Cut-throat competition in razor market

Razors and blades in the UK is big business an industry worth 300m a year, but one dominated by Procter & Gamble brand Gillette, which holds more than two-thirds of the market. Yet entrepreneur Will King thinks his Azor range, launched under his King of Shaves (KoS) brand this week, can not only dent, but account for 25% of the market within five years.

f2_120x120Razors and blades in the UK is big business – an industry worth £300m a year, but one dominated by Procter & Gamble brand Gillette, which holds more than two-thirds of the market. Yet entrepreneur Will King thinks his Azor range, launched under his King of Shaves (KoS) brand this week, can not only dent, but account for 25% of the market within five years.

It’s a formidable challenge, but one that King, who founded KMI to produce a range of shaving foams and oils in 1993, thinks he is up to. Yet while his “David” has fared well against the “Goliath” of Gillette and Wilkinson Sword in the “software” market, he faces a greater task in “hardware”, where manufacture is more expensive, margins smaller and the competition so advanced.

The idea behind the Azor is to shave closer, for longer and, crucially, to cost less. King says it is possible to undercut the system razors, such as Gillette Fusion, which use replaceable razor cartridges, by marrying the “performance” of such products with the “simplicity of disposables”. Hence his hybrid razor – which uses cheaper, lighter materials than the heavy plastics and steels of top-end razors – is more cost-effective.

The Azor is sold with three “Endurium” coated cartridges for £4.99. Four of these cartridge refills will retail at £4.99, while eight sell for £9.49, cheaper than Gillette’s flagship Fusion, whose cartridges sell at £9.49 and £14.99. It will be available from Sainsbury’s later this week and nationwide at Boots from July 21. Other retailers will follow in the autumn.

King says he is determined to break Gillette’s and Wilkinson Sword’s hold on the market. He has spent five years researching and developing the Azor and is committing £35m to marketing it over five years.

Marketing and, more critically, distribution will be key to his success. Gillette, which completed a £27bn merger with P&G last year, has a massive 67.9% of the market, with Wilkinson Sword holding 18.5%. Disposable brand Bic takes 7.9%, while own brands account for 5.7%, according to 2006 Mintel data, the latest available. Gillette and Wilkinson Sword, backed by Energizer Holdings, spent £14.5m and £4.9m respectively on marketing in 2007, according to Nielsen Media Research.

Industry experts agree it will be tough. “Gillette is an exceptional brand,” says Eddie Stableford, chief executive at branding consultancy Bryt. “King could attract some of the market, but not to the level of Gillette and Wilkinson Sword.”

Giles Lury, Value Engineers director of brand development, cautions that Gillette is “always one step ahead”. It also has the might to quash any newcomer to the market. “It has power and is well established, P&G is behind it, and it will be very tough to go in,” he says. “From a commercial point of view King has to be careful: by putting his focus on this has he left the business vulnerable?”

King says not. “We have taken extraordinary precautions,” he explains. “We have our own patents, rotweiler lawyers and we have ring-fenced as much as we are able to in a high-risk, high-reward environment.”

He also points to his marketing activity, claiming not to need the “heavy” TV and sponsorship focus his competitors have within their media plans. King has a deal with England football defender John Terry, which he says proves he too can sign up “big mainstream personalities”.

The bulk of the activity is online work, such as e-mail and online advertising, coupled with experiential and print advertising. “We’ve been using Facebook’s social platform to focus on 16-17 year olds,” he says. “Before they turn to the dark side of Gillette. Maybe eventually there will be TV ads, but given the reception online, we would be barking to go on TV. The market is so fragmented there.”

Gillette’s “mundane” domination of the market, according to King, will also work in his favour as it is one “crying out” for innovation. “People will give something new a try,” says King. “And it is only half the price.”

He also says there is a ready market waiting to be tapped; those who already buy and use his KoS products. “We are second in the market,” he says. “Our customers repeatedly e-mailed me to ask about a King of Blades.”
KoS accounts for 13.6% shaving gel and foam market, worth an annual £87m. Nivea
for Men has 8%, while Colgate Palmolive, Wilkinson Sword and L’Oréal have 2.3% each and own labels/others make up 15.8%. Gillette still accounts for 55.7% of this market, according to Mintel.

The KoS brand launched in 1993 when King and Hiten Dayal founded KMI after King was made redundant. Originally, he bottled and sold KoS shaving oil from his bedroom, developing the product after getting shaving rashes from conventional foams. That year it was listed by both Boots and upmarket department store Harrods. It also has a number of products designed for women.

King long publicly touted the possibility of extending from software to hardware but
claims it has been impossible to do so before now, suggesting that new entrants have been put off by the constraints of patents. “It’s a highly protected market,” he says, claiming there are around 20,000 patents on razors. “When I came to this market in 2002 and did some patent searches, there were some pretty ugly patents. We started five years ago with designers and engineers to look at how to get around these monopoly protection placements,” says King.

Furthermore, he suggests a new and growing consumer consciousness of environmental and economic concerns will work in his favour. System razors are predominantly made from metal and come heavily packaged, whereas King’s hybrid has a UK-manufactured handled, with all packaging either already recycled or 100% recyclable.

And, as the credit crunch bites, consumers will not want to go for high cost razors and refills. “Paying £9.99 for a Fusion and £2.50 a cartridge is an expensive habit to have,“ says King. “With the Azor you will save a whole lot of money. So you can go and do something with what you save.” A different positioning, perhaps, to the KoS foams, gels and oils, which play to the premium end of the market.

But price alone will not help King. “They are clearly trying to play cheaper,” says Lury. “The interesting question will be whether people agree two blades costing less really do give a good shave. Gillette will probably respond with price promotions. It has proved it can in response to Wilkinson Sword.”

Nevertheless, King is confident and is targeting 25% of the market within five years. Observers consider that target optimistic. “I think that’s an impressive sales target, but he is up against some strong brands,” says Rune Gustafson, chief executive of Interbrand. “That’s a tall order.”

“With 10%, he’d be over the moon, says Stableford. “Above 1% and he’ll be happy.”

It’s an ambitious move for the entrepreneur who, in taking on the might of P&G, is aiming for a mighty slice of the cut-throat razor blade market. Get it right and his empire stands to profit; wrong and the likes of Gillette will quash his five-year dream with a flick of the wrist.

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