US shaving products major, Gillette, has carried out a major consolidation of its operations in India by effecting a merger of its subsidiaries, Durable India and Wilkinson Sword, with its flagship company, Indian Shaving Products.

With the board of directors of Indian Shaving Products having approved the merger, the respective boards have decided on a swap ratio that will give two shares of Indian Shaving Products for every 13 shares of Durable India and nine shares of Wilkinson Sword. The merger will be effective 1 January 2000. The restructuring move is aimed at bringing all the Gillette operations in India for various brands, including all shaving products and batteries, under Indian Shaving Products Ltd.

Indian Shaving Products manufactures and markets a range of shaving products and dominates the higher end of the market for disposable and twin blade shaving systems. The company's product portfolio consists of imported disposable shaving systems, shave gels, deodorants and aftershaves and toothbrushes. Safety razor blades, which accounted for 75 per cent of the company's sales five years ago, today account for 31 per cent of total turnover. On the other hand, turnover from the other products has been rising gradually from 18 per cent in 1997 to 44 per cent in 1998. The company has also been marketing an increasing number of products that are directly imported from the US.

Indian Shaving Products has a well-entrenched distribution network with a retail reach of about four lakh outlets. Its shaving products are marketed under two main umbrella brands, 7 'O Clock and Gillette. With over 40 per cent market share in the shaving products business in India, the company's products are positioned in the upper end of the market and command a price premium over that of competitors. Spends on marketing and advertising are heavy, in order to upgrade consumers to use more sophisticated shaving systems.

The company launched the 7 'O Clock range of safety blades in 1986 and shaving systems in 1989. Over the years, the brand has been extended to several other products in the same category such as shaving brush, shaving cream, super platinum razor, PII twin blades, super stainless blades, ready shaver disposable shaving system. In 1998, a new brand extension 7 'O Clock Diamond double-edged blade, was launched. The double-edged blade segment has been witnessing stagnant growth rates with consumers shifting to higher end products.

Indian Shaving Products launched Gillette Presto in 1995 and supported the product with heavy marketing and promotions. Presto has achieved impressive volume expansion during the last three years. In 1997, the company launched the Gillette Sensor Excel state-of-the-art shaving system, which is directly imported. The latest product from the Gillette stable is Gillette Mach 3 shaving systems, positioned at the premium end of the market.

The company has also ventured into the feminine personal care segment with the launch of the world-renowned Gillette Sensor Excel for Women. In 1998, the company expanded its portfolio for women with the launch of Satin Ready shaver and Shave gel. The liberalisation of the import policy has found the launch of a slew of shaving products such as shave foams, gels, after shave splashes and conditioners as well as deodorants under the Gillette brand name.

After the global merger of Duracell with Gillette in 1997, Indian Shaving Products commenced distribution of Duracell alkaline batteries through its distribution network. The sales of battery cells accounted for 10.5 per cent of the company's turnover in fiscal 1998. The alkaline battery segment is a growing market, but is much smaller compared to dry cell batteries.

In 1998, Gillette, through its wholly-owned subsidiary, Gillette Diversified Operations, acquired the dry cell battery division of Geep Industrial Syndicate. Geep Industrial's Geep brand is the largest selling dry cell battery brand in rural India. Gillette took over the Mysore manufacturing facility of Geep Industrial Syndicate and entered into a sourcing agreement for batteries and flashlights from the latter's Allahabad facility. The acquisition has enabled Gillette to consolidate its position in the zinc-chloride battery segment, besides giving it access to a large rural distribution network. With a view to consolidating its entire battery business into a single entity, Gillette transferred its battery business to Wilkinson Sword India Ltd from the year 1999 onwards. The outcome of this was that the company would no longer be involved in the distribution of Duracell batteries.

Indian Shaving Products also sells toothbrushes under the Oral-B and Prudent brands. Apart from this, it is engaged in the marketing of Braun products such as Silkepil -- an electric hair remover. Braun is a $1.3 bn personal care products subsidiary of Gillette. To leverage on its existing distribution network, the company has entered into a sales and distribution arrangement for a selected range of Parker and Luxor writing instruments.

The other two subsidiaries of Gillette, Durable India and Wilkinson Sword, are engaged in the manufacture and sale of Duracell Alkaline batteries and Wilkinson Sword blades and razors, Geep batteries and torches. Wilkinson also distributes Duracell batteries.

For the year ended December 1999, Indian Shaving Products announced that its pre-tax profit was up 10 per cent at Rs 19.5 crore against Rs 17.6 crore the previous year. Sales income increased by more than 25 per cent to Rs 250 crore.

Gillette Company USA was founded in 1901 and today is the world leader in shaving products. It has been instrumental in all the major technological advances in the field of blades and razors. Gillette also owns Parker, a world renowned pen manufacturer through which it has a significant presence in writing instruments and stationery products. Its other major lines of businesses, besides blades and razors, include toiletries and cosmetics, stationery products, Braun electric shavers, small household appliances and oral care products.

The blades and razors business in India is dominated by the Malhotras, who have a strong presence at the lower end of the market. Indian Shaving Products, the only other significant player, has been able to achieve critical mass by carving out a strong niche in the premium segment.