This document provides an overview of acquiring the Barbasol brand from its parent company Perio Inc. Key points include: - Barbasol is well-positioned to capitalize on consumers continuing to buy lower-priced products post-recession. - Acquiring Perio would obtain Barbasol, which generates 89% of Perio's revenue, as well as other personal care brands. - Recommendations include raising Barbasol foam prices and launching an economy gel product to enter a profitable market segment. - Valuing Perio at $52.7M currently, the acquisition price range is estimated at $45-68.8M, with an expected 13.6

1. Barbasol Acquisition Pitch Book For: Diversified Products Inc. Prepared by: Rook Consulting Cohort C – Team 2 December 13, 2010 Rook Consulting Project Team: Hythem Abdelwahab Tejas Atawane Eszter Hamori Kevin Harder Molly Plimpton Carl Uttaro

3. Company Profile

4. Shaving industry overview

5. Current Valuation

6. Adjust Pricing

7. Launch Economy Gel Product

8. Valuation of Acquisition

9. ReferencesTable Of Contents

10. Executive Summary

11. i Executive Summary Please Note: Because Barbasol provides 89% of the manufacturer revenue for its parent company Perio Inc., it is proposed that Diversified Products Inc. purchases Perio in its entirety. As a result, The financial valuations in this pitch book are based off of the entire Perio, Inc. organization. However, all other analyses relate specifically to the Barbasol brand and its competitors among the men’s shaving cream market only. Introduction The recent US economic recession has shifted consumer purchasing towards economy products, a trend which is forecasted to persist for the foreseeable future. In a recent study, 94% of consumers surveyed stated they were “likely” or “very likely” to continue buying lower-priced products. As Barbasol is the dominant low price men’s shaving product, it is uniquely positioned to capitalize on the post-recession consumer. Company Profile Barbasol was founded in 1919 by MIT professor Frank Shields and was an instant innovator being the first pre-lathered shaving cream. The brand is well-known for its “barber-pole” striped packaging and has been famous throughout the years being endorsed by male figures such as baseball star Babe Ruth and football coach Knute Rockne. The company was run independently for its first 43 years until it was acquired by pharmaceutical giant Pfizer from 1962. Barbasol was then purchased by Perio Inc. in 2001. The company has seen increasing revenues from $18 million in 2001 to approximately $26.7 million in the most recent 12 months. This success is in spite of the recent US economic recession and the failed launch of a Barbasol Ultra line which was misaligned with corporate strategy and culture. Industry Overview & Competition The $338M men’s shaving cream market, a segment of the personal care and grooming products industry, is comprised primarily of two major product segments – shaving gel accounting for 66% and shaving foam accounting for 29% of retail sales. Barbasol is positioned as a low-price, high volume product within the men’s shaving foam market – Barbasol products account for 49% of foam units sold but only 37% of foam retail sales dollars. Barbasol’s largest competitor in the men’s shaving foam market is Gillette, a subsidiary of Proctor & Gamble Co. (PG), which offers two foam product lines, Gillette Foamy and Gillette Series Foam, which account for 45% of foam units but 51% of foam retail sales respectively. Although Barbasol is very successful in the foam segment, the market share of foam units sold compared to the entire industry has been decreasing steadily. n = 69 Gel/Foam Usage by Age Note: Data for responses other than gel or foam preferences (such as cream, oil or water) are not shown on chart. Source: Rook Consulting Shaving Cream Survey 2010

