BRAND - Gillette responds to Harry's and Dollar Shave Club

Gillette is rapidly moving to a more cost effective shave

In a "very different approach", Gillette said it will introduce lower-cost razors and beef up its disposable shaver collection.

Gillette will start selling new three-blade and five-blade razors in January that will cost less than $10. It will also start selling disposable razors that will feature the Gillette cooling technology.

This new approach appears to be Gillette's latest response to subscription competitors who have been very disruptive. Until now, Gillette had focused most attention on its expensive Fusion razors, marketing itself as a top-tier brand. That strategy and the rushed to market copycat, Gillette Shave Club, hasn't paid off.

Gillette's pricey razors opened the space for innovation in men's grooming

When Procter and Gamble purchased Gillette for $57 billion in 2005, then the largest acquisition in the company's history, Warren Buffett called it "a dream deal." However, a pack of innovative subscription services including Dollar Shave Club, Harry's and ShaveLogic, have chipped away Gillette's market position. "Gillette was poorly positioned to defend (market) share as consumers shifted to cheaper razors," said Joe Agnese, CFRA Research analyst to CNN.

According to Macquarie Research, Gillette now controls about 56% of the market meaning Gillette's share of the U.S. razor market has dropped 11% in the past two years. Sales at Procter and Gamble's grooming unit, which includes Gillette, slumped 6% in the most recent quarter. Yet Procter and Gamble had not launched a new razor line in 12 years. Their strategy seemed to be upgrading the Fusion series while betting on brand power to lure consumers to its higher-priced blades and slogan 'the best a man can be'.


WHY THIS IS IMPORTANT:
Unilever's purchase of Dollar Shave Club for a billion dollars and Target's partnership with Harry's is easier to understand in the light of the Gillette experience. It now seems evident that brand power is expensive and may not be successful for maintaining brand position in the face of innovation. Clearly there is a paradigm shift occurring that doesn't favour legacy brands of the large and powerful consumer directed organizations and retailers.

ACQUIRE - Unilever Acquires Seventh Generation Inc.

Unilever announced last week they have completed the acquisition of Seventh Generation, Inc., a North American home and personal care products company.

Their intention to acquire the company was publicized in September, shortly after reports they were in talks to acquire The Honest Company.

Seventh Generation is a Vermont based business which makes natural and eco-conscious cleaning products.

The company’s turnover exceeded US $200m in 2015 and it has seen double digit compounded annual growth over the last 10 years.

Seventh Generation has a comprehensive product portfolio and a distribution network covering the ‘natural’ category in grocery, mass merchandise and e-commerce channels.

The biggest difference between The Honest Company, that also sells natural products, and Seventh Generation is the former largely sells directly to the consumer while Seventh Generation sells predominantly through retailers.

Nitin Paranjpe, President of Unilever’s Home Care business said in a release: “Seventh Generation has long been a disruptor in the US marketplace, leading the industry in sustainable innovation while attracting new generations of conscious consumers. This addition to Unilever’s product portfolio will help us meet rising demand for high-quality products with a purpose.”

As previously reported in InfoStream, the value of potentially acquiring The Honest Company goes beyond the product portfolio.

It indicates a concentrated effort by Unilever to access the subscription bases of successful start-ups in order to diversify their customer base and remain agile in a new market environment.

This focus was demonstrated earlier this year when Unilever purchased ECommerce startup Dollar Shave Club.

ACQUIRE - Unilever Negotiating Acquisition of The Honest Company

Unilever’s proposed purchase of Jessica Alba’s The Honest Company for $1 billion is its second recent move to acquire young start-ups with direct-to-consumer subscription models.

The Dollar Shave Club was purchased by Unilever earlier this year, allowing the much larger company to tap into the market share that Dollar Shave Club had opened up.

The model of cheap, subscription-based service eliminates a lot of expensive elements involved in brick-and-mortar operations.

These types of purchases offer benefits for the start-up in terms of an influx of cash to push them into the black.

For the larger company, such as Unilever with these purchases, or Walmart purchasing Jet.com, the benefits are less tangible but no less real.

Acquiring start-ups that are finding footholds with consumers who now demand much more flexibility and responsiveness from their providers allows large companies to remain relevant in a changing capitalist climate.

The convenience and price point are probably also a factor in The Honest Company’s success, with their bundle services and subscriptions designed to fit specific lifestyles.

The Honest Company also offers the promise of eco-friendly and baby-safe products (though there has been controversy over whether they keep that promise).

This second purchase by Unilever indicates a similar focus on accessing the subscription bases of successful start-ups in order to diversify their customer base and remain agile in a new market environment.

In 2014, 80% of The Honest Company’s sales were via a monthly subscription service. Although their products are now available in Costco, Whole Foods, and Target, their subscription services are still a significant part of their marketing.

And, even if some of their subscribers are inactive, those inactive subscribers are still a valuable commodity for Unilever.

Research has shown that even inactive subscribers purchase more, and more frequently, than non-subscribers. This means that Unilever gains benefits from The Honest Company’s subscription-model start despite the company’s move into department stores.

And the subscription model offers valuable information and direct access to customers, which provides value beyond the standard sales figures.

With venture capitalists being much choosier about where their money goes, these sorts of alliances between agile young start-ups and established larger companies will become more and more important.

By Tiffany Sostar

Tiffany is a writer, editor, academic, and animal lover who came late to her appreciation of pets. At 18, a rescue pup named Tasha saved her from a depression and she hasn't looked back. She has worked as the canine behaviour program coordinator for the Calgary Humane Society, and was a dog trainer specializing in working with fearful and reactive dogs for many years. She doesn't have any pets right now, but makes up for it by giving her petsitting clients (and any dogs she comes across on her frequent coffee shop adventures) extra snuggles.

ACQUIRE - Unilever Buys ECommerce Startup Dollar Shave Club

Dollar Shave Club's 3.2 million members generate US$1 Billion Cash (US$312/Member)

According to a twitter report by Forbes reporter Ryan Mac, Unilever, the $130 billion dollar multinational consumer goods company, is paying $1 billion cash, for the startup Dollar Shave Club. While the details are still emerging, this transaction is likely to be the third largest ever in e-commerce. The other higher dollar transactions are zulily and Wayfair.


Venture capital providers Venrock, along with other other well known investors Andreessen Horowitz, Battery Ventures, and KPCB, have provided the capital for Dollar Shave Club’s growth. However, Battery Ventures and KPCB won’t benefit from the sale to Unilever since they exited earlier. The others are likely to see a true venture return of up to 10X investment.

Dollar Shave Club (DSC) has grown to become a dominant player in the male grooming business since its founding in 2012. Although best known for a shaving service, DSC also markets wash, skincare and styling products to its male club members. The company's revenue was $153 million in 2015 and there is an expectation it will top $200 million during this fiscal period. Other published information suggests this transaction will represent the largest multiple for a e-commerce startup in history.

DSC's 3.2 million members should be a valuable addition to Unilever, increasing the company’s exposure to a growing demographic as well as adding valuable client data. Unilever offers Dollar Shave Club the ability to plug into existing international marking and distribution channels.

Apparently, Unilever does not have plans to make any executive changes meaning DSC’s CEO, Michael Dubin will continue into the future.