Gillette adds to oral-care portfolio

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Gillette Co. boosts its oral-care business with last week's acquisition of Den-Mat Corp. and its $73 million Rembrandt whitening brand. But the deal comes as new oral-care categories-among the biggest growth engines in U.S. package-goods this decade-are seeing sales declines.

Terms of the Rembrandt deal, expected to close next quarter, weren't disclosed. But an executive familiar with the situation indicated Gillette paid less than $300 million. Rembrandt gets about half its sales from whitening toothpastes and a quarter from at-home whitening kits, with the rest split about evenly between professional and international sales, said Andrew Shore, Deutsche Bank Securities analyst.

Buying Rembrandt gives Gillette, marketer of Oral-B products, its first foothold in an at-home whitening business that grew from virtually nothing in 2000 to more than $400 million last year. Despite a late start compared to such competitors as Procter & Gamble Co.'s Crest and Colgate-Palmolive Co., Gillette also has gained ground in what was another fast-growing $400 million-plus oral-care segment-battery-powered toothbrushes-thanks to last year's launch of Oral-B Cross Action brush.

"We do expect to grow Rembrandt," said a Gillette spokesman.

But the whitening category Gillette is entering has hit-depending on one's viewpoint-a wall or a speed bump recently, with sales declines in each of the past six months. It had been growing at double- and triple-digit rates through last September, powered by the 2000 launch of Crest Whitestrips, followed by the fall 2002 launch of the paint-on Colgate Simply White product. Almost all of the drop can be attributed to Simply White, which has had trouble holding its consumer base in year two amid heavy ad and promotion spending by P&G. Colgate has had six consecutive months of steep double-digit sales declines from September through February, according to data from VNU's ACNielsen, reported by Banc of America Securities.

returning focus

Speaking to analysts in a conference call in December, Colgate Chairman-CEO Reuben Mark said he believed whitening kits may be a niche business. After "taking our eye off the ball" in toothpaste, he said Colgate is returning its focus there.

Battery brushes also have begun to lose sales, declining for five straight months and by double digits during the past four. The numbers don't include Wal-Mart Stores or club or dollar outlets. But even with consumer-panel data for Wal-Mart folded in, whitening declined 23.5% and battery-brush sales fell 7.6% in the 12 weeks ended Feb. 21, according to Banc of America Securities.

But P&G sees the slowing as no more than a hiccup. On the strength of its January launch of Crest Whitestrips Premium, a twice-as-powerful version of the original, P&G's own whitening-kit sales soared 34.4% in the four weeks ended Feb. 21, though the category still declined a modest 0.8%.

A P&G spokesman said the launch of Crest Spinbrush Pro Whitening, with bristles designed to aid whitening, will reinvigorate battery brushes, too. In June, Spinbrush breaks a print campaign from Publicis Groupe's Saatchi & Saatchi, New York, on a theme of "beauty in a brush."

Both categories still only have household penetration in the 20%-25% range, he said. "We see plenty of potential for continued growth."

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