12. ii Executive Summary Gillette and Edge – a subsidiary of Energizer Co. (ENR) – have captured much of the younger age segments by offering several types of shaving gel, a product used on average more than twice as often by 18-34 year old males as foam. As a market segment, gel accounts for 66% of retail sales for all shaving cream product types, showing the high margins that the product offers. Because Barbasol does not currently offer a gel product, it is not taking advantage of a large and profitable area of the industry. Adjust the pricing of existing foam products Rook Consulting’s first recommendation upon acquiring Barbasol is to raise the price of its current products in order to capture untapped value in the market. Although Barbasol is the primary low-price shaving foam, there is room for a price increase because of the 7-cent gap in per unit price between Barbasol and Gillette Series Foam. After analyzing price elasticity, Barbasol foam products can be increased 0.5-cents per ounce in order to maximize profits. This price adjustment will result in a 1% loss of unit sales in the first year but generate $0.86M additional contribution margin in the first year and increase the firm’s value in perpetuity by $2.3M. Launch Shaving Gel product US men’s shaving consumers, particularly 18-34 year old males, clearly prefer gel products as shown by the disproportionate breakdown in sales figures between the two categories. We believe that Barbasol must re-enter the gel market after their failed attempt at a premium line and do so using a similar positioning and strategy that has been successful in foam – low price and high value. There are very few brands in the gel economy segment and there is an opportunity to provide a lower price alternative to Gillette Series gel and Edge Gel. Barbasol will be able to maintain a cost advantage over Gillette and Edge because they have 50% spare capacity.A gel product launch will generate $2.5 million in the first year and increase the firm’s value by $21.5 million. Conclusion Barbasol is a stable and fairly strong brand as it currently stands, but under its current management and strategy, it is not taking full advantage of the opportunities in the market, specifically in regards to price and product availability. Rook Consulting estimates the total current value of Perio to be $52.7 million. With our projected future growth opportunities, the range of prices that DPI should offer are between $45 million and $68.8 million. Based on this investment, Barbasol is an attractive acquisition target that we estimate to produce an ROI of between 73% and 13.6% over the next five years. US Male Shaver Facts: 79% Purchase shaving cream themselves. Think all grooming products work the same Occasionally or regularly try new shaving products Buy shaving cream and razor from the same brand 55% 51% 23% Source: Mintel Data

13. Company Profile

14. Barbasol was introduced to the market by the Napco Corporation. Barbasol quickly took off in popularity among US shavers and Frank Shields, the inventor (see sidebar), established The Barbasol Company in 1920. The Barbasol Company owned the brand for the next 42 years. Barbasol’s innovative product immediately helped it become a market leader. Throughout the years, Barbasol was even endorsed by various sports superstars, such as Babe Ruth in 1923 (pictured right). The company changed the product format from a thick cream in a tube to a “softer, fluffier” composition we now recognize as shaving foam and began packaging in the aerosol cans that are ubiquitous today. Throughout Barbasol’s history, the brand has been identified by the characteristic red stripes of traditional barber shop poles. “No brush, no lather, no rub in.” - Original 1920 Barbasol slogan 1 An Old and Well Known Shaving Brand Barbasol Original Shaving Cream in a Tube (1920) Success through Innovation Source: Perio Inc. Company home page Early Barbasol Advertising Messages Barbasol Inventor In 1919, MIT Professor Frank Shields succeeded with the invention of a shaving cream that did not have to be worked into a lather. Source: Babe Ruth Barbasol endorsement (1923); Perio Inc. Company homepage For Best Results: shave with Barbasol (1949); Westervin.com. Source: Perio Inc. Company homepage Company Profile

19. Total employees have grown from 4 to 35 since 2006, due to increasing growth and in-house manufacturing

20. Majority of staff managed under Operations Group August 13, 2009: Perio senior management with local Political leaders at the ground breaking of a new plant in Ashville, OH. Source: Ashville Times Gazette. Source: Perio Inc. LinkedIn Company Profile Company Profile

22. Perio’s other products include a women’s shaving gel and body wash.

23. Because of the single Management Team, we recommend buying Perio as a whole.

24. Barbasol Soothing Aloe is #1 retail SKU of all men’s shaving cream products.

25. Uniform packaging shows characteristic stripes modeled after traditional barber’s pole.Barbasol Ultra (Discontinued in 2010) 9 Source: Nielsen Data adjusted for Wal-Mart Barbasol Original Source: Barbasol.com Company Profile 4

27. Barbasol is a “historic brand”

28. Barbasol is “inexpensive and works well with my skin.”

29. I chose this shaving cream brand because it’s “cheap, old fashioned and works”.

30. “It [Original Barbasol] is effective and priced the way a daily use product should be priced: reasonably.”

