Dr Amit Rangnekar

www.dramitrangnekar.com

Gillette Guard- Indo-vation

Case Learning
How the worlds largest FMCG company P&G gained consumer insights and identified consumer specific needs in EM through ethnographic research How were these insights leveraged to develop a safe, easy to use and affordable India specific razor using reverse innovation How was this Indo-vation successfully marketed

 Global

P&G

Founded 1837, FY 2013 $84bn, 4.8bn daily consumers Operations 70 countries, marketing 180 countries Worlds biggest advertiser, Portfolio- 25 billion$ brands Gillette M&A 2005 $57bn India 1988- household, beauty, grooming, health care 650mn daily consumers

Gillette India Ltd, Procter & Gamble Hygiene & HC Ltd, Procter
& Gamble Home Products Ltd (Unlisted)

Gillette M&A
Synergy- P&G- focus on women, Gillette- focus on men Same channels, reach, customer connect- control, cost Ability to command premium, profitability, captive pricing

P&G global scale and leadership

Blades & Razors 68% GMS Oral Care 19% GMS Batteries 27% GMS

Gillette India
1984- Indian Shaving Products Ltd- Poddar Group + Gillette(24%) 1991 Gillette 51% share, allowed to use "Gillette" name 2005 Gillette M&A by P&G for $ 57bn 2013 Gillette India sales Rs 1500 cr

Availability, pricing, sizing, innovation

Equity, heritage, innovation, customer delight, range, price point

Availability- modern retail, kirana, panwala

Closely related portfolio- common customers, channels, facilities

Gillette India Sales

US$ mm Net sales % growth Cost of goods sold % of sales Advertisement & promotion % of sales Other expenses % of sales EBITDA % Margin Depreciation & Amort. Exp. Other Income Tax Net Income % Margin FY08 98.1 37.8 38.5% 15.6 15.9% 17.6 18.0% 27.1 27.6% 2.3 5.6 10.8 19.6 19.9% FY09 110.3 12.3% 43.1 39.1% 18.2 16.5% 22.5 20.4% 26.4 23.9% 1.9 5.0 10.6 18.9 17.1% FY10 142.1 28.9% 53.3 37.5% 28.1 19.8% 26.6 18.7% 34.0 23.9% 2.1 3.5 12.6 22.9 16.1% FY11 176.4 24.2% 72.0 40.8% 46.4 26.3% 37.7 21.4% 20.3 11.5% 3.3 5.3 8.0 14.4 8.1%
2

FY12

205

16.5

91

44.5

44

21.5

52

25.3

17

8.7

12

6.1

Costs of goods sold has increased on account of currency devaluation and changing product mix Gillette Guard launch, increased spending on Oral Care behind competitive promotions, increased spending on Duracell Accounting reclassification from Advertisement and Promotion to Sales Higher contract manufacturing set up expenses for upcoming initiatives, Increased freight expenses and devaluation of currency

Blades & Razors

172.7

Sales (US$ mm)

147.3
118.4 98.9 74.4 81.3

s
Oral Care Oral Care

FY08

FY09

FY10

FY11

FY12

FY13

Portable PortablePower Power

55.2 55.2
32.6% 26.9% 32.1% 31.8 24.3 21.8 25.6 9.2 9.2 25.8 21.6% 17.5% 15.0%

EBIT (US$ mm)

48.8 48.8 36.3 36.3 18.4 18.4 23.1 23.1

48.0 48.0

11.7 10.2 10.2

25.9

5.4 5.4

5.9 5.9

6.9 6.9

FY08

FY09

FY10

FY11

FY12

FY13

FY08 FY08 FY09 FY09 FY10 FY10 FY11 FY11 FY12 FY12 FY13 FY13

FY08 FY08

FY09 FY09

FY10 FY10

FY11 FY11

FY12 FY12

FY13

Segment Sales $mn, 1$= Rs 60, Source- P&G website and Annual Reports

Oral Care
Toothbrush + Toothpaste Rs 7800cr @13%, niches, penetration
Oral Care Toothbrush Portfolio50%sales Growth in 23% contribution to GIL

Oral Care Toothbrush Portfolio- 50% Growth in (1) Market Share Market Share(1)
Mid Tier: < Rs. 20

Oral-B toothbrush strong dentist endorsement

NPL- Oral-B toothpaste (Fluoride innovator, now Stannous)
Pro-Health PH Clinical PH Clinical Power Power Oral-B Kids

Mid Tier: < Rs. 20

Shiny Clean ShinyFresh CleanClean Fresh Kids Clean Junior

Kids Junior

Premium Tier: Rs. 22 Rs. 44

All-Rounder All-Rounder Advantage Advantage AR Sensitive AR Sensitive Oral-B Kids

