Tuesday, February 01, 2005

P&G buys Gillette

on Economist

P&G spends some $5.5 billion a year on advertising and boasts a particular expertise in marketing to women, while Gillette’s forte is in selling to men.

In concrete terms, P&G reckons that the merged group can cut its combined headcount by 6,000, some 4% of the total.

There are also suggestions that Gillette could be at the crest of its wave. P&G may believe that it can squeeze more value out of Gillette’s brands. On the other hand, the costs of product innovation are high for razors and there are suggestions that consumers may be getting fed up with having to pay ever-increasing sums for razors with ever more blades.

P&G’s rivals must consider their response. Analysts have long suggested that the sector is ripe for consolidation. With the acquisition of Gillette, P&G will usurp Unilever as the world’s leading consumer-goods manufacturer by both market capitalisation and revenue. And it will offer yet more intense competition if it cuts prices for products where it competes directly with Unilever.

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