31. I chose Barbasol because of its “price”, it’s “cheap”.

33. Barbasol’s strategy and competitive advantage has always been cost leadership, not differentiation.

36. In 2010, the Company began pulling the gel product from shelves, citing poor performance and its intention to focus on core Barbasol products.Company Profile

38. Retail Direct: 36%

39. Wal-Mart: 48%

40. Distributors: 16%

41. Overall, according to Barbasol’s VP of Product Management, approximately 75% of total manufacturer sales are direct purchases by retailers.

42. Consequently, distributors are only used by smaller, independent retailers that cannot afford the minimum order shipment quantity.

43. Thus, distributors are offered the same MSP as other customers in order to maintain direct purchases from the largest buyers.Company Profile

45. Rook Consulting believes the company is near its maximum potential in the current state.

46. Barbasol needs additional capital resources to support long-term growth in sales and product development.

48. Company has seen increasing revenues since Perio acquisition and the US economic recession, but failed with the launch of Barbasol Ultra because of misalignment with corporate strategy and culture.

50. Staff/Skills: Company has hired mostly manufacturing staff in the last year now that it runs production internally at new factory, but the sales and marketing staff could be expanded in order to foster continued growth in revenues.

51. Strategy:Perio has been successful with its core products but has not yet had the vision to achieve success in truly growing the company from good to great – such as having more products and creating higher margins.

52. Shared Values: Rook Consulting believes that one of Barbasol’s strongest traits is its long-standing tradition of being a company based on values such as hiring locally and having a conservative, family-oriented culture.Source: http://www.free-press-release.com/news-select-international-announces-benchmarks-successes-with-new-client-barbasol-1274109461.html Company Profile

53. Shaving Industry Overview

55. Forecasted growth rate of 2.7% annually for the next 5 years.

56. Wal-Mart comprises and estimated 44.9% of retail sales.Source: Nielsen Data adjusted for Wal-Mart Men’s Shaving Cream Retail Sales Last 12 Months Retail Sales by Product Category: Gel: $221M Foam: $99M Cream: $15M Other: $3M Total: $338M Source: Nielsen Data adjusted for Wal-Mart Source: Nielsen Data adjusted for Wal-Mart and Mintel Report Industry Overview

58. In foam, Barbasol and Gillette account for 88% of retail sales dollars with the remainder coming from fewer than 10 competitors.

59. In the gel segment, Edge and Gillette make up 75% of retail dollars, and the other 25% is spread among approximately 100 other companies.

61. Product variety and ability to segment the market have benefited the competition.Retail Sales Market Share - Foam segment Retail Sales Market Share – Gel segment Total Foam Retail Sales: $99 million Total Gel Retail Sales: $221 million Source: Nielsen Data Industry Overview

63. Mid-Price is the largest Gel segment with little competition from Economy.

64. Gel market has substantial Premium and Super Premium consumersPrice segments were identified using scatter plot analysis of price per can which is how the typical consumer perceives the price point. All products which deviate significantly from the standard 11oz foam and 7oz gel size have been removed. The exceptions are Schick Hydro Gel which is an 8.4oz can and Gillette Series Foam which is a 9oz can. Industry Overview

65. Current Valuation of Perio, Inc.

66. 11 Assumptions for Initial Financial Analysis Highlights: To purchase Barbasol, DPI must purchase the parent company, Perio, because Barbasol provides 89% of the manufacturer revenue for Perio. Current Valuation

67. 12 Perio Company Projected Income Statement Current Valuation

68. 13 Perio Company Projected Balance Sheet Current Valuation

70. At 1.68x 2011E Revenue, this valuation is in line with personal care companies in the market.Current Valuation

71. 15 Notes to Financial Statements: Revenues Current Valuation

72. Recommendations #1: Adjust Pricing for Existing Products

74. Capitalize on Perio’scompetitive cost efficiency.

78. Lack of current cost / price competitors.Sources: 1Compustat: McKinsey Analysis 2 Bernstein US Consumer Survey Adjust Pricing

