Gillette Feels Market Share Is Not the Best That It Can Get

P&G's Razor Brand Still a Powerhouse, But Quest for Greatness Led to Agency Review

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Stubbled jaws dropped across adland last week when Gillette called a review for its North American shaving business at BBDO. After all, it's not often a client that 's spent 80 years with the same agency considers straying.

But the reason is actually rather academic: Gillette seems to be hitting a wall.

The brand is one of the most profitable in packaged goods, with regular price hikes and market shares long north of 80% for lucrative replacement blades. It seemed that all Gillette had to do was add another blade and sales went up.

But recently, the weak economy has been working against the brand.

It is facing declining market shares and tougher competition from less-expensive upstarts such as Schick Hydro. Gillette's replacement-blade share fell below 80% for the first time in recent memory for the eight weeks ended Sept. 9, according to SymphonyIRI data from Deutsche Bank.

That was despite a big effort behind the Summer Olympics, the results of which Patrice Louvet, president-global grooming and male shaving, said he was pleased with, though he gave the advertising mixed reviews. "We believe there's an opportunity to be even better and, importantly, to better integrate the product proposition with the overall idea," Mr. Louvet said of the Olympics effort.

"Work has been good, but we're looking for great," said P&G Global Brand-Building Officer Marc Pritchard.

Some investors have the same thing to say about P&G's Gillette deal in 2005. Though P&G stock recently broke out of a five-year trading range to near $70 a share, it's up less than 25% since the company bought Gillette. Colgate-Palmolive Co., which passed on Gillette, is up 118% over the same period.

Wall Street is having doubts that the Gillette trade-up model still works. "It's already the best a man can get, and men aren't as willing to pay more for better," said Sanford C. Bernstein analyst Ali Dibadj.

Marketing could be better, he said, but he doubts it's the real problem. Pricing, which has tempted thieves and led retailers to put blades behind locked glass cases, makes purchases less convenient and promotions less effective, Mr. Dibadj said.

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