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It's been five months since Procter & Gamble (PG, news, msgs) unleashed the Gillette Fusion, its biggest consumer-product launch in eight years.
Procter & Gamble needs a big hit with the five-blade Fusion to help persuade Wall Street of the wisdom of shelling out $57 billion last October to acquire Gillette -- the world's biggest maker of shaving supplies, as well as a producer of batteries, dental products and toiletries.
On the surface, all is smooth for Fusion, which is outselling rival Energizer Holdings' (ENR, news, msgs) entire Schick and Wilkinson Sword razor business, men and women's products combined. Procter & Gamble says it's on track to hit its goal of $1 billion in Fusion sales by 2008.
But there's potential trouble ahead for the Cincinnati company, one of the world's biggest makers of household products and owner of such brands as Tide, Crest, Pampers, Pantene and Pringles.
Fusion razors have encountered skepticism from bloggers and other critics who chafe at the notion that five blades are now needed for the best shave a man can get.
"You also have Consumer Reports, which actually said in their tests it wasn't as popular, and that maybe people would be quite happy with (Gillette's) Mach 3," says Jonah Bloom, an editor and columnist at Ad Age magazine.
Perhaps more troubling are sales figures showing that the Fusion razors themselves are selling much faster than refill blades -- suggesting that some consumers who gave Fusion a try following its hyped launch are fitting both the manual and battery-powered handles with Mach 3 blades, each of which costs 75 cents less than a Fusion blade.
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Another factor behind the slowing sales momentum is the trend toward bulk purchases at club stores and other discount retail outlets. Men today stock more blades in a bathroom cabinet than they did when Mach 3 razors were introduced, in 1998.
And Fusion blades last longer, meaning slower unit sales growth will undermine the improved dollar sales and profit margins Procter & Gamble realizes from the product.
Video: Procter & Gamble pins hopes on Fusion
Analysts worry that despite the successful launch of Fusion, Gillette sales contributed less than expected to Procter & Gamble's sales growth in the most-recent quarter, when total sales of blades and razors grew by 1%. Sales of Gillette's Braun and Duracell brands fell by 1% in the period.
Procter & Gamble points out that Fusion sales exceeded expectations, with more than 4 billion razors sold in the first two months -- 20% more than the Mach 3 launch eight years ago. The addition of Gillette's razor and blade business should give a long-term boost to operating margins, the company says.
According to Gillette research, 94 million males shave in the United States, and 72% of them use a razor rather than an electric shaver. For $12, the Fusion is an inexpensive way for many of them to get a superior shave, the company says.
Procter & Gamble also touts independent research commissioned by Morgan Stanley (MS, news, msgs), which found most who try it will become converts. The company is sticking behind its ambitious estimates of $1 billion in Fusion sales within two years.
"This is Procter & Gamble's biggest product launch of the year," says Bloom. "They're putting $200 million in advertising and marketing money behind it. This is enormously important to them."
Success with the Fusion could go a long way toward a frictionless integration of the two consumer products giants.
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