81. The prices that assured a higher contribution margin than earlier is considered even if it meant reducing sales volume.Source: Nielsen Data Adjust Pricing

82. 18 Monte Carlo Simulation of Foam Price Raise Adjust Pricing

83. Recommendation #2: Launch Gel Product

85. Consumers price sensitivity, despite their willingness to pay more for gel based shaving products.

87. Opportunity to increase Perio’slow manufacturing capacity utilization (50%).

90. Potential of introducing a new economy gel products.

93. Introducing economy gel product that appeal to budget-conscious men.Sources: Mintel Data Launch Economy Gel

95. The products can be clustered into four distinct groups based on can price.

96. Sales volume is outstanding for the two most well-known brands in the shaving cream market, Gillette and Edge.

99. Gillette Series is Gillette’s oldest brand but does not receive as much marketing support as Gillette’s premium brands such as Fusion, thus leveling the playing field.

100. Moreover, Gillette Series accounts for approximately $16 million in sales, but is only 13% of Gillette’s total shaving cream retail sales

101. However, gaining a portion of these sales would be a major increase to Barbasol’s revenues

102. Therefore, our competitors would be both, the strong Gillette and the relatively weak Edge.EDGE BARBASOL GEL Future customer base Economy $1.79-2.24 Source: 1 “Marketing Management” - Kotler & Keller Source: Nielsen Data Launch Economy Gel

104. Barbasol is perceived as value brand.

105. Consumers prefer cheaper products.

106. 37% of males between ages 18-34 perceives gel as a fashionable type of product and over 33% of them use it regularly1.

108. 46% of survey respondents believe that the Barbasol has a good value for price and 34% of them believe the brand stand for values1.

109. Barbasol gel will be positioned as a low price, good quality gel product.

110. Though overall brand loyalty is highest for Gillette, Gillette Series gel users would be less likely to recommend the product than other users would recommend other brands.

111. Consumers, especially in the economy market segment are price sensitive.

112. Rook Consulting survey shows that consumers would switch to a product if it was cheaper1.

113. Report data shows that consumers who buy cheaper during recession are unlikely to switch back to more expensive products 2.

114. Barbasol gel users will come from current low mid-price segment users who cannot find a known brand in the economy segment. Source: 2 The “Great Recession“ and Shifts in Consumer Behavior, Bernstein Research; 2009 Source: 1 Rook Consulting Shaving Cream Survey 2010 Launch Economy Gel

116. Sensitive Skin is planned to launch in three yearsInitial Barbasol Gel Offerings Barbasol Gel when launched will be available in two varieties: Regular and Soothing Aloe. We will maintain the option of introducing Sensitive Skin in the third year to continue growing Barbasol’s gel portfolio. The designer also created a variety of striking color combinations that can be used in the future to differentiate the gel varieties. Barbasol Gel will continue to display the characteristic barber shop strips, but in an updated and more youthful style. The new product packaging was designed by José Luis GarcíaEguiguren of Barcelona Spain as a design concept to launch Barbasol in Europe. . However, we think that this design can be re-purposed for the US launch of Barbasol Gel and will provide a starting point for the final packaging creative design. Alternative Packaging Colors: Source: Copyright José Luis GarcíaEguiguren, http://www.packagingoftheworld.com/2010/02/barbasol-re-styling.html Launch Economy Gel

