success to the sports advertising program, and sports programs remained an important vehicle for Gillette advertising.

During World War II foreign production and sales declined, but domestic production more than made up for those losses. Almost the entire production of razors and blades went to the military. In addition, Gillette manufactured fuel-control units for military-plane carburetors. The backlog of civilian demand after the war led to consecutive record sales until 1957.

Postwar Diversification

During the profitable postwar period Spang began to broaden Gillette's product line. The company had introduced Gillette Brushless shaving cream, its first, nonrazor, nonblade product, in 1936. In 1948 Spang began to diversify by acquiring other companies when he bought the Toni Company, a firm that made home permanents. In 1955 Spang purchased Paper Mate Company, a manufacturer of ballpoint pens.

Company Perspectives:

The Gillette Company is a globally focused consumer products marketer that seeks competitive advantage in quality, value-added personal care and personal use products. We are committed to building shareholder value through sustained profitable growth.

When Spang retired in 1956, Carl Gilbert became CEO. During the 1960s Gillette faced a threat to its bread-and-butter product, the double-edged blade. In 1962, the English Wilkinson Sword Company began to export stainless-steel blades to the United States. Wilkinson had developed a polymer coating that made it possible to put an edge on stainless steel, which resists corrosion, increasing the number of shaves from a blade.

Two of Gillette's domestic competitors—Eversharp, which made Schick blades, and American Safety Razor—rushed versions of the stainless-steel blade onto the market. Gillette, the market leader, was left behind without a stainless-steel blade of its own to compete, and profits slumped in 1963 and 1964. Gillette recovered much of its market share through a simple strategy: developing a better blade and initiating an aggressive advertising campaign that emphasized quality. After its own blade hit the market, Gillette's market share stabilized at 60–65 percent, compared to 70–75 percent before the challenge.

Vincent C. Ziegler, head of the company's North American razor operation, had developed the razor-marketing strategy, and when Gillette reorganized on a product line basis in July 1964, Ziegler was named president. He took over as chairman of the board in 1965. The stainless-steel blade controversy taught Ziegler not to rely on one product. He saw Gillette as "a diversified consumer products company," and promoted both internal development of new product lines and acquisition of other companies.

During the later 1960s Gillette pursued this strategy actively, but with mixed results. A new line of Toni hair-coloring products failed, as did Earth Born shampoos, luxury perfumes, and a line of small electronic items such as digital watches, calculators, smoke alarms, and fire extinguishers. Many of the companies Gillette acquired, such as Eve of Roma high-fashion perfume, Buxton leather goods, Welcome Wagon, and Hydroponic Chemical Company—which produced Hyponex plant foods—never found the fit with Gillette comfortable. The acquisitions led to shrinking profit margins.

Gillette did have some successes. The Trac II twin-blade shaving system introduced in 1971 was a success, and the 1970 acquisition of the French S.T. Dupont gave Gillette the disposable Cricket lighter, which Gillette introduced to the U.S. market. By 1971 Gillette had four domestic divisions: the Safety Razor Division; the Toiletries Division, which featured Right Guard deodorant and antiperspirant; the Personal Care Division; and the Paper Mate division.

By the mid-1970s Ziegler was ready to retire, and began to groom outsider Edward Gelsthorpe to succeed him, but Gelsthorpe left Gillette to join United Brands, now Chiquita Brands, 15 months after his appointment as president. Ziegler next tapped Colman M. Mockler Jr. to replace him when he retired in 1975. Mockler had been at Gillette since 1957 and had an entirely different background and style than Ziegler. He had come up from the financial end of the business rather than through sales.

Diversification Moderated Starting in the Mid-1970s

Mockler moderated Ziegler's diversification policy. He concentrated on a limited number of promising markets, particularly high-volume, repeat-purchase consumer items, selling Ziegler's least successful acquisitions—including Buxton in 1977, Welcome Wagon in 1978, and Hyponex and the Autopoint mechanical pencil business in 1979—and pumping money into promising companies compatible with already-existing manufacturing or distribution capabilities. Mockler stuck with the Cricket disposable lighter even though high introductory marketing costs and a costly price war with the Bic Pen Corporation, owned by the French Société Bic, kept it from showing a profit.

Mockler also held on to the West German Braun company. Ziegler had bought the family-owned business in 1967 to gain entry to the European electric-shaver market and for the quality and style of its small-appliance designs. Mockler pared Braun's less profitable lines and rode out a Justice Department antitrust suit against the acquisition. The suit eventually prevented Gillette from introducing Braun shavers in the U.S. market before 1984. Mockler also increased Gillette's advertising budget and undertook companywide cost-cutting measures in all other divisions. Before the results of those policies could be seen, Mockler faced other problems. Growing fear of fluorocarbons, which deplete the earth's ozone layer, affected sales of products in aerosol cans during the 1970s.

