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Strategies & Market Trends : Booms, Busts, and Recoveries -- Ignore unavailable to you. Want to Upgrade?

To: Maurice Winn who wrote (59608)	1/29/2005 3:25:30 AM
From: elmatador	Read Replies (1) \| Respond to of 74559

"Gillette will help us in India and Brazil, while P&G will help in Japan and China" Forget tech. Think consumer goods, MQ. In the post-Keynesian regime, hordes of new consumers will be added to the market as the purchase power will be created. Message 20993730 The Gillette P&G deal is not about consolidation to add power to face Wal-Mart as the analysts are saying. The deal is to have the best strategy and channels to penetrate developing countries. Anyone who has a channel into developing countries will be in pole position. WATCH! But let ne give you example close to home: 280million mobiles in2001. 1billion+ 2004. Which bunch of countries were responsible for that growth? Deal forces new realities on competition By Jeremy Grant in Chicago, Louisa Hearn in London and Ian Bickerton in Amsterdam Published: January 28 2005 19:02 \| Last updated: January 28 2005 19:02 Procter & Gamble's "transformational acquisition" of Gillette to create the world's largest consumer goods company could not have been better timed for P&G - or worse-timed for its competitors. "The writing is on the wall," says Gary Stibel, chief executive of New England Consulting Group in the US. "P&G will emerge as one of the two or three largest health and beauty companies in the world in the future. The jury is out on who the others will be, but whoever it is will have to step up to the plate in the next 12-24 months or else they'll become road-kill." The Ohio-based giant, which made its name selling soap and candles to soldiers during the US civil war, has rebounded from 2000 when it issued three profit warnings after years of inertia. On the eve of Friday's deal, P&G raised its earnings outlook after beating back rising commodity costs with a raft of new products from Kandoo Toddler Care Wipes in the US to Olay hand and body soap. Gillette too is once again in rude health. Jim Kilts, who will oversee the fusion of an entity boasting more than $60bn in annual revenue, says: "Four year ago we were underperforming and drifting but we've turned the company round." By contrast, P&G's main global rival, Unilever - under fire from investors for missing earnings targets - has been forced to rethink its 2005-2010 strategy in the light of sluggish sales, reflecting changing consumer trends and a price war. One analyst said on Friday: "This deal will raise alarm bells in Rotterdam." Other fast-moving consumer goods companies are no better prepared. Colgate-Palmolive's toothpaste and Speed Stick deodorant are battling P&G's Crest toothpaste and Gillette's Right Guard deodorant. Yet it is enmeshed in a restructuring. Kimberly-Clark, maker of paper towels and battling P&G in nappies, faces an added threat with the addition to P&G of Gillette's talent for innovation. For AG Lafley, P&G chief executive, the approach from Gillette could not have been better timed after his success in turning P&G into a solid profit-making machine. "This combination of two best-in-class consumer products companies, at a time when they are both operating from a position of strength, is a unique opportunity." Part of that opportunity is to capitalise on increasing demands from retailers that they deal with the most successful product innovators, to ensure their shelves are stocked with the most attractive - and high-margin - healthcare and beauty products. "Global retailers are looking for those marketers who are bringing innovation to categories that are otherwise starting to mature. And P&G is one that's doing this especially well," says Mr Stibel. But it is also a matter of global scale. Mr Lafley says: "P&G and Gillette can grow together at levels that neither could sustain on its own. The reason is that consumer products is, in the end, a scale business. The more scale a company can create, the more opportunities there are to grow margins and invest in brand innovation." William Schmitz, analyst at Deutsche Bank, says the deal "creates an enterprise unmatched in geographic reach and competitive positioning". Indeed, thanks to Gillette's razor and women's haircare products businesses, health and beauty will now account for half of P&G's portfolio. P&G says women's haircare alone is worth $10bn in sales annually and is growing at 8 per cent. P&G and Gillette have also had in place a similar structure of "global business units" in the last five years that should help integration and growth into fast-growing developing markets like China. Mr Lafley says: "Gillette will help us in India and Brazil, while P&G will help in Japan and China." The deal also triggered consolidation speculation, although Pete Brabeck, chief executive of Nestlé, the world's largest food company, said he did not see any need to participate. Unilever is considered unlikely to play a prominent part, given its pressing business issues. Graham Jones, analyst at Panmure Gordon, says: "The key issue for Unilever is to reinvigorate its top line and to do that it must address how it manages the brands and most importantly its innovation pipeline." Coca-Cola, the soft drinks group, could even be sucked into consolidation as a result. Carlos Laboy, Bear Stearns analyst, said: "[Coke chief executive] Neville Isdell and Coke's board woke up to a different world this morning. If he falls short of both improving Coke's execution and transforming Coke into a non-carbonated soft drink innovator, he may be forced to resort to M&A options."