fb

From blades to balance sheets…

From blades to balance sheets…

Consumer behavior is constantly evolving, and businesses must adapt to these changes to stay relevant and profitable. One industry that has witnessed significant shifts in consumer behavior is the shaving industry. Procter & Gamble, the household goods giant that owns the Gillette brand, recently experienced a writedown in the value of its Gillette business due to changing consumer habits. In this article, we will explore the impact of changes in consumer behavior on businesses, with a focus on the shaving industry and the example of Gillette.

Understanding Consumer Behavior

Consumer behavior encompasses the actions and decisions individuals make when purchasing and using products and services. It is influenced by a multitude of factors, including economic conditions, cultural trends, technological advancements, and personal preferences. As consumer behavior evolves, businesses must adapt their strategies to meet the changing demands of their target audience.

Procter & Gamble’s Experience

Procter & Gamble (P&G) is a multinational consumer goods company known for its diverse product portfolio, including the Gillette brand of shaving products. In December, P&G announced a $1.3 billion writedown in the value of its Gillette operations. This decision was driven by several factors, including changes in post-pandemic work habits and a stronger U.S. dollar, which led to slower volume growth.

Impact of Post-Pandemic Work Habits

The COVID-19 pandemic had a profound impact on the way people work and live. With the rise of remote work and social distancing measures, many individuals reduced their frequency of shaving. As a result, the demand for shaving products, particularly razors and shaving cream, experienced a decline. P&G’s decision to writedown the value of its Gillette business reflects the challenges posed by this shift in consumer behavior.

Waning Benefits of Price Increases

Consumer goods companies often rely on price increases to boost their profits. For two years, P&G and many other companies benefited from these price hikes. However, this strategy has its limits, and the benefits eventually wane. As consumers become more price-conscious, companies must find innovative ways to sustain profitability.

Restructuring and Impact on Profitability

To address these challenges, P&G announced a restructuring plan that includes the writedown of the Gillette business and the restructuring of certain assets. This move was expected to result in up to $2.5 billion in charges over two fiscal years. While these actions may help P&G realign its strategy, it also underscores the need for businesses to adapt quickly in response to changing consumer behavior.

The Gillette Example

Gillette, a brand synonymous with shaving, was acquired by P&G for $54 billion in 2005. However, the brand has faced challenges in recent years. In 2019, P&G took an $8 billion charge on the Gillette operation, citing currency devaluations and a contraction in the blades business in more developed markets. The recurring need for writedowns highlights the turbulence in the shaving industry and the need for adaptation.

Flat Volumes and Rising Prices

In the three months leading up to December last year, P&G reported that its volumes were flat, while average prices across product categories rose by 4 percent. This juxtaposition of flat volumes and rising prices demonstrates the delicate balance that businesses must strike to maintain profitability. In a competitive market, price increases must be justified by added value to the consumer.

Challenges in the Chinese Market

P&G’s net sales rose by 3.2 percent in the second quarter, reaching $21.44 billion. However, this figure fell slightly below analysts’ estimates due to weak demand for its beauty and personal-care products in China. China, a significant market for consumer goods, is experiencing a recovery from the COVID-19 pandemic that is characterized by non-linear and somewhat unpredictable patterns. This highlights the need for businesses to remain agile and adaptable in the face of varying market conditions.

Conclusion

The example of Procter & Gamble and its Gillette brand illustrates the profound impact of changing consumer behavior on businesses. As the shaving industry faced shifts in post-pandemic work habits and pricing strategies, P&G had to make significant adjustments to remain competitive. The key lesson for business students is that adaptation is essential in a dynamic marketplace. To thrive in an ever-changing landscape, businesses must closely monitor consumer behavior, anticipate trends, and be prepared to modify their strategies accordingly. In doing so, they can not only survive but also excel in challenging times, as demonstrated by P&G’s resilience in the face of its recent challenges.

Share this entry

Related articles

View All Articles

Recent articles

View All Articles
Lessons from Kraft Heinz’s Sales Decline
Feb 20, 2024
Title
Lessons from Kraft Heinz’s Sales Decline
Excerpt

In the fast-paced world of business, staying ahead of market trends and consumer preferences is paramount. The recent […]

The strategic rationale behind Uber’s share buyback…
Feb 15, 2024
Title
The strategic rationale behind Uber’s share buyback…
Excerpt

In the realm of corporate finance, decisions regarding share buybacks often spark curiosity and sometimes confusion among investors […]

Adapting to the Digital Age: Lessons from Sky TV
Feb 09, 2024
Title
Adapting to the Digital Age: Lessons from Sky TV
Excerpt

In the ever-evolving landscape of the entertainment industry, adaptability is key to survival. Recently, Sky TV, a prominent […]

EY’s Hybrid Work Insights
Jan 29, 2024
Title
EY’s Hybrid Work Insights
Excerpt

The world of business has seen a significant transformation in recent years, with the COVID-19 pandemic acting as […]

From blades to balance sheets…
Jan 26, 2024
Title
From blades to balance sheets…
Excerpt

Consumer behavior is constantly evolving, and businesses must adapt to these changes to stay relevant and profitable. One […]

Keep it in the family?
Jan 26, 2024
Title
Keep it in the family?
Excerpt

In the world of business, family companies often occupy a unique and intriguing position. They combine the dynamics […]

Benchmarking, football VAR and pilots…
Jan 23, 2024
Title
Benchmarking, football VAR and pilots…
Excerpt

In the ever-evolving world of business, staying ahead of the competition is essential. Companies constantly seek ways to […]

Walkers Sensations Poppadoms – a crisp VAT case…
Jan 22, 2024
Title
Walkers Sensations Poppadoms – a crisp VAT case…
Excerpt

Aspiring business students and seasoned professionals alike understand that running a successful business involves navigating a labyrinth of […]