Gillette eventually developed new product-delivery systems to replace aerosol cans, such as nonaerosol pumps and roll-ons, for Gillette's already-established product line, and he put advertising dollars behind the products, which included Right Guard and Soft & Dri deodorants and Adorn and White Rain hair sprays. He also started development of a new deodorant product, Dry Idea, which feels dry when applied. Dry Idea was launched in 1978 after two years of development at a cost of $118 million. It quickly recovered a quarter of the deodorant market for Gillette.

Key Dates:

1901:: American Safety Razor is founded by King C. Gillette.
1904:: King Gillette's safety razor is patented.
1918:: Gillette manufacturers razors and blades for soldiers during World War I.
1942:: The Cavalcade of Sports program is formed to oversee the company's various advertising and promotional activities in athletics.
1967:: Braun AG is acquired.
1971:: Company is organized into four domestic divisions: the Safety Razor Division; the Toiletries Division (featuring Right Guard antiperspirant); the Personal Care Division; and the Paper Mate division.
1991:: Gillette ranks 20th among the Fortune 500.
1996:: The company acquires battery manufacturer Duracell.

Gillette faced a more serious threat from Bic. In the 1960s Bic came to the United States with a 19¢ disposable pen, which made dramatic cuts into sales of Gillette's 98¢ Paper Mate pens. In the 1970s Bic attacked Gillette's Cricket disposable lighter with its own disposable lighter. Since the Cricket was more expensive to make—it had more moving parts than the Bic—Gillette was losing the price war. Lighters and pens, however, produced only 15 percent of Gillette's pretax profits; razor blades accounted for 71 percent of profits. When Bic began producing disposable razors and purchased American Safety Razor, with its 13 percent of the blade market, from Personna and Gem blades, Gillette had to respond. Gillette countered by competing with Bic on price while emphasizing the higher quality of its products. Gillette brought out the Eraser Mate pen despite marketing studies that questioned demand for an erasable pen, and sales soared. By 1980 Gillette had improved profitability despite the attack by Bic.

Takeover Threats in the 1980s

Mockler's policies led to a higher profit margin and a surplus of cash. Some of this cash was used in 1984 when Gillette added oral care products to its product mix with the $188.5 million purchase of Oral-B Laboratories, Inc.—the leading maker of toothbrushes in the United States—from Cooper Laboratories, Inc. The excess cash, however, also led to a new threat in the mid-1980s: the threat of takeover. In 1986 Ronald O. Perelman, head of Revlon, offered $4.1 billion for Gillette. He was attracted by Gillette's well-known personal-care brands, the possibility of combining the sales and distribution systems of the two companies, and Gillette's expertise in marketing abroad.

Gillette rejected Revlon's offer of $65 a share and bought back stock from Perelman at $59.50 a share and paid some expenses, for a total of $558 million. Revlon made two other unsolicited requests to buy the company in 1987, both of which were refused by the Gillette board of directors.

In response to the takeover threats, Gillette reorganized top management; thinned out its workforce through layoffs; modernized its plants while shifting some production capacity to lower-cost locations; and sold many smaller and less profitable divisions.

That was not the end of the takeover threats. In early 1988 Coniston Partners announced that it had acquired approximately 6 percent of the company and was determined to replace four members of Gillette's 12-member board so it could influence company policy. Members of the partnership said they would actively seek offers to sell or dismantle Gillette if they managed to get representation on the board. Coniston Partners' battle to get shareholders' proxy rights was intense, but in 1988 Gillette came out on top with 52 percent of the votes for directors to Coniston's 48 percent. The matter was finally resolved when Gillette instituted a stock repurchase for all shareholders, which included 16 million of Coniston's 112 million shares at $45 a share.

Finally, in August 1989, Warren Buffett's Berkshire Hathaway bought $600 million of Gillette convertible preferred shares. The deal potentially placed 11 percent of Gillette's stock with Buffett, who had agreed to give the company the right of first refusal on the block, should he wish to sell it. The friendly agreement decreased the threat of takeover, though it tightened up cash flow at the company. Buffett's dividend was $52.5 million a year.

With takeover threats behind it and restructuring completed, Gillette returned to emphasizing its powerful brand names and its bread and butter, shaving products. While toiletries and cosmetics represented low-margin items and profitable stationery products accounted for only 9 percent of the company's total profits, razors and blades still accounted for a little over 70 percent of profits. Gillette brought in a new head of shaving operations, John W. Symons, formerly head of European operations, and developed new ad campaigns to emphasize the more profitable shaving systems over disposable shavers such as its own Good News.

In October 1989, Gillette unveiled the Sensor shaving system, which featured thinner blades mounted on springs by lasers so they could follow contours. The blades, to be used in a permanent shaving system, cost close to $200 million to develop and were launched simultaneously in the United States and Europe, backed by a $100 million advertising budget. Sensor's touted superior shave was a huge success with consumers, and the product garnered several awards. The Lady Sensor soon followed in 1992, with sales for both products exceeding $500 million that year.

