Unilever to acquire Dollar Shave Club for $1B. What does this mean for P&G?

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Courtesy: Unilever website logo library

Unilever paid 5x sales for Dollar Shave club.  Why?

Dollar Shave Club (DSC) brings two keys to Unilever:

1.  The opportunity to compete with P&G and Schick in the global razor/razor blade market and

2.  Category leadership in the direct sales to the consumer space.

According to Dan Primack in his July 19, 2016 Fortune article (“Unilever buys Dollar Shave Club for $1 billion”), Unilever will allow DSC to:

1.  Significantly improve its distribution capabilities in existing markets and

2.  Expand into other markets beyond the three countries currently served by DSC.

DSC, with 3.2 million members (Dick Lee, Value Innovations’ CEO is one of them), posted net sales of $152 million in 2015.

Michael Dubin will continue as DSC’s CEO once the acquisition is completed in 3Q, 2016..

Did P&G miss a golden opportunity?

We don’t know if P&G even considered purchasing DSC.  They have entered into an action where P&G claims DSC is infringing P&G’s patents which may suggest that acquisition was never on their radar screen.

We first blogged about DSC on June 28, 2015 and expressed concerns about P&G’s innovation capability on July 31, 2015.

What does this mean for P&G and Gillette?

Forbes ranked Gillette #28 in its 2016 list of The World’s Most Valuable Brands.  Forbes stated Gillette had 65% of the global razor market generating net sales of $7B with an operating margin of 29% ($2B).  In its 2015 Annual Report, P&G shared Gillette generated 10% of P&G’s sales and 16% of its net earnings.

With Unilever’s acquisition of DSC, we can expect Gillette’s market share, net sales and operating margin to decline, something P&G can ill afford.

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