This week, Proctor and Gamble announced it was writing-down the value of its Gillette shaving products brand by $8 billion.
It’s a bit hard to put $8 billion into perspective, so here are a few things you could buy with that kind of money:
- Two Manchester Uniteds
- 140 SpaceX Falcon 9 launches
- 1.6 million round-the-world flights
- 8 million iPhones
- 1.1 billion pizzas from Dominos
Filtering out the corporate jargon, P&G’s reason for the write-down was: millennial males are now growing beards and aren’t shaving as much as they used to.
Sure, that makes sense, but we should also consider the impact ’direct-to-consumer’ brands like Harry’s, Dollar Shave Club, and Cornerstone, are having on the Gillette-style incumbents. By delivering the same product, at a lower OPEX, with more youthful branding, it’s no surprise Harry’s was bought for $1.4 billion earlier this year.
The bigger lesson for me is how company valuations can be so fickle. A company’s valuation is the estimate of its present-day value based on its expected future financial performance. In this case, the P&G executives took a massive bet that the future of male grooming would be clean shaven. It’s now clear that assessment was patchy at best.
But at least patchy is now in vogue.