Early to Mid-1990s

Gillette made another effort to expand its presence in shaving when it attempted to buy the U.S. and non-European operations of its old competitor, Wilkinson Sword, early in 1990. The Justice Department blocked the sale of Wilkinson's U.S. interests since Gillette controlled about half the U.S. market and Wilkinson was number-four in the market with about 3 percent. Also in 1990, as part of a realignment of its shaving and personal-care units in North America and Europe, Gillette sold its European skin and hair care operations to Nobel Consumer Goods AB, a division of Nobel Industries of Sweden, for $107 million.

Despite the Wilkinson setback, the 1990s proved to be extremely fruitful years for Gillette thanks to an aggressive program of new product development coupled with the pursuit of targeted acquisitions. Mockler, who had had a very successful term as CEO and chairman and who planned to retire at the end of 1991, died unexpectedly in January of that year. Alfred M. Zeien, Mockler's heir apparent who was president and chief operating officer, replaced Mockler in both of his positions. Also in 1991 Gillette launched another award-winning product, the Oral-B Indicator toothbrush, which had bristles that change color to show when a new toothbrush is needed. This popular feature was added to all Oral-B toothbrushes the following year.

Significant new product introductions and a major acquisition highlighted 1992. Gillette's personal-care product division launched the Gillette Series line of men's toiletries, which included 14 "high-performance" products in the deodorant/antiperspirant, shaving cream, and aftershave categories. The company announced the acquisition of Parker Pen Holdings Ltd. for £285 million ($484 million), with the deal being consummated in May 1993. The addition of the Parker brand to Gillette's Paper Mate and Waterman brands moved the company into the top position worldwide in writing instruments.

Late in 1993 Gillette took an after-tax charge of $164 million for a reorganization of its overseas operations, including the integration of Parker Pen facilities into Gillette's structure. About 2,000 jobs were eliminated as a result of the reorganization.

Just four years after the debut of Sensor, Gillette in late 1993 launched in continental Europe and Canada its next-generation shaving system, SensorExcel, which promised even closer and more comfortable shaving based on its skin guard made of "five soft, flexible microfins." After its successful debut, SensorExcel was rolled out in Japan, England, and the United States in 1994. Other 1993 and 1994 product introductions included Braun's FlavorSelect coffeemaker; the Oral-B Advantage toothbrush, which was designed to remove plaque better than other toothbrushes; and Custom Plus men's and women's disposable razors with pivoting heads.

Gillette returned to acquisition mode in 1995 and 1996. In late 1995 Oral-B's position in Latin America was bolstered with the purchase of the Pro oral care line. Near the end of the year Gillette acquired Thermoscan Inc., a leader in infrared ear thermometers. Thermoscan promised to provide a base for Gillette to expand into the rapidly growing personal home diagnostic products area. Then in late 1996 the company made its largest acquisition ever when it paid $7.1 billion for Duracell International Inc., the world leader in alkaline batteries. Gillette thus added its first major product line since the purchase of Oral-B; in fact, batteries immediately became the company's second-leading product line in terms of sales, trailing only razors and blades. Duracell batteries had been underdistributed outside the United States, so Gillette planned to achieve sales growth by leveraging its existing marketing channels, which reached more than 200 countries by the mid-1990s. More immediately, the Duracell merger led Gillette to record a fourth quarter 1996 charge to operating expenses of $413 million to eliminate overlap between Gillette and Duracell operations.

In 1996 the company also launched more than 20 new products, including SensorExcel for Women. That year, a whopping 41 percent of Gillette sales came from products that debuted during the previous five years, a testament to the company's new product development strength. And an improvement on the SensorExcel was already in the works. Sales neared the $10 billion mark, as 1996 revenues were $9.7 billion, and net income—despite the Duracell charge—was a healthy $949 million.

Razor Wars: Late 1990s and Beyond

Gillette introduced a significant innovation in shaving technology—the first major innovation in safety razors since the beginning of the 1970s—with the Mach 3 in 1998. The new safety razor system introduced a third blade into the twin-blade system that had dominated the wet-shaving market for the previous quarter-century. The blades were set at an angle so that each blade shaves closer to the skin, allowing shavers to use fewer strokes to get the same close, comfortable shave. The shaving cartridge was set on a pivot, allowing the head of the razor to move with the angle of the jaw and skin. In addition, the cartridge itself was designed to facilitate cleaning, and the handle was ergonomically designed to make the razor more comfortable in the hand.

The entire Mach 3 system, protected by 35 patents, cost Gillette $35 billion just to bring to market. As a result, the corporation set the price for replacement cartridges about 35 percent more than its previous best-selling razor, the SensorExcel. Marketing strategy was slanted to persuade current Gillette product users to trade up their previous equipment in favor of the newer, more expensive models because of their improved performance, offering a closer shave with fewer nicks and cuts.

