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
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
’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
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
’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
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
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
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
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
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;
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.