NEW YORK — Procter & Gamble may be basking in the afterglow of its planned $57 billion purchase of The Gillette Co., but the hard part, industry observers say, will be making it work.
Judging by P&G’s track record with earlier acquisitions of Clairol and Wella, retailers and other market experts appear unconvinced that the Cincinnati-based consumer products giant can turn a razor blade manufacturer into a vibrant beauty brand. They cite P&G’s penchant for jettisoning the talent of the acquired company, consolidating marketing spending and its inability to develop new markets that it has acquired as its main hurdles for a successful merger.
In addition, some major drugstore and discount retailers are voicing fear of being strong-armed by the new union, which will boast $60 billion in sales. “This is just part of the ongoing back and forth shift of power,” said a discount store executive.
Whether P&G can absorb another acquisition is the question on many beauty executive’s lips, most notably since the consumer company has a penchant for shedding the experts in charge of the brands it acquires, along with overhead. This is a critical point since P&G has no expertise in the razors and blades category. Succeeding in this new territory won’t be easy, in the view of consultants.
Wendy Liebmann, president of WSL Strategic Retail, elaborated on P&G’s typical acquisitions strategy: “The company tends to want to bring its acquired brands in-house rather quickly,” rather than rely on the marketing expertise of the acquired executives. “It takes a long time to get your head around a new category,” added Liebmann. “With each acquisition, [P&G] senior management can’t continue to be totally devoted to the core categories.”
Consumer products analyst Bill Chappell of SunTrust Robinson Humphrey predicts P&G likely will leave Gillette’s razors and blades business as a stand-alone operation, and first bring its personal care brands in-house, namely the men’s grooming line Gillette Complete and Right Guard deodorants. “It would be a monumental mistake if P&G brought the razors and blades business in-house, because Gillette does such a good job marketing to men,” said Chappell, adding, “It’s questionable that P&G could actually improve on that part.”
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