Despite (or perhaps because of) the expense of introducing the new razor, Gillette saw its worst economic performance in almost a decade in 1998. Sales during the third quarter of the year alone dropped 15 percent. In October, Gillette management announced staff cuts of 4,700 jobs, about 11 percent of its total workforce. Lowered sales in key markets such as Brazil, Germany, and Russia also contributed to the loss of income, and share prices dropped by 11 percent virtually overnight.

Gillette's underperformance continued in 1999 and 2000, in large part because of currency-exchange differences. Its stationery and small-appliance businesses showed the greatest losses and the battery and toiletries businesses provided most of the profits. In October 2000 Gillette's managing board responded by firing CEO Michael Hawley and announcing a world-wide restructuring effort that would be led by former Nabisco CEO James M. Kilts, who joined the firm during its centennial year, in January 2001. Kilts, who had earned a reputation as a fixer of troubled companies, needed all his skills. Gillette's battery business, which had dominated the top of the market, lost market share to other brands (Energizer and Rayovac) that offered similar performance at a lower cost. In addition the company lacked fiscal discipline and used an antiquated quarterly tracking system. As a result of these and other expensive practices, Gillette's earnings continued to perform below expectations. Stock prices fell by about 60 percent in the months between early 1999 and late 2001.

Gillette's control of the toiletries market was threatened early in 2003 when rival Schick-Wilkinson Sword introduced the Quattro, the world's first four-blade shaving system. Gillette claimed that the Quattro illegally infringed on Gillette's patents for the Mach 3. The violence of the company's reaction was explained in part because the Quattro actually increased Schick's market share from about 14 percent to about 17 percent. At the same time Gillette's market share slipped by a similar amount—although the Boston-based firm still held a commanding 63 percent of the total wet-razor market. Although Gillette lost its attempt to ban sales of the Quattro in court, it nonetheless saw sales of its products increase. By the end of the first quarter of 2004, Gillette was able to report a 43 percent increase in profits, much of which was provided by its mens' and womens' wet razors, the Mach 3 and Venus systems. The company's grasp of its core businesses—toiletries and oral care—remained strong.

Principal Operating Units

Blades & Razors; Duracell; Oral Care; Braun; Personal Care.

Principal Competitors

Colgate-Palmolive Company; The Proctor & Gamble Company; Société BIC; American Safety Razor Company.

The Gillette Company

views updated May 11 2018

The Gillette Company

founded: 1901

Contact Information:

headquarters: prudential tower bldg. boston, ma 02199 phone: (617)421-7000 fax: (617)421-7123 toll free: url: http://www.gillette.com

OVERVIEW

The Gillette name is synonymous with a wide range of personal care products for men and women. It is the world's leading manufacturer of razor blades, razors (Gillette), alkaline batteries (Duracell), writing instruments (Parker, Paper Mate, and Waterman), and toothbrushes (Oral B). Shaving products account for more than 50 percent of Gillette's profits. Gillette's business also includes toiletries (Right Guard and Soft & Dri), hair removal products and household appliances (Braun).

More than 1.2 million people around the world use one or more of Gillette's products every day. Gillette is the world leader in 13 major consumer product categories. The company has a very extensive global presence and is credited with a strong program of new product development.

COMPANY FINANCES

In a study of the top 50 consumer packaged goods companies reported in Business Week, Gillette was 1 of only 17 that managed to achieve above-industry average growth in both sales and profits from 1985 to 1990. Gillette also was numbered among the 7 of these 17 companies that were able to maintain this excellence during the following 5 years.

Although due in part to the acquisition of Duracell, sales have more than doubled since 1991 to $10.1 billion in 1997, a 4-percent increase over 1996. Net income improved at a 16-percent rate to $1.4 billion. Earnings per share were $2.55. Gillette stock's price/earnings ratio was 41 times expected 1997 profits. Fiscal 1997 marked the twentieth consecutive annual increase in dividends per common share paid to Gillette stockholders. It was also the ninety-second consecutive year the company paid cash dividends on its common stock. In calendar year 1997, Gillette stock ranged from a low of $72.00 to a high of $106.38. The annual dividend was $.86. In June 1998 a two-for-one stock split became effective for stockholders.

Financial goals for the company are to increase total spending on research and development, capital spending, and advertising (in combination) at least as fast as sales to assure continued growth.

ANALYSTS' OPINIONS

The January 1998 Value Line Investment Survey reported that the climb in Gillette's profits should continue in 1998, with an almost 18-percent rise in earnings. According to Business Week, Wall Street analysts expect this 18-percent rise to continue over the next five years, slightly more than double the rate for the S&P 500. Value Line calls Gillette a good quality stock and ranks it as an average year-ahead selection. However, for the long term Value Line indicates, "Gillette shares offer lackluster appreciation potential through 2000-2002, due, in part, to a solid uptick in the stock's quotation since our October report."

