ANALYSIS: Client profile - Gillette battles back as cuts start to heal. Gillette is the leader in most of the categories it competes in, yet profits and stock price have fallen in the past two years. How is the world’s number one razor manufacture

When Gillette launched the Mach 3 razor during the summer of 1998, the company was taking a tremendous risk. It had invested seven years and dollars 750 million in research and development to produce it, and another dollars 300 million to market it. The Mach 3 would also compete with another Gillette product, the Sensor.

When Gillette launched the Mach 3 razor during the summer of 1998, the company was taking a tremendous risk. It had invested seven years and dollars 750 million in research and development to produce it, and another dollars 300 million to market it. The Mach 3 would also compete with another Gillette product, the Sensor.

When Gillette launched the Mach 3 razor during the summer of 1998,

the company was taking a tremendous risk. It had invested seven years

and dollars 750 million in research and development to produce it, and

another dollars 300 million to market it. The Mach 3 would also compete

with another Gillette product, the Sensor.



But Gillette executives breathed a sigh of relief as consumers embraced

the product, helping Gillette capture 14.6% of the US blade market

(which includes disposable shavers), boost its share of the razor market

(shavers with non-disposable handles) to over 70% and increase its US

sales by 30% over the previous year.



But the Mach 3’s arrival was one of Gillette’s few bright spots in the

third quarter of 1998. The company, which does two-thirds of its

business outside the US and had previously produced double-digit

earnings increases, was hit hard by the Asian economic crisis.



Wall Street was stunned on September 28, 1998 when Gillette announced a

major reorganization for the following 18 months, resulting in 4,700

layoffs (11% of its workforce), the closing of 14 factories and 12

warehouses and closing or consolidation of another 30 facilities

worldwide.





Internal PR challenge



This presented a major challenge for Gillette’s internal communications

staff, which consists of 12 PR professionals under VP of corporate

communication Eric Kraus, three IR pros led by VP of IR Claudio Ruben

and three public affairs specialists headed by VP of corporate public

affairs Joan Gallagher.



According to Kraus, the company chose to be up-front with the media

about its problems. It developed key message points, made sure that

executives were available and ready with the facts about the

reorganization and tried to ensure messages were consistent

globally.



’We stated the facts in a consistent and timely fashion - that we were

reorganizing to work smarter and faster and combine five separate sales

and traditional market groups into one,’ says Kraus.



The timing of the announcement was viewed as fortuitous by analysts,

since it took place in an already-weak period when numerous companies

were reporting lower-than-expected fourth-quarter earnings due to

economic problems abroad. However, forecasting layoffs so far in advance

in some areas has meant that Gillette continues to be haunted by

negative headlines as the changes are instituted.



Through all of Gillette’s troubles, Kraus claims that employee

communications has been paramount. ’It’s my philosophy that we

communicate with employees and inform them of major issues prior to

their reading about it in the paper,’ he says. The company has used

several tactics to do this, including posting information on its

intranet, two-way communications, employee videos, Q&A documents and

employee bulletins.



However, when Gillette announced the news, former chairman and CEO

Alfred Zeien reportedly refused to be specific about closings, leaving

many employees wondering about their futures. The day after the

announcement, The Boston Globe ran an article stating that some

employees claimed their bosses hadn’t clued them in as to whether they’d

have jobs or not, and one was quoted as saying she heard about the

layoffs on TV.



Despite this, Globe reporter Chris Reidy says that Gillette’s image

remains intact, at least locally, particularly since these local

reductions will mainly occur through attrition and early retirement.

’For most of the 1990s, they recorded impressive growth and were a

stellar performer,’ he says. ’The last two years haven’t matched that

pace and they failed to meet Wall Street’s expectations, but they

continue to be highly profitable.



They’re regarded as one of the premier private employers in eastern

Massachusetts.’



’I don’t think consumers care (about layoffs) if it ultimately keeps the

price of blades reasonable,’ adds Jeremy Kahn, a writer for Fortune

magazine, who says Gillette’s troubles are due to poor management, not

poor PR.



The layoffs haven’t hurt the company’s internal PR department either,

according to Kraus. In fact, it is looking to add two regional PR

directors in Europe and North America within the year.



In July, Gillette also built an internal public affairs department,

which handles The Gillette Centers for Women’s Cancers and the Gillette

Women’s Cancer Connection, to address the physical, social and emotional

needs of women with breast or gynecological cancers. Gillette founded

the Corporate Wetlands Restoration Partnership, working with the

Commonwealth of Massachusetts and the US Environmental Protection

Agency, to restore damaged wetlands in Massachusetts, and is also

involved in a number of other social issues. While Gallagher says she’s

not sure these programs, which are meant to enhance the image and

perception of Gillette, have counteracted negative press about layoffs,

they have underscored its commitment to the community and its staff.



Despite its problems, consumers still love Gillette. An November 1999

Fortune article points out that it is still the world leader in the

razor and blade industry, and in 10 other product categories, including

alkaline batteries, toothbrushes, epilators and pens.



Interbrand also ranked Gillette as the 15th most valuable global brand

name and the second most effective company in the world at ’translating

brand muscle into revenues and profit’ in its 1999 World’s Most Valuable

Brands survey.





Better times ahead



Things are even looking up on Wall Street. While Gillette shares were at

35 in November, down 45% since March, some analysts are getting behind

the company. Goldman Sachs analyst Amy Low Chasen recently upgraded the

stock from ’market performer’ to the ’recommend list,’ based upon

conversations she’d had with Gillette management, which reportedly

indicated that capital issues would be improving. She put a dollars 60

12-month price target on the stock, which currently hovers around

41.



It’s too soon to tell if this will help revive Gillette’s stock, but it

seems consumers and investors aren’t going to abandon it anytime

soon.



Gillette also plans to announce 20 new products this year, as it has

done in years past. While they certainly won’t all be as successful as

the Mach 3, they will no doubt keep Gillette a cut above the

competition.





GILLETTE



PR head: Eric Kraus, VP of corporate communication



Internal PR staff: 18 total



Joan Gallagher, VP of corporate public affairs; Claudio Ruben, VP of

investor relations; 4 business management communications directors



Key divisions: Blades & Razors (Mach 3 and SensorExcel); Toiletries

(Right Guard); Stationery Products (Paper Mate); Braun; Oral B;

Duracell



External agencies: Porter Novelli, lead agency for branding PR (13-year

relationship); Alan Taylor Communications, sports PR (seven years); Cone

Communications, Gillette Center for Women’s Cancers; Cairns &

Associates, Waterman (five years); 25-30 agencies abroad



Revenue: dollars 10.1 billion in sales in 1998.



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