Shastovich could lose 25% of its sales on P&G takeover of Gillette
The colossal merger of Procter & Gamble with Gillette could impact the local marketplace. That is especially true of Shastovich, the exclusive Israeli importer of Gillette products since 1963.
The colossal merger of Procter & Gamble with Gillette could impact the local marketplace. That is especially true of Shastovich, the exclusive Israeli importer of Gillette products since 1963. Not that your average shaver cares who sells his razor blade, but Shastovich stands to lose 25 percent of its income if Procter & Gamble decides to give the Gillette franchise to another company under its control.
Consumer products giant Procter & Gamble announced Friday that it is buying Gillette for $57 billion in a bid to expand its sales overseas, broaden its product lines and gain clout against massive retailers like Wal-Mart Stores.
In the Israeli market, Gillette's razor products account for about 25 percent of Shastovich's total sales, which reach around $150 million a year, and apparently contribute an even bigger proportion of its profits. The problem is that Gillette's deodorant and oral hygiene products are also popular in Israel, and they compete directly with P&G's.
Shastovich also imports Speed Stick deodorant, which has a 30 percent market share, and Colgate toothpaste, which has a 40 percent market share. P&G utterly failed to to introduce competitive products, Crest to fight Colgate and Secret against Speed Stick.
Meanwhile Shastovich, a company established before Israel - in 1945 - isn't talking. All it would say for this report is that it is studying the details of the giant erger, and awaiting instructions from Gillette. It can only hope the instructions are not walking orders.
Meanwhile, a battle is looming on the advertising front as well.
In the last three and a half years alone, since opening its Israel branch, Procter & Gamble has introduced no less than 16 brands to Israel, all for hair-care, female hygiene, laundry, oral hygiene and diapers. Managing this flood of products made P&G one of the biggest advertisers in the Israeli scene. In 2004, it spend a huge $17 million on advertising, second only to Strauss-Elite (TASE: ELEI).
Shastovich is spending $8 million a year on advertising, placing it 10th on the list of the biggest advertisers. The thing is, P&G and Shastovich use different advertising firms.
P&G has traditionally used three ad agencies: Saatchi & Saatchi, Grey Global Group, and Leo Burnett. It divides the $17 million a year spent in Israel among three local agencies: Bauman Ber Rivnay (affiliated with Saatchi), Adler Homski Varshavski (affiliated with Grey) and Geller-Nessis D'Arcy.
Shastovich on the other hand has devoted the Gillette advertising campaign to the ad agency of Fogel Levin/Ogilvy & Mather Israel, which handles the creative and strategy aspects. Media procurement is handled by Tamir-Cohen.
If P&G decides that the Gillette campaigns will be handled by its own teams from now on, the loss to Fogel-Ogilvy and Tamir-Cohen will be substantial.
When P&G acquired the Israeli brands Tip and Biomat, both laundry detergents, it transferred their campaign handling to Geller-Nessis.