Premium Tier: Rs. 22 Rs. 44

Oral-B Toothpaste Complete Port

Super Premium Tier: > Rs. 45

Super Premium Tier: > Rs. 45

Pro-Health

wth in

Oral-B Pro-Health
Super Premium Tier: > Rs. 45
Pro-Health PH Clinical Power

75 Gms -59 INR

43%43% of GIL SalesSales (FY13) ofBrush GIL Brush (FY13)

37% of37% GIL Brush (FY13) of GILSales Brush Sales (FY13)

Oral-B 20% of GIL Brush Sales (FY13) 20% of GIL Brush Sales (FY13) Extra Fresh
35Gms -15 INR, 80 Gms -36 INR

Entered Sensitive toothbrush segment with launch of All-Rounder Sensitive Brush Brush Entered Sensitive toothbrush segment with launch of All-Rounder Sensitive Strengthened Super Premium portfolio with launch of Pro-Health Clinical Clinical Strengthened Super Premium portfolio with launch of Pro-Health Plans to build scalescale in the Oral by playing across price points Plans to build in theCare Oralsegment Care segment by playing across price points Strong dentist endorsement

Strong dentist endorsement

rce: Company filings & website

Over the last 5 years

Source: Company filings & website (1) Over the last 5 years

Oral-B Healthy 32
40Gms - 15 INR, 80 Gms 35 INR

15

15

Personal Power
Batteries India Market size- $160mn

Duracell Batteries- 5% contribution to GIL sales

Global leader in alkaline batteries

Personal Power Converting the Category High growth potential- toys, cameras, games through Superiority
AA AAA Ultra Specialty

Mens Grooming
India Rs 3800 cr @22%, Gillette Rs 1500 crores, 5.5 billion units 72% GIL contribution, 51% NMS Pre shave (Blades, Razors, brush, gel, foam)- national leader Post shave (after shave, deo, moisturiser) Strong brand recall, strong growth Beauty majors shifting to men- Garnier, Nivea, Emami, Olay, ITC

Trade up, brand building, superior propositions, reach, range

Metro focus, multipoint displays, salience, preference

Gillettes Position in Men's Grooming

Category Segment Men's Razors & Blades Men's Pre-Shave Men's Post-Shave Men's Deodorants 4 Tiered 2 Tiered 2 Tiered Premium Mass Men's Bath and Shower Men's Toiletries Premium Mass Men's Hair Care Premium Mass Men's Skin Care Premium Mass Absent Gillettes position Dominant Leader Leader Follower Follower

Men's Shaving

Segmentation
Premium
Mass Premium

Value
Fusion Power Fusion Mach3 Sensor Excel Vector Guard Presto

Razor Rs 349 Blade Rs 199

Razor Rs 299 Blade Rs 174

Razor Rs 125 Blade Rs 99

Razor Rs 99 Blade Rs 79

Razor Rs 39 Blade Rs 16

Razor Rs 19 Blade Rs 7

Razor Rs 18

GIL sales 15% GIL sales 51% GIL sales Blades &34% RazorsPresent and Innovating Across the Spectrum

es & Razors Strong Ancillary Portfolio

Strong Ancillary Portfolio

Foamy Sensitive Skin Foam Conditioning Gel Fusion Hydra Gel Mach 3 Gel Tube shave Gel Splash

Pre + Post Shave

de portfolio of pre & post shave products lso has a presence in the female blades & razors market in India

Master Branding Strategy

Razors

Gel, Foam, Moisturizers

After Shave, Deo

Brush

Blades , Cartridges

Brand Architecture
Corporate Brand Endorsed Brands

Razors

Gel, Foam, Moisturizers

After Shave, Deo

Brush

Blades , Cartridges

NPL
2010
2002 1999

2011

1996
1993

1987

Presto
NPL 1993

Volumes
Rs 18 + blade free Refills @ Rs 5 for 5 shaves High ad and promotion spends

Vector XP
2002- NPL Indians using double-edged razors Insights- thick, long hair, shave less frequently, Vector- plastic push bar, slide down to unclog Testing- Indian students in US- India trip costly Reaction- Wow that's a big improvement Result- Vector flopped- clogging- still water

Learning- Go to consumers, talk, observe,

spend time- insights

2009 Pre-Guard MS
Brand Vector MS % Company 13 Company MS %

Mach3
Wilkinson Others Super Max Topaz Laser

9
8 7 15 10 Super Max 15

P&G

37

Malhotra Shaving Products

6

16
Euromonitor

Gillette Guard
Breakthrough shaving system

Safe, high quality, affordable

Target- 1 bn+ EM men who shave with double-edge razors- unsafe, expensive

Objectives

Understand EM consumers
Need gaps Preferences Role that grooming plays in their life

