Politics

Gillette’s Controversial Toxic Masculinity Ad: Idiotic or Brilliant?

The ad is an attempt to staunch the bleeding, as the company’s mens razor market share continues to erode precipitously

The reaction to Gillette’s toxic masculinity ad has been swift and so far, unforgiving. Procter & Gamble shareholders must be wondering: was the company’s decision to run the controversial ad a brilliant marketing ploy that will ultimately inure to the bottom line, or a needless act of self-immolation?

At first blush, one’s initial reaction might be that airing the vexatious ad was an imprudent decision, likely to cause an unwanted backlash. Many are calling it an unexampled and suicidal act of corporate marketing stupidity. A shaving products company should not be in the business of virtue-signaling. Right?

But, not so fast…

Gillette seemed to believe that it could replicate Nike’s political ad strategy with similar success. However, the target environment for the two ads is markedly different.

Nike correctly surmised that those consumers who found its ad offensive, were not Nike customers to begin with and would never be Nike consumers in the future. The company’s ad was targeted with specificity at its existing and potentially new customer base who would find the audacious message sufficiently inspiring to preserve its products unique branding, ensure existing customer loyalty while attracting younger newer customers, receptive to the ads underlying, implicit message. Nike had a keen understanding of their customer profile. It was a calculated marketing decision and to date, it appears Nike made the right decision, as the ad has had little, if any adverse impact on sales.

Gillette, like Nike, has run an advertisement that sends a political/social message. However, the similarities between the two company’s marketing strategies ends there. Indeed, from a strategic business standpoint, there is much to criticize about Gillette’s decision to run the bold and unorthodox MeToo ad.

While Nike’s customer base is well-defined and limited within the general consumer marketplace, the customer universe for razors is infinitely larger and comprised almost entirely by men. Another notable difference? There is a natural link between the Nike ad, its products and those football players participating in their symbolic protests during athletic events that provides the subject matter for the advertisement.

Some of the protesting football players actually wear Nike shoes. By comparison, for Gillette, there is no natural affinity between men shaving, using their razors and the #MeToo social awareness movement.

Can Gillette staunch the bleeding as their market share continues to erode by replacing those men who are buying through the mail with new, younger customers? Apparently, they believe so.

“For us, the decision to publicly assert our beliefs while celebrating men who are doing things right was an easy choice that makes a difference,” said Gillette president, Gary Coombe. “By holding each other accountable, eliminating excuses for bad behavior, and supporting a new generation working toward their personal ‘best,’ we can help create positive change that will matter for years to come,” said Gillette’s president, Gary Coombe.

Really? Many perplexed investors will want to know what does Coombe’s sanctimonious mumbo jumbo have to do with growing Gillette’s customer base?

Gillette’s North America brand director, Pankaj Bhalla, told CNN, “We expected debate. Actually, a discussion is necessary” to ensure “real change.” Did Bhalla anticipate that some Gillette consumers, regardless of their stance on social issues, may feel it’s inappropriate for a consumer products company to be a vehicle for the proselytization of political views? Does Gillette’s marketing department know how easy it is to order Harry’s razors thorough the mail?

Regardless of how people reacted to the Nike ad, its ploy was astute and ultimately successful. Will Gillette be able to make the same claim in six months?

Enterprising investors should ignore the pious posturing by Gillette’s “woke” marketing team, as it obscures a more important issue. Here is the inevitable reality against which the decision to air the ad must be adjudged: Gillette’s share of the men’s razor market has been steadily declining.

Consider the following David vs. Goliath tale that helps illustrate the current competitive predicament Gillette, as well as many other companies within the consumer staples sector are facing.

As I noted in a previous article, Gillette has enjoyed a dominant, unchallenged position in the men’s razor and shaving products industry for decades. It’s razors and cartridges were priced at a premium and stayed at that level for decades. Gillette razors were never cheap.

Recently however, Gillette’s dominance in the shaving market has been challenged, perhaps inadvertently, by a brash, scrappy start-up company called Harry’s, whose mail order razors have successfully eroded the giant Gillette’s once insurmountable market share. Many men, tired of the price-gouging for a simple cartridge razor were only too happy to jettison Gillette when a comparable product appeared at a substantially lower price.

Harry’s tiny ads appeared initially on the back pages of magazines; Gillette, by comparison, has always been a darling of Madison Avenue. Today, Harry’s robust sales and growth are in part, responsible for Gillette reducing the price of its razors. For almost a century, Gillette was synonymous with shaving products and priced its products accordingly. In the new millennium, that will no longer be the case.

According to the Associated Press, Harry’s has captured about 2 percent of the $2.8 billion men’s shaving industry since its launch in 2013, as monitored by market research firm, Euromonitor. Harry’s main shaving club rival, Dollar Shave Club, has about 8 percent.

Here are some stark numbers for P&G shareholders: Gillette controlled about 70 percent of the U.S. market a decade ago. Last year, its market share dropped to below 50 percent, according to Euromonitor. New start-up entries in the market were starting to eat away at Gillette’s once unrivalled position in the shaving products forcing the company to slash its razor prices by an average of 12 percent last year.

A review of the chart below tells a foreboding tale. For the past year, P&G’s operating, gross and net margins have all declined while revenue has increased. They can no longer pass on price increases to the consumer with impunity; the days of operating in a pricing environment of elasticity are over.

Although one year a trend line does not make, the erosion of a steadfast customer base and decreasing margins has become notable for all consumer staples company’s during the past few years. This has become all the more pronounced because the decrease has occurred during historically high consumer spending and confidence. Wall Street has recently taken notice.

The immutable reality is that in order to preserve market share, Gillette must lower the price of its razors. The company has reached critical mass with its marketing and “new” product innovations campaigns. Regardless of what the multi-million-dollar ad buys tells consumers during the Super Bowl, how many blades can you fit on a razor before men realize it’s all a marketing ploy?

In some ways, Gillette’s provocative MeToo ad is a desperate attempt to generate publicity for purposes of recapturing some of the company’s disappearing market share. It is too early to tell if this tactic will bear fruit; if it has a deleterious impact on sales, does management believe that shareholders will be so forgiving for its inexplicable and counterproductive exercise in consciousness-raising?

Gillette is a bellwether for the changing fortunes of the consumer staples sector in the 21st century.

The marketing gurus at the consumer staples companies realize they need to come up with new pitches or strategies to meet unforeseen competition and attract new customers. Gillette’s response to this challenge was to attract new younger millennial consumers with an eyebrow-raising, socially conscious ad. The company is betting that for some consumers, paying a premium price for a razor is acceptable if the company who manufactures the product is on the right side of history.

There is a message in the Gillette high-risk ad gamble for value investors. Enterprising investors must be willing to challenge the conventional wisdom about relying on the consumer staples defensive strategy. Old assumption needs to be re-examined. Consumer staples companies of yesteryear can no longer count on customers remaining with them through thick and thin. The reliable Campbell soup and Gillette customer of yesteryear no longer exists.

I have no position in any of the securities referenced in this article.

Please follow and like us:
error
Tags
Show More

Leave a Reply

Your email address will not be published.

Back to top button
Social media & sharing icons powered by UltimatelySocial
Close
Close
Skip to toolbar