Clean Edge Razor: Case Analysis

Prepared by: Ankur Patel (B14133)

Nikhil Arora (B14159)
Sumit Periwal (B14180)

Case Overview
Paramount Health and Beauty Company, a leading producer of consumer products in Health,
Cleaning, Beauty and Grooming, will soon be launching a non-disposable razor that promises to
improve the overall shaving experience to a new level. The new product developed with superior
design and technology promises a new value dimension to the consumer and recognizing this
opportunity, Paramount has decided to launch the product in the Super Premium segment a
segment where Paramount doesnt have any presence so far. The next big decision is the positioning
of the product which can either be in the highly conscious Niche market or the aesthetic drive
mainstream market.
Background information
The US Razor market is mainly divided into the following categories - non-disposable razors,
refill cartridges, disposable razors, shaving cream and depilatories.
From 2007 to 2010, growth of non-disposable razors is approximately 5% and that of refill
cartridges is 2% per annum.
Currently, Paramount is a global consumer products giant with $13 dollars in sales.
Paramount currently offers two products Paramount Avail and Pro in the Razor market.

Market Segments and Consumer Behavior
Non-disposable razor and refill cartridges had three segments value, moderate and super-
premium.
Sales in the Super premium segment have been mainly driven by product innovation.
There are three types of consumers as per their involvement with the product:
a. Aesthetic shavers - 28% (involved and motivated by the cosmetics results).
b. Social/emotional shavers - 39% (involved and motivated by the overall shaving
experience).
c. Maintenance shavers 33% (completely disinterested).

Market Trends

The number of new products in non-disposable razors and refill cartridges category has
grown. The margins are higher when compared to the personal care products.
There was a shift in the market, where male grooming was given more attention and the
frequency of purchase increased due to sponsored articles regarding advantages.
Competition
Paramounts main competitor in non-disposable razor category in 2010 are Prince, B&K, Radiance
health and other substituted products. Prince sold non disposable razors in super-premium category.
Prince had gained #1 spot in terms of retail dollar sales up until 2009. Notable feature of B&K
another competitor was that they entered the market in this non disposable razor category only in
1985. However, they managed to reach #3 in market share and unit-volumes by superior technology
and releasing super premium products. New entrants were coming to market with super premium
products, technology and greater advertising dollars to gain market share. Paramounts clean edge
should compete with Radiance Naiv in test markets. Naiv had already acquired 13% market share in
test markets. Radiance and Paramount were fierce competitors and Paramount had to launch a new
technology in Super Premium segment to regain market share and continue to exist as a global
leader in this category.
Product Positioning:
While Paramount had established as a unit-volume leader in 2009, the non-disposable razor market
had a significant growth only in Super-Premium segment. The rate of increase in total media
advertising expenditures in this category is greater than the rate of increase in retail market sales as
shown in Appendix A. Main reason for this is numerous product innovations in Super-Premium
segment and advances in technology. Paramount had developed a new product in this category
called Clean Edge based on superior technology and 5 blade designs. This new product would give
Paramount much needed boost to position itself as a leader in Super-premium segment and
technology giant for non-disposable category. If Paramount decides to position and market Clean
Edge in mainstream positioning, then it will have to cannibalize existing
Paramount Pro and Paramount Avail products. This could potentially reduce loss of revenue and
eliminate these products from Paramount offering resulting in losses due to Clean Edge.
Paramount is currently not sure as to where to place this product, niche or mainstream
SWOT ANALYSIS
Strength Weakness
Paramount is an historical global consumer
products giant.
Clean Edge Razor carried new breakthrough
technology. It could be a revolutionary
product, which appeals to a growing
market.
Paramount was the unit-volume market
leader in 2009.
Current product line-Paramount Pro had
strong market share in the current
business.
The potential cannibalization might occur
The marketing budget of Clean Edge has
limitations.
Opportunities Threats
Non-disposable razors sales had
experienced approximately 5% growth
annually from 2007 to 2010.
In the last decade, the industry had
experienced significant growth in the super-
premium segment.
The growth of super-premium segment was
caused by the product innovations.
The purchase and replacement cycle of
razors and replacement were shortening
In the last five years, there was no
significant technology innovations
introduced by Paramount.
Male-specific grooming products became
the mainstream in the market.
The accelerate rate of new-product
introductions for non-disposable razors
and refill cartridges in these years.
The new launched Navi made from
Radiance had similar new technology with
Clean Edge.
There are many substitute products
available.
The no disposable razor market is high
competition.





Profit & Loss Analysis

Category Driver items
Year1
(Niche)
Year1
(Niche)
Year1
(Premium)
Year1
(Premium)
Razors
Capacity 1 1.5 3.3 4
Manufacturer Price 9.09 9.09 7.83 7.83
Total Revenue 9.09 13.635 25.839 31.32
Production cost per unit 5 5 4.74 4.74
Total Production Cost 5 7.5 15.642 18.96
Cannibalization cost 0.616 0.924 3.4848 4.224
Cartridges

Capacity 4 10 9.9 21.9
Manufacturer Price 7.35 7.35 6.22 6.22
Total Revenue 29.4 73.5 61.578 136.218
Production cost per unit 2.43 2.43 2.24 2.24
Total Production Cost 9.72 24.3 22.176 49.056
Cannibalization cost 3.92 9.8 16.632 36.792
Other Costs
Capacity cost 0.61 0.87 1.71 2.45
Advertising 7 7 19 17
Consumer promotions 6 6 17 14
Trade promotions 2 3 6 8
Total
Cost(Razors+Cartridges) 34.866 59.394 101.6448 150.482
Total
Revenue(Razors+Catridges) 38.49 87.135 87.417 167.538
Final Margin 3.624 27.741 -14.2278 17.056
Cannibalization cost is calculated as % of cannibalization * capacity unit*contribution
margin per unit

CONCLUSION
After looking at the profit sheet and our analysis we will like to recommend Niche Category as
the chosen one.