As it announced plans last week to lay off 11% of its work force, Gillette cited strong September numbers for the new razor in the U.S. and said it continues to sell every Mach3 it can make.
But Gillette's overall third-quarter razor shipments aren't up by as much as second-quarter shipments were, leading some analysts to wonder whether the brand is failing to meet lofty expectations created by a $750 million research and development budget and $300 million marketing campaign.
"While [Gillette] didn't release all the numbers regarding the third quarter, they certainly led people to believe that the blade and razor numbers were going to be weaker in the third quarter than previously anticipated by most analysts," said William Steele, an analyst with Buckingham Research. "That's got to be part and parcel with what's going on with the Mach3."
`AHEAD OF EXPECTATIONS'
John Darman, Gillette's VP-business management for male shaving, insisted the Mach3 rollout is at or ahead of expectations.
"We're doing unbelievably well," he told Advertising Age.
In the first four weeks of September, Mach3 had a 45% unit share and 58% dollar share of the razor category and was selling six times more units than any other razor, Mr. Darman said, citing ACNielsen Corp. figures.
Overall, razor sales have doubled to about $20 million a month over last year's levels, he said, thanks in large part to the Mach3 introduction.
In the period since Mach3 advertising from BBDO Worldwide, New York, broke Aug. 10, sales-already driven by pre-launch publicity-have risen 70%, Mr. Darman said.
In replacement blades, the key moneymaker for Gillette, Mach3 had an 18.5% dollar share in September, Mr. Darman said, even though most consumers haven't needed to buy replacement blades as yet. Mach3 blades are priced 50% higher than the marketer's Sensor Excel blades.
REAL TEST IN NOVEMBER
The real test for Mach3 may be in November, when men who bought razors return to buy blades. Although Gillette won't start measuring conversion rates until then, Mr. Darman said early results for refill blades are encouraging.
Gillette always expected significant cannibalization in a category where it already holds more than a 70% share. A spokesman said the company projects 75% of Mach3 buyers are existing Gillette consumers.
The company still wins when it converts a Sensor user because of Mach3's higher price and margin.
But Gillette needs the other 25% of Mach3 consumers to come from competitors' brands, and Warner-Lambert Co. appears to have defended its own turf with heavy promotions for its Schick brand.
For the 52 weeks ended Aug. 16, Schick actually gained share on Gillette in both razors and blades despite effects of the first six weeks of the Mach3 launch, according to figures from Information Resources Inc.
WHO LIKES IT: 50%
"My rough estimate of all the people I've talked to is that it's about 50/50 between people who like it and don't like it," Mr. Steele said.
"Some people are telling me they hate [Mach3], and I just don't recall that with Sensor Excel."
A bigger problem for Gillette may be that Mach3 isn't different enough from Sensor Excel, said Ken Harris, partner at consultancy Cannondale Associates.
"Mach3 was supposed to be a clear breakaway," he said. "It performs well, but not so much better . . . that people are willing to spend that much more."
Mach3 still has plenty of defenders among analysts, too.
"We continue to believe Mach3 will be a blockbuster product that will provide impetus to Gillette's sales and earnings growth for several years," said Brown Bros. Harriman analyst David Hill in a report last week.