The Battle for Your Beard and Body Hair Is On
Duck Dynasty ZZ Top beards and hipster hirsutism aside, the closest shave leaving the smoothest skin is big business -- really big business for Procter & Gamble and Energizer Holdings.
The battle for your beard and body hair is on, bro.
It's no wonder why shaving accoutrements take up so much shelf space in stores: 1.3 billion men worldwide use a razor to shave, and 75% of men shave their faces every day (11% of women shave daily). Those are just a few of the hair-raising factoids about this corner of the grooming market.
That's a lot of beards to tame. With 85% of men preferring to "wet shave" -- that is, shaving on wetted skin with a doubled edged safety razor (ideally followed with a toner and moisturizer) -- there's a huge market for shave prep creams, lathering agents and other items.
Although there are some 44 companies involved in the non-electric razor business, the top dog is Procter & Gamble, which owns the Gillette, Braun, Fusion and Mach3 brands, among others. Coming in second in the grooming division is Energizer, the company behind Schick.
Yes, you read that right. Energizer -- the company most famous for batteries and the Energizer bunny -- got into razors with Energizer Holdings' 2010 purchase of Personna American Safety Company.Today 35% of the company's revenue comes from shaving.
But the recent news for Energizer should give investors pause. During its fourth quarter earnings call Energizer blamed "heightened competitive activity" for lower shave preparation sales and estimated "its main competitor" (translation: Procter & Gamble) spent an additional $172 million this year for Wet Shaving and Feminine Care in the U.S. alone.
Softer sales for shave prep items isn't the only thing Energizer has to worry about.
Nicking at the big boys' heels
Energizer also noted sales of razor and blade type shavers are down, while sales of disposable razors have risen.
The uptick in disposables shouldn't be too surprising given that the razor and blade model is costing ever more, with the initial razor around $12 and enough refills to get through a month of daily shaving coming in at $19.
The high cost of daily shaving has led to small start-ups like the Dollar Shave Club gaining traction. Dollar Shave Club's YouTube ad plays on men's sneaking suspicion they are getting hosed by the big two, flat out asking, "Do you like spending $20 a month on brand name razors? Nineteen go to Roger Federer" (Federer is a celeb spokesman for Gillette). In the last year Dollar Shave Club's genius (and low budget) ad garnered over 12 million views.
However clever the ad is, the math is questionable. Bloomberg Business Week argued the average monthly cost of shaving cartridges for Procter & Gamble's Gillette models is closer to $5. But note, that was based on the company's own estimates.
Then there's Jeff Raider, the co-founder of online eyeglass sensation Warby Parker, who has created an online shaving business called Harry's with German razor blades, ergonomic handles, and more luxurious shaving creams for the bespoke beard.
No hair left behind
In trying to get an edge on the competition, both Procter & Gamble and Energizer are going after emerging markets and trying to out-innovate one another.
Procter & Gamble has introduced the Venus razor for women to Latin America. But even more meaningful is its Prestobarba brand, its shaving brand targeting emerging markets in Africa, the Middle East, Asia, and Latin America that has already 35% of the men's disposables market globally.
Closer to home, Procter & Gamble has unsheathed another weapon in the shaving battle. Their What Women Want ad campaign for the Gillette Fusion Pro Glide Styler highlights (and promotes) manscaping, adding a significant percentage of body mass to shave.. .
Energizer's targeting young men by entering into a co-branding licensing agreement with Unilever to manufacture and market Schick razors under Unilever's popular AXE young men's grooming brand.
Then there's the escalating innovation war, with constant tweaks to products for those with sensitive skin, and ad copy that sounds more like a manual to a high maintenance sport's car, touting independent suspensions, friction reduction, and various signature technologies to improve the shaving experience.
But does all this innovation and promotion pay off?
Close shaves and close calls
Energizer Holdings' net profit margin of 9.10% is lower than Procter & Gamble's 13.70%, undoubtedly because it is having to keep up in a promotional environment. However, Procter & Gamble's net profit margin is lower than its five year average of 14.8%. Also in Procter & Gamble's favor is that it's a Dividend Aristocrat and pays a higher yield of 2.9% than Energizer Holdings 1.9% yield.
That said, as time goes on Energizer Holdings is becoming a lot more like Procter & Gamble. Just recently the company bought several feminine care brands to better compete with the Cincinnati consumer care giant. Energizer is also gaining acceptance on the Street as it trades near 52 week highs.
Investors should keep a close eye on that Energizer bunny. It sure seems like it's training for a lengthy battle for the world's unwanted hair.
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The article The Battle for Your Beard and Body Hair Is On originally appeared on Fool.com.AnnaLisa Kraft has no position in any stocks mentioned. The Motley Fool recommends Procter & Gamble. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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