Gillette-P&G merger could shave RFID costs

The market clout Procter & Gamble will wield once its $57 billion bid to acquire Gillette is approved hasn't been lost on Wall Street. To date, most of the discussion has centered on the leverage the mega-corporation (which will surpass Unilever to become the world's largest consumer products company) will have when it comes to dictating prices to retailers.What has often gone unnoted, however, is the effect the merger will have on another area: the emerging world of radio-frequency identification (RFID).

Once the acquisition is completed, P&G will own not just such powerhouse consumer brands as Pringles potato chips, Pampers and (don't squeeze the) Charmin, but Gillette razor blades and Duracell batteries as well. That should give it a great deal of clout with retailers like Wal- Mart and Target going forward. As the sole supplier of products like Mach3 razors and Tide detergent that no self-respecting retailer can afford to be without, P&G will find itself in a position of strength when it comes to discussions about future RFID deployment, such as what products will receive RFID tags and when.

"The interesting thing is it makes the combined enterprises big enough that they should get a significant say in RFID issues in terms of the technology," says Gene Alvarez, vice president of technology research services for Meta Group. "It should enable them to flex their muscles and sit down at the table with Wal-Mart and to manage the expectations of their commitment from RFID."

That's not the only RFID-related advantage the newly enlarged P&G is likely to enjoy. Once it swallows up Gillette, P&G should also have significantly more buying power when it comes to RFID equipment like tags, readers and the integration tools required to support an RFID rollout.

Though the marriage of Gillette and P&G joins two pioneers in RFID technology—they represent two of the three founding members of the Auto-ID Center at the Massachusetts Institute of Technology—combining their RFID systems won't necessarily be a slam dunk. The two companies took different routes to meeting the Wal-Mart RFID mandate —Gillette embraced the technology, investing heavily in equipment, while P&G opted for the more stripped-down "slap and ship" approach. "The most popular question[s] around this entire takeover have been what will happen to the Gillette RFID initiative, and what will happen to the P&G RFID initiative," says Alvarez.

But some dismiss those differences as mere speed bumps. "As far as RFID is concerned, Gillette and P&G have been following a similar path with an equal passion for several years," says Kevin Ashton, vice president of marketing at RFID firm ThingMagic and the former executive director of the Auto-ID Center (now the MIT Auto-ID Lab). "I think they will end up with two strong RFID teams becoming one even stronger team. From a pure RFID point of view, I think [the merger] is nothing but good news."