Not only is it Gillette's largest launch in eight years, it's the first test of whether Procter & Gamble Co. ultimately made a smart business decision in doling out $57 billion to acquire the Boston company last year in the priciest consumer-products deal ever.
So much so, in fact, that P&G's stock fell nearly 4% in May amid reports that though the retail pipeline was swollen with Gillette's Fusion, P&G's new unit posted only 1% global growth in the last quarter to $1.19 billion (3% without currency effects).
Murmurs of worry
Add in that some of the razor's reviews -- be they from bloggers or Consumer Reports -- haven't been glowing, and that Schick's razor and blades market share actually went up for the four weeks ended May 21 according to Information Resources Inc., and you have murmurs of worry.
Even as she upgraded P&G recently, Lehman Brothers analyst Lauren Lieberman noted "a healthy degree of skepticism over Fusion's early performance ... particularly in terms of blade refills."
So with all that riding on the fate of Fusion, Peter K. Hoffman, president-Gillette's blades and razors business, is out to dispel doubters. He's evangelizing the brand as the biggest consumer-product launch of the past year, tracking ahead of Mach 3, which is primarily what led to a big payday for Gillette investors and comfortable retirement for Gillette executives, including Mr. Hoffman, 57, who retires at year's end.
Yes, Mr. Hoffman acknowledges, there was a lull in sales between Fusion's strong launch and a run-up to a major Father's Day promotion. Gillette's reported sales have lagged retail sales largely because of a shift to P&G distributors outside the U.S. that started last quarter and will continue this quarter. (P&G distributors carry four to six weeks less inventory than Gillette's.) But that doesn't mean Fusion isn't pulling its weight, Mr. Hoffman said. "Our early [Father's Day] data -- and I'll just underscore that it's early -- is very, very positive," he said.
Fusion's handle and refill sales both are off to strong starts vs. plan and Mach 3. But handles have been farther ahead than refills, leading to concern about whether men would stick with Fusion at 75 cents more per blade than Mach 3 products. "If we deconstruct the month-by-month data, you see a very strongly increasing segment of repeat buyers, of Fusion converts," Mr. Hoffman said.
Men try it and like it
While Consumer Reports tested Fusion with 26 men, Gillette tested it with thousands. Independent research among 800 men commissioned by Morgan Stanley also finds strong adoption. Follow-up research from Morgan Stanley's prelaunch survey indicates 26% of men will try Fusion -- up from the firm's initial estimate of 16% -- and that 60% of those who try it will adopt Fusion permanently, up from an initial estimate of 50%.
Men do have more blades in their bathroom inventories this time than when Mach 3 launched, mainly because the growth of club stores has made more people stock up, Mr. Hoffman said. That's slowing Fusion's uptake some, but not much, particularly among M3 Power users.
Fusion blades also last longer, as do all new Gillette systems compared to older ones, he said. That's led to consistently slowing unit sales over time, even as dollar sales and margins keep rising.
People tend to use the first blade in a new system longer than subsequent blades because of the initial "wow factor," Mr. Hoffman said.
Mr. Hoffman called Fusion's $1 billion sales goal by 2008 "ambitious," but "we're ahead of that glide path." He credited, among other things, "the highest-scoring blade and razor television advertising ever" from Omnicom Group's BBDO Worldwide, New York. After three months, brand and advertising awareness exceeded 60%, another record, he said.
"Integrations are always hard, and they're always going to be a little lumpy," said Mr. Hoffman, but added: "We're combining the two best companies in consumer products and creating the best consumer-products company in the world."