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Case OF GilletteChoosing the right distribution channel

Introduction

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Indian Shaving Products Limited(ISPL)- Gillette and Poddar

Gillette- 70% worldwide market shareSales in 1987-88 Rs 4 croresAccumulated losses Rs 7.24 croresStainless steel blades Priced its blades about 50%-80% over

Wiltechs’ Brands like 7 O'clock Ejtek, 7 O'clock Super

Stainless

Indian Shaving Market

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World’s largest market in volume ( 2.4 billion blades annually)

Small in value terms

( Rs 250 cr vs. US’s $800 million )Low tech carbon steel blades

prominentStainless steel blades market smallTechnologically latest Twin blades

segment(less than 2%)

Competition

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House of MalhotrasMarket leaders ( 80%-90% of market)Best selling brands like Topaz, Panama,

Laser etc7 manufacturing units; largest in

Calcutta with a capacity of 1500 million blades per year

Highly street smart ( imitation products etc)

Distributed products through network of very large wholesalers to semi wholesalers and retailers

Special promotions and stock push strategies

Competition

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WiltechRP Goenka group and Wilkinson Sword

Ltd of UKCapacity of 120 million blades per year

and 80% capacity utilisationBrand like Wilman I, Wilman II50% market share in twin blade ( by

value)Priced its blade about 50% over

Malhotras brandsAccumulated losses of Rs 2 cr

ISPL’s Distribution Channel

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Two options:Build own distribution networkTie-up to use Lipton’s network at 5% margin

Advantages of the tie-up with LiptonLow cost solution(5% commission)Well established sales networkFor Lipton, better utilization and profit

without extra investment

Problem

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After 2 years, less than 3% market shareAccumulated losses of Rs 7.24 croresAccording to customer surveys, no serious

problem in product, prices, positioning.Problem in distribution strategy.

Comparison distribution channel:

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Malhotra’s distribution channel

Malhotra’s

Primary Wholesaler

Secondary wholsaler

Retailer

Customer

Gillete distribution channel

Gillete

Lipton

Distributor

Stockist

Customer

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Marketing Mix Analysis

Product

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Low tech carbon steel blades making the bulk of the market

Stainless steel blades, present only in urban market

Latest Technology Twin Blades-market less than 2%

ISPL believed there was big opportunity at upper market.

Created Stainless Steel Blades

Price

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ISPL believed that consumer is ready to pay higher price for a better product

ISPL priced 50%-80% above Wiltech’s brands, while Wiltech was priced 50% above Malhotra’s brands.

ISPL priced 125%-170% above the main competitor Malhotra’s price.

Promotion

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Gillete and House of Poddars paid 5 Crores each. (5 Crores=24 %)

The joint venture raised 20.83 CroresInvestment on Plant- Over 20 CroresPresumably, small budget on PromotionNew Product- 7O’ Clock Launched at Higher

Price- Poor Sales

Place-Proper Distribution Channel

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Combination of Push and Pull strategyMore Emphasis on Pull Strategy through

promotionsSimultaneously, start building its own

distribution networkVariable Sales Margin To Distributors &

Stockists

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Target Market Segment Target Segment

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Proposed solution

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Combination of Push and Pull strategy should be used

Provide stainless steel blades to barbers all across the country at discounted rates

Simultaneously, start building its own distribution network

Target first time users, by promoting in high schools and colleges

Proposed Solution

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Promotion of the advantages of stainless steel blades produced by ISPL

Extensive market research to exactly know the future of stainless steel blades market

Look for other tie-ups as part of horizontal marketing system

Target based commission to Lipton5% for sales upto Rs 5 crore7% for sales between 5 and 10 crore

What actually happened?

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It merged Wilkinson Sword Pvt. Ltd. with itself

97% of today’s Inidan market is double edged blades

ISPL focusing only on premium products

Strategy: Move people towards twin blades segment and gradually move them towards premium products

Segmented the market with offerings at different price points 7’O Clock, Sensor and Mach III

THANK YOU

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