EM double edge users- unique needs, preferences than RoW

NPD
Design, manufacture and deliver a unique, affordable and sustainable model for safe razors for EM

Market immersion
2008- Multi-functional US innovation team 20 engineers, developers- in India for 3 weeks Ethnographic research
Observe daily routines- 300 rural home visits
Experience life- 3,000 hours with 1,000 consumers, shop along GDPI- aspirations, why they shave, how often

I had never seen people shaving like that A Carvalho, VP, Gillete

Shaving insights
Insights- small houses, power cuts, common bathrooms Indian male shaver price-sensitive

How men shave

Sitting on the floor- with / without a hand held mirror Unique gripping patterns when shaving Frequent nicks and cuts- unsafe Small cup of still water Dark morning hours, often without electricity Tedious, twice the shaving time than others

Specific benefits sought

Safety Ease-of-use Economy of time and cost in shaving N9M 5 prototypes developed
User friendly design Shave performance Safety Easy rinse Low cost

NPD 18 months to develop Gillette Guard

NPD
Safety

Single blade, safety comb, light for easy control

Ease of use Flexible pivot, easy rinse cartridge, textured grip, easy click dock Affordability Low cost, 4 components (Vector-20, Mach3- 25), low price

NPL 2010
Co-created, meaningful features, impactful Plugged key need gaps Consumer Insights
74% felt Gillette Guard provides fewer nicks and cuts

75% felt safer using Gillette Guard than double edge razors
80% felt Gillette Guard offers an affordable alternative

N3M No. 1 razor in India, N8M 11 million tried Gillette Guard N18m 50% razors sold in India, N36m 66% razors sold in India

Gillette Guard
Swivel head Comb Guard Easy rinse blade

Single squeeze cartridge for loading /unloading

Textured grip

User-friendly handle design

Hang hole

Enlarged lubrastrip

2-point intuitive docking

India centric product and business model

Place
22 Depots 3 Distribution Centers Gillette 20 lakh retailers (P&G 55 lakh) Guard fastest to reach 9.5 lakh stores

Strengthened distribution network

Focus on kiranas than modern trade Oral-B- 1.8mn retailers, 2X over 1999

Duracell- 0.12mn retailers

Pricing
Penetrative pricing strategy

MRP Rs 15 per razor

Rs 5 /cartridge for 5 shaves

Re 1/ shave

Promotion

TVC with Bollywood stars

ette Guard Innovated Primarily for India

IMC

PoS activation TVC Website

3QFY11 4QFY11 1QFY12 2QFY12 3QFY12 4QFY12 1QFY13 2QFY13 3QFY13 4QFY13

QFY11

ention by Global R&D for the Indian value tier consumer product drawing new consumers h to t e Gillettes Systems regimen y impactful trial and awareness program in rural India ease in Cartridge sales volume

Celebrity endorsements

Gillette Guard Cartridge

Gillette Guard Razor

Campaigns

data

ng June; 1QFY11 stands for Jul-Sep 2011

13

Gillette Marketing & Distribution Network

Distribution Coverage

Shave India Movement

Celebrity Endorsements & Awards Guard is th Gillette 1.9mm distribution of 9 campaigns ever share bui 85 + Awards for Shave
Product India Movement (Gillette) including 8 Lions at Cannes. Only Brand to win Black Lion for effectiveness in Asia (11-12) Oral-B 1.8mm Duracell 0.12mm

Grown di

Distribut

Jammu and Kashmir Himachal Pradesh Uttarakhand

Salute the Soldier in YOU Movement

Smile India Movement

Haryana Jaipur New Delhi Lucknow Patna

Jharkhand Madhya Pradesh We Ahmedabad Chhattisgarh Nagpur Mumbai Hyderabad

Bhubane

Mental map
Razor Easy to use Gillette

vated Primarily for India

Available

Safe

Affordable
4QFY12 1QFY13 2QFY13 3QFY13 4QFY13
Guard Cartridge Gillette Guard Razor