HISTORY

In 1895 King C. Gillette, an ambitious traveling salesman, had two problems. One was his dulled razor and the other was his lack of a "right" product to market. Gillette envisioned an inexpensive, double-edged blade that could be clamped over a handle, used until it was dull, and then discarded. Gillette spent about six years trying to perfect his safety razor, despite pessimistic views of scientists and tool-makers.

In 1901 Gillette joined forces with William Nicker-son, a Massachusetts Institute of Technology-educated machinist, who helped Gillette form the American Safety Razor Company. While Gillette raised the $5,000 they needed, Nickerson developed production processes to make Gillette's idea a reality. In 1903, with Gillette as the president of a three-person directorate, the company began production of razors.

In October 1903 the company was renamed the Gillette Safety Razor Company. Product advertising began that year. In 1904 Gillette received a patent on the safety razor and bought a six-story building in Boston. The company paid its first cash dividend in 1906. While earnings increased steadily due to print advertising, Gillette also concentrated on international expansion. In 1905 a London sales branch was established; followed in 1909 by a small manufacturing plant in Paris; and offices in Germany, Austria, Scandinavia, and Russia. Foreign business accounted for 30 percent of Gillette's profits by 1923.

King Gillette fought off challenges for control of the company from John Joyce, a major investor in the company. Gillette bowed out in 1910 after selling a substantial portion of his controlling share to Joyce. Even though Gillette retained the title of president, Joyce took charge of the active management of the company until he died in 1916. Edward Aldred, Joyce's long-time friend and an investment banker, bought Joyce's interest in the company, retained Joyce's management team, and took control.

Gillette supplied 3.5 million razors and 36 million blades to troops during World War I, earning a large number of new loyal customers. Five hundred new employees were hired. In 1921 when Gillette's patent expired, a new and improved safety razor, which sold at the price of the old one, was introduced. Growth and expansion, both domestic and foreign, continued. The company received favorable publicity when it became royal purveyor to the Prince of Wales in 1922 and to King Gustav V of Sweden in 1924, and when the Paris office gave Charles Lindbergh a Gillette Gold Traveler set the day after he completed the first transatlantic flight.

At the end of the 1920s Gillette faced two major problems that led to a loss of confidence in the company and lower stock prices. In 1929 Stock prices fell from a high of $125 to $18. This crisis led to a management reorganization. Gillette made a bold advertising move when it admitted that the blade it had introduced in 1930 was of poor quality. The company then introduced what became its most recognizable product, the Blue Blade. Even though the Blue Blade kept Gillette a leader in the field, profits remained disappointing through the Depression.

In 1939 Gillette restored the company's advertising budget, relying successfully on heavy broadcast sports advertising. During World War II almost all of Gillette's production went to the military. Even though foreign production and sales declined, domestic production more than made up for it. The backlog of civilian demand led to record sales until 1957. During this time Gillette started broadening its product line by introducing brushless shaving cream; ball-point pens and home permanents were added to the product line through acquisitions.

Gillette reorganized in 1964 as a diversified consumer products company. It pursued the strategy of internal development of new product lines and acquisition of other companies to add to its product lines. This strategy brought mixed results. New products, which included Toni hair-color products, Earth Born shampoos, luxury perfumes, and small electronic items (smoke alarms, watches, and calculators) all failed. The acquisition of the West German Braun Company gained the company entry into the European electric-shaver market, but a Justice Department antitrust suit prevented Gillette from introducing the Braun shaver in the U.S. market until 1984. Other companies acquired in this period, including Eve of Roma perfume, Buxton leather goods, Welcome Wagon, and Hydroponic Chemical Company never found the right fit with the company and were later sold.

Colman M. Mockler Jr., who came to Gillette in 1957, took charge of the company in 1975. Mockler sorted through all the new acquisitions, sold off the least successful ones, and retained those that either were successful or had a good line of products that needed to be marketed more efficiently. Mockler also increased Gillette's advertising budget and undertook company-wide cost cutting measures. In 1984 Gillette acquired Oral-B, enabling it to branch into dental-care products.

The growing fear of fluorocarbons was one of the biggest problems faced by Mockler. He eventually replaced the propellant in Gillette's aerosol cans. This move was followed by new product launches, which recovered a quarter of the deodorant market for Gillette.

Bic was a French competitor that threatened Gillette's pen and Cricket lighter products. Once again Gillette countered by competing with Bic on price while emphasizing the higher quality of its pens and lighters. By 1980 Gillette had improved profitably despite Bic's challenge.

FAST FACTS: About The Gillette Company

Ownership: The Gillette company is a publicly held company traded on the New York Stock Exchange, as well as the Boston, Midwest, Pacific, London, Frankfurt, and Zurich Stock Exchanges.

Ticker symbol: G

Officers: Alfred M. Zeien, Chmn. & CEO, 68, $3,416,667; Michael C. Hawley, Pres. & COO, 60, $1,358,333

Employees: 44,000

Principal Subsidiary Companies: Gillette's subsidiaries include: The Gillette Company Andover Manufacturing Center, The Gillette Company Personal Care Division, Oral-B Laboratories, Paper Mate, Braun AG, and Duracell.

