Warren Buffett Gillette

Buffett’s Gillette Under Pressure From Shave Club Growth

Warren Buffett loves a good moat and this is one of the reasons why he has always been a big fan of Gillette - consider the following quote from Robert Hagstrom's The Warren Buffett Way

And:

The shave club boom is changing the face of the shaving product industry, and according to research firm Jefferies, Warren Buffett's Gillette is likely to lose market share and smaller player Schick could face a serious squeeze as consumers today apparently prefer to have their razor blades delivered. Gillette was purchased by P&G in 2005. At the time,  Buffett, was Gillette's largest shareholder and acquired P&G stock via the purchase. At the time, Buffett said "Over that time we've been happy with that investment but I've got to tell you I'm happier today", and "It's a dream deal". Buffett has owned shares of P&G ever since, but secular trends could be eating away at the moat of gillette.

A November 11th report from Jefferies explains the changing dynamic in the sector: "Despite comprising c. 20% value share in US men’s blades, we estimate...have put a relatively small ~5% dent into the profit pool to date. That said, we est. that if shave clubs can profitably scale their businesses, they may control c. 20% of the industry profit pool by 2020, of which close to 1/2 from Gillette's shave club.'

As of July of this year, Schick became a part of the Edgewell Personal Care family of products.
Shave club members actually spend twice as much overall on Gillette and other razor blades

In the report, Jefferies analyst Kevin Grundy and team point out that shave clubs have a "dirty little secret" that not many people know about. They note: "shave club subscribers spend about 2x as much p.a. on blades as men who use systems and nearly 3x as much as those that use disposables."

The dynamic here is really not surprising; it turns out that although they are spending less per razor blade, "shave club users – knowingly or unknowingly – change blades c. 4.5x as frequently as “traditional” men’s systems users and c. 1.5x as frequently as disposable users."

However, Gillette is trying to make inroads in the shave club. Jefferies notes:

SORRY!

This content is exclusively for paying members. Sign up here

If you are subscribed and having an account error please clear cache and cookies if that does not work email support@valuewalk.com or click chat


X
Saved Articles
X
TextTExtLInkTextTExtLInk

The Life and Career of Charlie Munger

Charlie is more than just Warren Buffett’s friend and Berkshire Hathaway’s Vice Chairman – Buffett has actually credited him with redefining how he looks at investing. Now you can learn from Charlie firsthand via this incredible ebook and over a dozen other famous investor studies by signing up below:

  • Learn from the best and forever change your investing perspective
  • One incredible tidbit of knowledge after another in the page-turning masterpiece of a book
  • Discover the secrets to Charlie’s success and how to apply it to your investing
Never Miss A Story!
Subscribe to ValueWalk Newsletter. We respect your privacy.

Are you an intelligent investor?

ValueWalkPremium is a website and newsletter for smart investors like yourself. We focus on the latest hedge fund industry news much of which is not in the public domain and obtained via our sources.

We also have 10 years of resources on how to use this information to better your investment process.

Sign up for  today for only a few dollars a day and get a 3 day no obligation trial with a targeted 20% discount coupon code.

Cancel anytime during trial and you are never charged.

Limited time offer: For first 50 subscribers

0