VFM International

12

n value tier consumer o t e Gillettes Systems regimen

STPD
Rural men, Urban value conscious men Men who seek an affordable , and safe shaving experience

vated Primarily for India

12

4QFY12

Safe, easy to use, affordable

1QFY13 2QFY13 3QFY13 4QFY13
Gillette Guard Razor

VFM, convenience

Guard Cartridge

n value tier consumer o t e Gillettes Systems regimen gram in rural India

Crafting the positioning

Nature of competition Intense, Oligopoly, NC, MNC, own brands

FY11

1QFY12

Target segment
2QFY12 3QFY12

4QFY12

1QFY13 2QFY13

Rural, value conscious urban men

3QFY13 4QFY13

Gillette Guard Cartridge

Gillette Guard Razor

al R&D for the Indian value tier consumer Consumer behaviour Price sensitive, ing new consumers h to t e Gillettes Systems regimen al and awareness program in rural India ge sales volume

seek safety, convenience, economy

Point of parity

Razor, single blade, economical

13

p 2011

Point of difference

Safe, easy to use, affordable

Reason to believe

Gillette heritage, dominant leader, Best a man can get

PoP/ PoD
POP
Razor Single Blade

POD
Safe Convenient

novated Primarily for India

Affordable
Made for India

Testing the position- Protection

Relevant- Safety, affordability key purchase parameters
Unique- Easy to use, non clogging Believable- Gillette heritage

Desirable- Offers safety, ease of use, economy Deliverable- Gillette dominance and credibility

Brand Personality

Competent
4QFY12 1QFY13 2QFY13
Gillette Guard Razor

Sincere Reliable

Y12

e Guard Cartridge

High performance

3QFY13

4QFY13

n value tier consumer Value h to t e Gillettes Systems regimen ogram in rural India

Safe shave

13

Brand= Value Proposition

Functional-

EmotionalSafe

EconomicRe 1 / shave

Performance

ted Primarily for India

QFY12

1QFY13 2QFY13

3QFY13

4QFY13

ovated Primarily for India

Brand Identity & Image

Identity Gillette razor made for India

4QFY12 1QFY13 2QFY13 3QFY13 4QFY13
Gillette Guard Razor

QFY12

Position Safe, easy to use, affordable

llette Guard Cartridge

an value tier consumer s h to t e Gillettes Systems regimen program in rural India

Image Less cuts, low clogging

13

Perception Convenient, protects, economical

4Ps
Place
20 lakh retailers Kirana, modern trade Safe, easy to use razor Made for India

Product vated Primarily for India

Price
4QFY12

Y12

e Guard Cartridge

n value tier consumer h to t e Gillettes Systems regimen

Penetrative Affordable
1QFY13 2QFY13

3QFY13

4QFY13

Promotion
IMC, Celebrity Consumer Touch Points

Gillette Guard Razor

Core Brand Values

Brand Values Articulation
Trials, usage Design

Safe

Easy to use

Non clogging Light, convenient

Affordable

Low cost razor Affordable shave

Customer Research Insights

2012- 81 MBA students 1150 respondents, 18+ men All India
Shaving preferences Shaving frequency

Reasons to prefer Gillette

Post shave preferences

Customer Loyalty Insights

Top of the mind razor brand- Gillette 98%

Do you pay a premium price for Gillette products- 100% yes

Is the premium price worth the value delivered- 98% yes If Gillette is unavailable- 95% wait, 5% buy another product If Gillette increases prices- 90% would still buy Gillette Do you trade up to new Gillette brands- 80% yes

Trade Research Insights

2012- 81 MBA students 389 respondents, retailers (stores, chemists, modern trade) All India

Gillette customers are very loyal- 100% Customers demand specific Gillette brands- 86% Customers willingly pay premium for Gillette brands-100% Gillette customers wait if product is not available- 86%

Customers trade up to new Gillette brands- 76%

Gillette caters to all shaving needs- 100%

Reasons to prefer Gillette

Impact 2013
Gillette Guard preferred 6:1 v double-edge razors Gillette Guard- 2 out of 3 razors sold in India Gillette 50% NMS (37% in 2007) Matched the model to the market HBR Safe and inexpensive shaving option for 500 million Indians

References
P&G Innovates on Razor-Thin Margins, Vijay Govindarajan, HBR Blog, April 16, 2012 http://blogs.hbr.org/2012/04/how-pg-innovates-on-razor-thin/ Gillette Guard http://news.pg.com/sites/pg.newshq.businesswire.com/files/image/image/Gillette _Guard.jpg Cheap razor made after P&G watches Indians shave Business Today 6Oct13 http://indiatoday.intoday.in/story/cheap-razor-gillette-guard-procter-&-gamblealberto-carvalho-indian-shave/1/313382.html How Indian men pushed Gillette to do things differently, AP, October 06, 2013 Gillette Guard www.gilletteguard.com Gillette Guard, 3 October 2013 http://www.dailymail.co.uk/news/article2443191/Gillette-spent-fortune-Indian-razor-forgetting-countrys-runningwater.html Gillette launches Gillette Guard at Re 1, Business Standard, October 18, 2010 Gillette Guard P&G 2011 Annual Report Cheap razor made after P&G watches Indians shave, Times of India, AP | Oct 6, 2013, 12.10PM IST