Chief Competitors: Due to the diversity of its products, Gillette competes with multinational companies in a variety of industries, including manufacturers of razors, toiletries, stationery products, alkaline batteries, and oral-care products. Chief among the company's competitors are: BIC; Ralston Purina; Bristol- Myers Squibb; Colgate-Palmolive; Johnson & Johnson; Procter & Gamble; Remington Products; Sunbeam; and Warner-Lambert.

Mockler's policies proved very successful for Gillette, producing a higher profit margin and a surplus of cash. This resulted in a takeover threat from Revlon in 1986. In 1987 two unsolicited requests from Revlon to buy the company were rejected by Gillette's Board of Directors. In response to these takeover threats, Gillette reorganized top management, laid off workers to thin out its workforce, modernized its plants, shifted some production to low-cost facilities, and sold many smaller and less profitable operations.

In early 1988 Gillette experienced one of its biggest takeover threats. Coniston Partners sought representation on Gillette's board in an effort to sell or dismantle the company. In 1989, $600 million shares of Gillette convertible preferred stock were purchased by Berkshire Hathaway, of which Warren Buffet owns 9 percent. Buffet agreed to give Gillette the right of first refusal, which lessened the threat of a takeover. With its restructuring completed, Gillette returned to emphasizing its powerful brand names.

In early 1990 Gillette tried to expand its shaving operation by acquiring Wilkinson Sword. However, the Justice Department blocked the sale of Wilkinson's U.S. interests since Wilkinson was number four in the market and Gillette already controlled about half the U.S. market. Since 1990 firm's earnings grew an average of 20 percent annually.

Throughout the 1990s Gillette continued acquiring companies with popular brand products. In May 1993 Gillette acquired Parker Pen Holdings Ltd. Thermoscan was acquired in 1995. In 1996 Gillette merged with Duracell International. Duracell is the world's leading producer of alkaline batteries, with nearly 50 percent of the U.S. market. The Knight Ridder/Tribune Business News stated, "The consumer giant spawned by the merger will create a marketing powerhouse selling everything from copper-topped batteries to Right Guard deodorant - and play an increasingly dominant role in the world's supermarkets and drugstores."

STRATEGY

Gillette's strategy is a three-pronged focus. Simply put, its mission is to achieve or enhance clear leadership, worldwide, in the core consumer product categories in which it chooses to compete. The company hopes to achieve this through a continuing process of new product introductions. Maintaining a new-product ratio above 40 percent of sales is the objective. A record 49 percent of Gillette sales in 1997 came from products new to the market in the last five years. This is twice the level of innovation at the average consumer-products company.

A vast research and development program is at the core of Gillette's success with its new product introductions. According to Business Week, Gillette religiously devotes 2.2 percent of its annual sales, or over $200 million, to research and development (R&D)—roughly twice the average for consumer products. The company aims to prove that consumers can be induced to pay a premium for innovative products that deliver superior performance. The company goal is to increase spending on R&D, capital expenses, and advertising—all combined—at least as fast as sales to assure continued company growth.

CHRONOLOGY: Key Dates for The Gillette Company

1901:: Traveling salesman King Gillette starts the American Safety Razor Company to manufacture disposable razors
1903:: The company is renamed Gillette Safety Razor Company
1904:: Gillette receives a patent on the safety razor
1910:: King Gillette sells his controlling share
1929:: Gillette merges with Auto Strop Safety Razor Company
1936:: Gillette Brushless shaving cream, the company's first non-razor product, is introduced
1948:: Expands its product line even further by purchasing the Toni Company home permanent maker
1955:: Gillette acquires the Paper Mate pen company
1963:: Gillette patents a coated, stainless-steel blade
1971:: The Trac II, the world's first twin blade system, is introduced
1984:: Gillette acquires Oral-B
1990:: The Sensor is launched in 16 countries, marking the company's first international launch
1996:: Duracell International merges with Gillette

INFLUENCES

Several factors influenced Gillette's sales performance in 1997. The strength of the U.S. dollar relative to most foreign currencies reduced sales growth by 4 percentage points. The company faces the challenge of making its other businesses as profitable as its blade business. Shaving had been the business that powered Gillette since early this century. Batteries, toiletries, writing instruments, and toothbrushes, for example, must now account for at least half of Gillette's growth.

CURRENT TRENDS

Gillette's plan for the next five years is continued expansion in global markets including Asia, Russia, and Latin America. It will also continue with increased emphasis on new products.

PRODUCTS

The Gillette Company's brands are organized into six major business segments: blades and razors, toiletries, stationery products, Braun products, Oral-B products, and Duracell products. More than 20 new products were launched in 1997.

