INDUSTRY POISED FOR P&G PLUS GILLETTE

Wendy Toth / Additional reporting: Dan Alaimo

CINCINNATI -- Retailers are regarding Procter & Gamble Co.'s acquisition of the Gillette Co., Boston, with both optimism and some trepidation.

Supermarket retailers and consultants said they are looking forward to strong marketing and supply chain support while shaking off the common nervousness that surrounds initial product availability during any supplier merger.

"The only concern with change for any retailer is the opportunity for gaps in product availability," a nonfood executive with a Northeast supermarket chain told SN. The executive noted that the deodorant brands involved in the acquisition, and now up for sale, are a big part of the chain's health and beauty care business.

As part of the $57 billion purchase, the Federal Trade Commission required P&G, here, to divest Gillette's Right Guard deodorant line, and P&G said it would make two other Gillette deodorants, Soft and Dri, and Dry Idea available for purchase by whoever buys Right Guard. In addition, P&G is required to divest Rembrandt, for which it has not yet found a buyer, and SpinBrush, which it will sell to Church & Dwight, Princeton, N.J.

"The Gillette brands lend themselves to more systematic category management and P&G is very good at that, so I am seeing that the category, and by inference the retailer and consumer, are going to be helped by this deal," said Bill Bishop, president of Willard Bishop Consulting, Barrington, Ill.

Investors are demonstrating support, as well, according to Don Stuart, managing director, Cannondale Associates, Wilton, Conn., a sales and marketing consultancy. "The market has spoken for the merger. Stock price on Gillette increased significantly post merger until finalization, which shows a lot of investor support," he said.

Since the Federal Trade Commission cleared P&G to purchase Gillette in late September, the consumer goods and personal care giant boasts 22 brands each with sales over $1 billion.

"Both P&G and Gillette have strong business momentum that has continued since the merger was announced," said A.G. Lafley, chairman, president and chief executive, Procter & Gamble, at an analyst meeting at the New York Stock Exchange last week.

This merger takes a strong brand and puts it in the hands of "master marketers," said Chuck Carlson, CEO, Horizon Investment Services, Hammond, Ind. As with any integration, there will probably be some "hiccups," he said, but "under current management, P&G has demonstrated its ability to make deals work."

Whatever retail buyers were doing with Gillette will fall into the processes and procedures they are using with P&G, said Jim Wisner, president of Wisner Retail Marketing, Libertyville, Ill. He told SN that the market-leading technology and innovation Gillette is known for will likely be retained by P&G.

"Innovation remains the primary driver of sales and earnings growth in the consumer goods industry," Lafley said at the analyst meeting.

This innovation will likely be seen in a consumer "gender blender way," said Stuart, referring to Gillette's expertise in marketing towards men and P&G's expertise in marketing towards women. "Competitively this is a great combination of Gillette's global product blend with P&G's global clout."

As Lafley remarked about Gillette, "This is a great brand that can become an even bigger platform for male personal care innovation."

A nonfood executive with a major East Coast retailer told SN that his company hopes that P&G and the other buyers will "take great pains to treat and nurture the Gillette brands the way the Gillette Co. did."

Although P&G, now estimated to be a $50 billion to $60 billion company, has been compared to a supply-side Wal-Mart, it remains a David to Wal-Mart's Goliath, according to industry sources.

"Wal-Mart will probably exceed $300 billion this year," Stuart said. "So, while P&G will be able to add insight and help other retailers build business, it is not shifting the balance," he said.