Gillette India Ltd.

(ISPL)

Group 11

Sanju Matthew George Arpan Biswas Pinky Jain Sindhuja N Prashant Anand

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Company
Gillette was the largest shaving products in the world with a 70% global market share. Due to govt. regulations on investment in consumer markets by foreign companies, Gillette entered the Indian market through a JV with House of Poddars. The Poddars and Gillette each put in 5 crores and held 24% equity in the JV called Indian Shaving Products Limited (ISPL). The balance equity was issued in an IPO which was well received.

Collaborator
ISPL had the option to either build its own distribution network or collaborate with an existing one. The first option was too costly and required substantial resources so they decided to distribute razors through Liptons network. Lipton India Ltd was a well known FMCG with an extensive distribution network. They could use their distribution channel to greater use without any investment. ISPL got the benefit of a ready made distribution channel at a low cost.

Competitiors
House of Malhotras: they had a market share of around 80-90% in the Indian shaving market. They had 7 manufacturing units with a capacity of 1500 million blades per annum. They were street smart and did everything possible to keep competitors products off the shelves. They had the lowest priced blades on the market. Wiltech: it was a subsidiary of the RPG group and co promoted by Karnataka state Industrial investment and development corp. it had a capacity of 120 million blades per annum. The price was about 50% that of the Malhotras blades.

Consumer
India was the worlds largest shaving blade market with a market size of 2.4 billion blades annually. Indian market was very small in terms of retail prices at 250 crores compared to the US market which was worth $800 million (2.2 billion blades). The target market was Indian male population in both rural and urban markets, estimated at 15-20 crore men.

Context
Indian market was at lower technology end as it produced mostly carbon steel blades while the more contemporary stainless steel blades were produced only in urban markets. Stainless steel blades gave about 1.5 times the number of shaves as given by carbon steel blades but their main advantage was smoothness and closeness of shaves. Twin blades, the latest technology in shaving blades, accounted for less than 2% of the total market.

Issues
Even after using Liptons extensive distribution channel, ISPL accounted for only 3% of the total market indicating inefficient use of distribution network. Proper and reliable data on actual retail sales was not easily available They were facing losses of 7.24 crores at the end of the financial year 1987-88 caused mainly by low sales turnover. ISPL faces the dilemma of continuing to use Liptons distribution channel or setting up its own channel.

Recommendations
We do not recommend setting up of a new distribution channel for the following reasons. The setting up of a new distribution channel was cost intensive 2 years ago and now the company was facing huge losses. More investment into a distribution channel without investigation into causes of low sales would not be wise. Lipton already had a wide distribution network. It would take ISPL a long time to set up the same channel. Even if it could set up the channel, it would have no distinct advantages over the previous one except for a better informed sales force.

 We recommend leveraging the distribution network in the following ways Stockists and salesmen for Lipton should be educated about ISPL products and their advantages over the competitors products like the greater number of shaves and better quality. They should be as informed about ISPL products as they were about Lipton. The stockists should also be given incentives based on sales figures to encourage them to take an interest in selling ISPL products. They might not master the technical details or handle the promotion materials effectively. There should be an agreement between Lipton and ISPL for proper exchange of data and a system to evaluate effectiveness of distribution channel.