Energizer Holdings' proposed $930 billion acquisition of Pfizer's Schick and Wilkinson Sword brands, announced last week, means that battery marketers with a history of not playing nicely together will now fight it out in razors, too.
In a conference call announcing the deal, Energizer CEO Pat Mulcahy sounded deferential, citing Gillette's 70% global market share in razors, a degree of dominance seen nowhere else in package goods. Mr. Mulcahy said he sees room to innovate more, but said Schick won't necessarily have to lead innovation.
Mr. Mulcahy also said he wants to expand Schick's margins, adding that the personal nature of shaving and consumer commitment to systems make price competition difficult. "We're not trying to be Gillette," Mr. Mulcahy said. "We'll only be a quarter the size."
Gillette bought Duracell in 1996, and since then the battery duel has been one of the nastiest and most price-focused in package goods. Duracell and Energizer fought it out on TV and in court over comparative ad claims in recent years. Due to price cuts and promotion, net sales for both Duracell and Energizer were lower last year than in 1997, Duracell's first year under Gillette management, despite rising unit sales and growth of battery-powered devices.
The promotion wars have drained ad spending by both rivals, but Energizer has outspent the industry leader 2 to 1 in U.S. media in recent years, according to Taylor Nelson Sofres' CMR, most recently $53.7 million to $25.7 million through the first 10 months of 2002.
"Sobering" is the best word to describe the financial scorched earth left behind in the battery battle, according to Lehman Brothers analyst Ann Gillin. But she believes the razor fight could be more genteel.
bigger lead in razors
One reason is that Gillette's lead is much bigger in razors. Energizer is a relative whisker's length from Gillette's Duracell, which outsells it by 32% in batteries. But Gillette outsells Schick by more than five times in razors.
The U.S. disposable-razor category could also get more contentious, she said. Schick has been gaining ground and Gillette, which has a relatively narrow lead, is girding for a June launch of its three-bladed answer to Schick Xtreme 3. The introduction will be backed by the first TV ads in a decade for Gillette disposables, from Omnicom Group's BBDO Worldwide, New York.
But disposable razors are only a $395 million category in the U.S., less than half the $830 million spent on blades and razors, according to Information Resources Inc., whose numbers exclude Wal-Mart Stores, dollar and club outlets.
Consumers have been more willing to pony up for innovation in razors than batteries, Ms. Gillin said, as shown by the success of Gillette's Mach 3 and Venus razors. Gillette has raised list prices successfully in two of the past three years, with Schick quietly following, a stark contrast to the deflationary spiral in batteries.
The potential to engage Gillette in its more-profitable business and possibly divert resources from the battery struggle is likely part of Schick's appeal to Energizer, said an executive close to the company.
Gillette had no comment on the Schick deal, and an Energizer spokeswoman did not return calls.
But both the executive and Ms. Gillin said the deal makes sense beyond fueling the grudge match, since distribution and marketing synergies could help Energizer overseas and Schick in the U.S.