Gillette

Gillette’s Eroding Moat & Key Lessons

Posted by | Indian Markets, Investing Framework, Investing wisdom, Stocks | 2 Comments

Back in 2013, I had written a post on Gillette discussing the likely challenges it is going to face in growing its business. A business with such headwinds trading at 80 times earnings should have gone only one way- down. That’s a different thing the stock has actually more than doubled given the exuberance in markets. Nevertheless, it has significantly underperformed the broader markets.
For a long time, Gillette was touted as the perfect example of a moated business, well reflected in its 70%+ market share, 60-70% gross margins and extraordinary Return on Capital Employed. This was all being protected by sustained investments in 1). product innovation; pioneered multi-blade technology and kept on launching better razors latest being a 5-blade razor 2). branding to have a dominant recall.
The demand was

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Some thoughts on Gillette India

Posted by | Stocks | 2 Comments

One common bullish viewpoint made by most of the investors regarding Gillette has been “Market potential is huge considering its a highly under-penetrated market & Gillette is largely a monopoly business”
 
Lets break up the target market into urban men & rural men and see if there is actually that kind of potential:
 
Urban Men (Metro/Tier I/ Tier II)
Look around and talk to any working man, chances are that he will be shaving with a Gillette razor.
 
Now if entire target segment in Urban area is already using a Gillette product where can the growth come from?

Uptrading: A guy using Gaurd/Presto could up trade to a Mach3 and later to Fusion.
Rise in working population: Every year some part of youth, which otherwise finds it cool to keep beard,

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