Link to today's Daily Mail article here
Reprinted below
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Gillette marks up razor price by 4,750%
Sean Poulter, Daily Mail
8 June 2009
Men are paying over the odds for a clean shave because of a huge mark-up on razor heads.
But consumers are charged up to £2.43 a piece - a mark-up of more than 4,750%.
The price of shaving products at leading supermarkets is under investigation by the Office of Fair Trading.
The Government watchdog is involved in a long-running inquiry into alleged collusion between manufacturers and retailers.
It is alleged that salesmen from Procter & Gamble, which
bought Gillette for $57bn (£35bn) in 2005, urged retailers not to cut
the shop price of its brands.
A check of Tesco, Asda and Sainsbury's found the UK's three
biggest supermarkets are selling Gillette's Fusion Power cartridges at
the same price.
A pack of eight costs £18.53, and the replacement razor heads
are so expensive that they are now the most shoplifted product in the
High Street.
Special security measures have been introduced, including
sealing the packs in boxes with an electronic tag which sets off an
alarm if it is not removed before leaving the store, and CCTV that
activates if the product is removed from the shelf.
A pack of four Fusion Power cartridges costs only 20p to
manufacture, plus 8p for packaging. But they are sold for £9.72 - a
mark-up of £9.44.
An industry insider said Gillette takes the lion share - £6.28
- to cover its operating costs and make a profit. Some £1.90 goes to
the retailer and £1.26 to the Government in VAT. The insider said: 'I
know as a matter of fact that it will not cost more than 5p to produce
a refill cartridge, it is a question of pennies given the bulk
involved, yet Gillette is charging a wholesale price which is much
higher.
'The figures tell you why it can afford to use stars such as
Tiger Woods on its payroll (for advertising) and how it could afford to
give David Beckham a diamond-encrusted mach3 razor for Father's Day
some years back costing $54,000.
'With the Gillette products, the company is so dominant that
it is able to spell out the terms of sale, including the price they
want to see, to retailers.'
As well as Beckham and Woods, Gillette has splashed out large
amounts of money on tennis star Roger Federer and footballer Thierry
Henry to help market its products.
A recent Which? survey praised Gillette's products but gave a 'Best Buy' rating to the King of Shaves Azor.
Its four cartridge refill pack comes in at a much cheaper £4.88.
Tesco's Matrix system, which has a triple blade head, has also
won plaudits. A four cartridge refill costs only £2.20. A spokesman for
Procter & Gamble said the retailers, rather than manufacturers, set
the price paid by customers.
She said: 'Delivering value to our consumers is critical to our business.
'P&G determines the (wholesale) prices at which we sell to
customers primarily based on covering our costs - the cost of product
development, raw materials, processing, packaging, transport,
general-expenses and marketing.' She said that the company also needed
to earn 'a sufficient return to sustain our business' and argued that
its products provide good value in terms of performance in relation to
price.
She said the company was unable to comment on the OFT
investigation, but added: 'Our policy is to comply with the letter and
spirit of the law everywhere we do business'.
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The products sold by Gillette and other companies cost as little as 5p to make, industry insiders have revealed.
