Procter & Gamble may have single-handedly tipped the balance of power from retailers to supersized manufacturers when it acquired Gillette this fall. The Federal Trade Commission approved the $57 billion union in October, giving its blessing for the two companies to operate as one consumer products behemoth.
The move fortifies P&G's reach in its existing categories, such as personal care and oral care, and introduces the company to new areas, such as batteries and razors and blades. Combined, the beefed up P&G will have more than $60 billion in sales annually.
To gain approval from the U.S. antitrust authorities, however, P&G did make several concessions, such as shedding brands in categories where the companies have overlapping businesses. P&G will spin off Gillette's Right Guard deodorant business and the Rembrandt oral care line, which it plans to sell to Johnson & Johnson. To meet with the European Commission's clearance provisions, P&G announced plans to sell SpinBrush battery-operated toothbrush business to Church & Dwight, the maker of Arm & Hammer toothpaste.
Aside from more leverage at the negotiating table with retailers, the prize component for P&G is Gillette's market-leading razors and blades business. The Gillette brand also gives P&G more of a platform on which to build a viable men's grooming business in an increasingly crowded segment. Gillette, a company with a penchant for marketing to men, last year launched Gillette Complete Skincare to compete with the likes of Nivea for Men, Neutrogena Men and now L'Oréal Men's Expert. P&G has dabbled in the men's arena by redirecting its Old Spice brand to young men, but has yet to carve out a distinct niche in the space. The company will likely leverage Gillette's sharpness to do that. By combining P&G's skin care expertise from brands like Olay and Gillette's prowess in getting men's attention, the pair could create a powerful men's skin care brand.
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