Gillette’s Energy Drain (a): the Acquisition of Duracell

Topics: Battery, Rechargeable battery, Duracell Pages: 15 (4251 words) Published: October 24, 2009
Gillette’s Energy Drain (A): The Acquisition of Duracell

MACK Consulting
Michelle Neill, Ali Nassem, Cindy Arsenault, Krystal Mayne, Charlene Ford, Laura Robertson March 20, 2008
Bus 491 - Gary Evans

PROBLEM STATEMENTS – STRATEGIC ISSUES
The Duracell Division of Gillette has lost market share and failed to move forward in the last four years, which may be the result of a lack of strategic vision and/or mandate from Gillette’s Board of Directors. It is our opinion that perhaps too much emphasis or “hype” was placed on the acquisitions potential and not enough effort has been re-focused on maintaining the Duracell Division itself. Gillette, and certainly Duracell, needs a revamped strategy to increase its market share and minimize its marketing and operating costs. IT IS MY OPINION THAT HERE THE 5 POINTS SHOULD BE MOVED AS OUR STRATEGIC ISSUES. Also, the last point on page 4 regarding Energizer and Walmarts relationship, I believe, should also be included as a strategic issue that should be touched on in the final analysis, because in my opinion, this is a big issue. Duracell needs to improve its supplier/retail relationship!

So, Duracell needs to improve the relationship with retailers to improve its sales, should Duracell go back to the “old” ways or acquire a competitor……………….what does everyone else think

Also, the changes that I made I did not mark so everyone could read it over and see if it flows in stead of putting more enphasious on my changes alone…..

Krystal

Let me know what you guys think.
INTRODUCTION/ANALYSIS OF THE BATTERY INDUSTRY

The competitive landscape changed considerably after Gillette’s acquisition of Duracell in 1996. Prior to the purchase, Duracell’s competition was mainly from Energizer, who was the worldwide leader in dry cell batteries. The original Energizer held a market share of 36.6% in 1997, dropping to below 30% by the year 2000 with their operating revenues dropping as well.

Competition was also offered from the Rayovac brand. Rayovac’s “Maximum” battery is comparable to both the Duracell and Energizer’s products, although it was sold at a discount of approximately 15%. This strategy has allowed the Rayovac Corporation to enjoy growth in both market share and overall sales over the period of 1995 through 2000. Although their sales totalled only a fraction of that reported by both Duracell and Energizer, their revenue growth was consistent while Energizer and Duracell experienced negative growth over the same time period. A report in the 1999 Consumer Reports may have been a contributing factor. That publication reported that batteries were so similar overall that the wise consumer should buy based on price alone. Sales of Rayovac’s lower-cost batteries improved consistently after the findings were reported.

Minimal competition was offered from several other brands (Sony, Panasonic, Kodak, RCA), although these products were primarily offered as a complement to electronics items provided by these manufacturers. In total, the market share of primary batteries outside of the top three was only 11.7% in 1997, rising to 13.3% in 2000. Although part of the competitive landscape, these competitors were considered inconsequential.

Perhaps in response to the increasing pressure from Rayovac, both Energizer and Duracell started a trend of offering “new and improved” products in 1998. Although their original tried-and-true batteries continued to be available, they began coming to market with increasingly more powerful and specialized products over the next few years. This trend, however, appeared almost counter-productive. As Duracell and Energizer continued competing head-to-head with each other (see Appendix I), the Rayovac product kept winning over the consumer with their original battery. The variety of Energizer and Duracell products on the shelf may have proved confusing to the consumer looking for a multi-purpose battery. As each new product focused on a...
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