P&G/Gillette Merger Shakes Up Locals

Distributors, ad firms fear losses; it's too soon to know, says P&G Israel CEO

The weekend announcement of the merger between consumer products giant Procter & Gamble and the smaller, but nonetheless sizable, shaving and grooming products firm Gillette has already started to stir up local players that are expecting to be hit by the implications.

Intercosma, the local distributor of Wella hair products (made by P&G) since 1952, is likely to lose 18 percent of its profits following the deal, according to Intercosma CEO Yehuda Brown. The company could see its sales drop by NIS 30-40 million, Brown said, adding that the company knows how to deal with a changing market, and it was currently examining acquisition possibilities. Intercosma's latest purchase was the Soft Touch cosmetics firm.

According to the merger deal, Intercosma will continue to distribute products to hairdressing salons, but the other consumer products will pass to P&G's marketing arm. Brown added that despite the impact on its sales, the company is not expected to dismiss any staff.

But Procter Israel CEO Sophie Bloom said yesterday that it was too early to determine what the eventual implications of the P&G/Gillette merger will be. However, the advertising field is already scanning its horizons. In the last three and a half years alone, since opening its Israel branch, Procter & Gamble has introduced no less than 16 brands to the local market, all for hair-care, female hygiene, laundry, oral hygiene and diapers. Managing this flood of products made P&G one of the biggest local advertisers, spending a huge $17 million last year on advertising, second only to Strauss-Elite.

Meanwhile, Shastovich, the exclusive Israeli importer of Gillette products since 1963, spent $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 Chomski Warshavsky (affiliated with Grey) and Geller-Nesis D'Arcy.

Shastovich, on the other hand, has entrusted 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 campaigns to Geller-Nesis.