Gillette's Sensor brand is its top-of-the-line shaving product. Sensor includes the SensorExcel shaving system for men (introduced in 1993) and for women (introduced three years later). The Atra and Trac II twin-blade shaving systems have been major brands for more than 20 years. Agility, the new women's disposable razor, was introduced in North America in late 1997. Gillette's Good News brand is the best-selling disposable razor in the United States.

In April 1998 Gillette introduced its first triple-blade razor, the Mach3. This razor stars in the company's biggest product launch ever, complete with a multimil-lion dollar global marketing campaign supported by six years of research and development.

Deodorants/antiperspirants, shave preparations, after-shave products, and skin care products make up Gillette's toiletries line. Gillette Series, Right Guard, Soft & Dri, and Dry Idea are part of the largest toiletries category, deodorants. The Gillette Series and Satin Care for women are two major brands in the shave preparation business. In early 1988 Gillette divested the Jafra line of skin care and color cosmetics. According to the company, Jafra "no longer fit Gillette's business strategy."

Parker, Paper Mate, and Waterman writing instruments and the Liquid Paper line of correction fluids, pens, and DryLine correction film comprise Gillette's stationery products.

The Braun line of hair-removal products is the largest Braun business, led by the Flex Integral shaver and the Silk-epil electric hair epilator for women. Braun's oral care products include the Oral-B plaque removers. Food processors, hand blenders, steam irons, hair dryers, and the Thermoscan infrared ear thermometer are among Braun's household and hair-care appliances.

The Oral-B toothbrush is used by more dentists and consumers than any other brand in the world. Toothpastes, mouth rinses, dental floss, and professional dental products are also manufactured under the Oral-B brand.

Alkaline batteries are Duracell's principle line of business. It also makes specialty and high-power rechargeable batteries. In May 1988 Duracell introduced its new Duracell Ultra high-tech battery. It lasts up to 50 percent longer than ordinary batteries and claims to be the world's longest-lasting alkaline battery for high-technology consumer devices, such as cellular phones and camcorders. In 1997 the company announced that it would discontinue manufacturing rechargeable batteries.

CORPORATE CITIZENSHIP

For Gillette, fulfilling the traditional value of good citizenship has meant "reaching beyond the workplace, through corporate contributions and employee involvement to improve our communities." In the company's headquarters city of Boston, Gillette supports organizations and community programs that help improve education, aid the less fortunate, revitalize inner city neighborhoods, and increase community spirit.

Gillette was a founding corporate sponsor of the YMCA of Greater Boston's Black Achievers program. It also sponsored teams of young men and women as part of City Year Boston, a full-time community service program for youth. A number of internship programs for high school and college students are also offered by Gillette. Also in Boston, Gillette provides financial support for organizations such as the United Way, Dimock Community Health Center, South Boston Neighborhood House, and The Museum of Afro-American History, as well as for mentoring programs at local elementary and middle schools.

In the medical field Gillette contributes significantly to women's cancers research at the Women's Cancer Program of Boston's Dana-Farber/Partners CancerCare. In 1997 Gillette awarded $5 million to this program.

In addition to its strong involvement in community service, Gillette is also committed to its responsibility to the environment. With the company's acquisition of Duracell batteries, the company has placed renewed emphasis on environmental initiatives. Since 1990 Gillette has spent more than $60 million on environmental projects around the globe. In the last eight years, Gillette cut worldwide emissions by 80 percent, reduced packaging by 12 percent, and realized energy efficiency gains of 10 percent.

GLOBAL PRESENCE

Gillette is one of the most globalized companies among Fortune 500 multinational organizations. Foreign operations account for 63 percent of Gillette's total sales and operating profits. Gillette has maintained a vast international market base and is growing its business in emerging markets around the world. Gillette operates 64 manufacturing facilities in 26 countries, and Gillette products are distributed in more than 200 countries around the world. The most promising new markets for Gillette are in what the company calls its AMEE region—an acronym for Africa, Middle East, and eastern Europe. The company maintains 16 manufacturing facilities and more than 5,500 employees in this region. Gillette attributes its flourishing growth there to its strategy of training local nationals for the highest positions as soon as possible. Among the emerging markets where Gillette is making its presence known are Poland, Russia, the Czech Republic, Turkey, India, Pakistan, and South Africa.

One of the reasons for Gillette's global success is the fact that its product offerings, marketing strategies, and messages are the same for all markets. The global view also extends to the company's hiring and training of managers, as well as to its technology policy—proof of which is Gillette's research and development facilities worldwide. In an article in Chief Executive, CEO Alfred Zeien claimed that the organization's global focus is the glue that holds its disparate businesses together.

EMPLOYMENT

Gillette employs 44,000 people, nearly three-quarters of them outside the United States. Bringing out the finest in each of its employees is the foundation of the company's human resources philosophy, policies, and practices. The company invests about $125 million annually in worldwide training and development programs.

