Buyers eye up business at shaving industry's cutting edge

Will King's King of Shaves has received bids valuing the company at about $86 million. Photo / Supplied

Will King, the chief executive of King of Shaves, is not shy in coming forward. He once stood at Speakers' Corner in London's Hyde Park to advertise his products.

But not surprisingly, he is reluctant to talk about the potential sale of the razor handles-to-shaving oils business which he set up with just £15,000 ($28,712) in 1993.

The founder, who has a 30 per cent stake in the business, remains silent on the auction and will only confirm that the board appointed Alpha Advisory recently after three bids were received in the first quarter of this calendar year. King says: "We have always had quite a lot of approaches for the business."

However, he is far more loquacious about how he started King of Shaves, about the growth prospects for the brand in Asia-Pacific and about how he is taking on the US giants Gillette, part of Procter & Gamble, and Schick-Wilkinson Sword, a division of Energizer Holdings, in their "own backyard".

Following a shaving epiphany, King started developing his company's oils from his girlfriend's back bedroom. "I started using her bath oil and I found it did not give me a rash. No one had thought at that point about shaving with a natural exotic oil."

Since then, King of Shaves has added numerous shaving oils and gels, and in 2008 it introduced its Azor razor system. These have helped it make a gross profit of £5.88 million, on sales of £11.88 million, for the 17 months to May 31, 2010. Its first-year sales after launching in 1993 were just £300.

Such figures are now small beer compared with the bids King received for King of Shaves this year, which are thought to value the company at up to £45 million ($86 million).

A deal at this price tag would net King a lucrative payout depending on how many of his shares he sells.

King is expected to remain involved with King of Shaves if it is sold. This would be a major boost for new owners, as he has developed the company into the UK's third-biggest player for branded razor handles and shaving preparation products.

Gillette is No 1 for both razors and soft products, while Wilkinson is ranked second for razor handles and fifth for gels and oils.

One of the bidders for King of Shaves is reported to be Kai Industries, the Japanese technology company that took a 21 per cent stake last October. Spectrum Brands, the owner of the electric shave brand Remington, has distanced itself from speculation over a possible bid.

However, King of Shaves has a distribution agreement with Remington to extend its reach into the US, Canada and Mexico later this year.

King of Shaves launched in the US in 2000 in Target, the general merchandise giant, and now sells its products in a host of major American retailers, including Albertsons, CVS and Walgreens.

King remains undaunted by the prospect of taking on Gillette, which has a market share of more than 70 per cent in the US, and says the opportunity could be "quite big" for King of Shaves.

He forecasts annual sales in the US over the next three to five years of between US$150 million ($181 million) and US$200 million - based on an 8 per cent to 10 per cent market share.

In addition to its UK agreements with the likes of Tesco, Boots and Sainsbury's, King of Shaves sells its products in seven countries, including Japan, Mexico, Australia and New Zealand.

After the US, the company aims to launch across Asia-Pacific, including China, over the next two years, and in India by 2014.

"You have to fish where the big fish are", says King. He says Chinese men are increasingly being drawn to Western brands and that "male grooming is becoming more important from a lifestyle perspective".

While these markets potentially offer explosive growth, King of Shaves is battling an economic slowdown and a trend in the UK for growing beards.

"Men are shaving less today than five years ago. We are in a beard phase because the economy is tough and beards are in vogue with certain celebrities, such as Brad Pitt and David Beckham," says King.

The pressure being exerted on King of Shaves by its two big rivals cannot be underestimated.

Both Gillette and Schick have massively stepped up their price promotions in the UK in the last four years.

One way that King of Shaves seems to be fighting its corner is by keeping its prices lower than its rivals on certain products.

King of Shaves sold an impressive 1.5 million razor handles and 2 million to 2.2 million soft products last year.

But the company actually made a pre-tax loss of £2.76 million over the 17 months to May 31, 2010.

Despite continuing to invest heavily in developing its intellectual property, product development and marketing investment, King of Shaves is expected to have made another loss in the year to this May but is forecasted to make a trading profit in 2011-12, driven by increased sales from international expansion.

Indeed, with a potential sale of the company and a big push in the US on the horizon, King of Shaves appears to have reached a tipping point that augurs well for its long-term future.

King admits that "never in his wildest dreams" did he expect to become the No 3 player in the branded system shaving market and admits people told him he could never compete with his two big US rivals.

He says: "We have been lucky but I believe we made our own luck."

- Independent