THE SPACE-AGE RAZOR

"One day soon," writes humorist Dave Barry, "the Gillette Co. will announce the development of a razor that, thanks to a computer microchip, can actually travel ahead in time and shave beard hairs that don't exist yet." Gillette hasn't reached this point yet, but it wouldn't be a surprise to find out that the shaving company is feverishly working on such a project in its laboratories. One doesn't usually associate "high-tech" with "shaving," but Gillette works every day to do just that. What do you expect from a company run by a former naval engineer? According to the Knight Ridder/Tribune Business News, Gillette CEO Alfred Zeien "talks about 'shaving systems' with the same sort of technical gusto one expects from a Boeing or Hughes engineer." Zeien's attitude permeates Gillette. It's a company that spends huge amounts on R&D and that refuses to release a new product until the next generation is already in development. Gillette has four laboratories devoted just for research, eight for the development of new products, and three engineering centers that work on improving processes and equipment.

This is best exemplified in the story behind the razor that Gillette released in the spring of 1998—the Mach3, the first triple-blade razor. The razor was developed over a seven-year period at a cost of over $750 million. Gillette then spent over $300 million promoting it—meaning over $1 billion was spent on the development and marketing of a razor.

To develop this high-tech razor, Gillette put over 500 top-notch engineers on it—some with degrees from universities such as Stanford and M.I.T. The engineers ended up using technology from the semiconductor industry to help build a better blade. They discovered that they could make the blades stronger by dipping them in carbon—the same process used for computer chips. By the time the research and development was complete, Gillette had applied for 35 patents. The stakes involved in the development of the Mach3 were made apparent when it was discovered that one engineer had handed shaver secrets over to the competition. He plead guilty and was sentenced to 27 months in federal prison and ordered to pay $1.2 million in restitution.

Reviews of the new razor were mostly favorable, many commenting on the closer, smoother shave the Mach3 gave. Although some thought it a little pricey, the Mach3 was the top-selling razor during its first full week on the market and, according to Gillette, outsold the closest competition by a two-to-one margin.

Oh, and by the way, the next generation razor was, of course, already in development before the Mach3 was released. It should be out somewhere between 2006 and 2008.

Fortune magazine ranked Gillette number 46 in its 1998 list of the "100 Best Companies to Work for in America." Of the Gillette employees who were randomly chosen to participate in the magazine's survey, 85 percent felt so positively about the company that they indicated their intent to remain with the company until retirement. The company was also cited for its practice of promotion from within.

SOURCES OF INFORMATION

Bibliography

canedy, dana. "gillette, long a favorite of investors, finds itself walking an edge as thin as one of its razor blades." the new york times, 28 january 1998.

donlon, j.p. "an iconoclast in a cutthroat world." chief executive (u.s.), march 1996.

"the gillette company." hoover's handbook of american business 1998. austin, tx: reference press, 1997.

"the gillette company." hoover's online, 30 july 1998. available at http://www.hoovers.com.

hast, adele. international directory of company histories, vol. iii. detroit, mi: st. james press, 1997.

moody's company data report. moody's investor service, 1996.

symonds, william c. "gillette's edge: the secret of a great innovation machine? never relax." business week, 19 january 1998.

For an annual report:

on the internet at: http://www.gillette.comor telephone: (800)291-7615 or write: the fields co., 385 pleasant st., watertown, ma. 02172

For additional industry research:

investigate companies by their standard industrial classification codes, also known as sics. gillette's primary sics are:

2844 toilet preparations

3421 cutlery

3951 pens and mechanical pencils

3991 brooms & brushes

Company Profiles for Students

The Gillette Company

The Gillette Company

Entrepreneurial Beginnings

Razors Supplied to Soldiers in World War I Increased Customer Base

Sports Advertising Boosted Sales Beginning in the Late 1930s

Company Perspectives:

Diversification Began Following World War II

Diversification Moderated Starting in the Mid-1970s

Takeover Threats Dominated 1980s

1990s and Beyond

Principal Operating Units

Further Reading

The Gillette Company

The Gillette Company

Principal Subsidiaries

Further Reading

The Gillette Company

The Gillette Company

Entrepreneurial Beginnings

Wartime Production

Postwar Diversification

Company Perspectives:

Diversification Moderated Starting in the Mid-1970s

Key Dates:

Takeover Threats in the 1980s

Early to Mid-1990s

Razor Wars: Late 1990s and Beyond

Principal Operating Units

Principal Competitors

Further Reading

The Gillette Company

The Gillette Company

Contact Information:

OVERVIEW

COMPANY FINANCES

ANALYSTS' OPINIONS

HISTORY

FAST FACTS: About The Gillette Company

STRATEGY

CHRONOLOGY: Key Dates for The Gillette Company

INFLUENCES

CURRENT TRENDS

PRODUCTS

CORPORATE CITIZENSHIP

GLOBAL PRESENCE

EMPLOYMENT

THE SPACE-AGE RAZOR

SOURCES OF INFORMATION

Bibliography

For an annual report:

For additional industry research:

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The Gillette Company

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