118. Gel and Foam products are easily and commonly made in the same factories.

119. Barbasol has the future option of expanding their new production facility to double it’s capacity.Unlike a can of shaving foam, a shaving gel can uses a “bladder” system to be installed inside of the can. The bladder contains the gel and keeps it separated from the isobutane propellant gas which would turn it into a foam. Currently, foam is mixed together without a separate bladder. During the production process, while in a pressurized tank, liquid butane is added to the formula (along with coloring) to create the familiar “gel” consistency that you see come out. It then turns to foam once exposed to air and/or agitated. Because Barbasol has the spare manufacturing capacity and there is no specialized equipment needed, there will be no incremental fixed costs associated with the project. There will be incremental costs associated with the purchasing of cans with bladders designed for gel use. There is in total an estimated 15% increase in variable production costs to produce gel as compared with producing foam. Manufacturing Logistics These additional steps in the production process cause an estimated 15% increase in variable costs per unit to create a gel product. However, capital expenditures are not needed to increase overall manufacturing infrastructure because the same PP&E used to produce foam can also produce gel. In 2009, Barbasol opened a brand-new factory to take production in-house for the first time and at this point in time the factory is still only running at approximately 50% capacity. Perio Inc. already has the expertise to produce gel shaving products because of their women’s shaving gel brand, Pure Silk. The Barbasol production and operating division will be responsible for producing the Barbasol Gel product line. Source: Interview with Tom Gallerani - former VP of Shaving Technology Lab, Gillette Company Launch Economy Gel

121. Retail Direct: 32%

122. Wal-Mart: 47%

123. Distributors: 21%

124. Barbasol will offer the same margins on the gel product to direct retail buyers as with core products

125. However, an extra 10% on top of SG&A will be allotted each year to allow for various promotional allowances and expenses to support the growth of the product (see projected financials)

126. Barbasol’s retail partners primarily determine shelf placement independently – the key is to sell high volumes in order to attain multiple “facing” slots on the shelf, even for one SKULaunch Economy Gel

128. Distribution strategy will follow what is already in place for Barbasol foam.

129. Intense counter-advertising is expected from major competitors.

130. No relevant reaction is expected from niche market product manufacturers.

131. 62% Contribution Margin expected from gel.Launch Economy Gel

133. Overall, online advertising is more cost-effective and fits Barbasol’s overall operating strategy of maintaining fairly low costs.Launch Economy Gel

135. Positioning the new Barbasol gel at a low price-point in the gel market will allow Barbasol to capture these sales from the main competitors – Edge and Gillette “Series” gel.Launch Economy Gel

136. 28 Effect of Acquisition and Product Launch on the Organization Launch Economy Gel

137. 29 Monte Carlo Simulation of Gel Launch Launch Economy Gel

138. Valuation of Perio Inc. after Acquisition

139. 30 Projected Financials: Income Statement Valuation After Acquisition

140. 31 Projected Financials: Balance Sheet Valuation After Acquisition

141. 32 Projected Financials: Valuation Valuation After Acquisition

143. Perio doesn’t have the financial arm to bail itself out or diversify into other shaving products.

144. DPI not only offers to buy Perio in an all cash deal, but also intends to keep Perio’s core value system intact. This would be done by providing various employee incentives and entrusting Perio’s executive board with higher responsibilities such as managing the gel launch.

147. Perio’s strong infrastructure in terms of a newly setup plant running at only 50% capacity, gives us operational flexibility to manufacture both gel and foam using the same infrastructure.

148. Strong HR systems management systems would help us cut turnaround time in employee hiring to keep pace with company growth rate.

149. An opportunity for DPI to diversify into the shaving cream industry with a brand name that’s over 90 years old and is the classic American brand.Valuation After Acquisition

150. References Documents: Perio Inc. Linked Company Profile. Accessed 12th December 2010: http://www.linkedin.com/companies/perio-inc.-barbasol-brands Indianapolis Motor Speedway, Indianapolis 500 official website historical box scores. Accessed 12th December 2010. 1938: http://www.indy500.com/stats/view/boxscore/year/1938, - 1939: http://www.indy500.com/stats/view/boxscore/year/1939 Perio Inc. Company homepage; Accessed 12th December 2010, http://www.perio-inc.com/ourstory/history Barbasolbreaks ground; Christ, Ginger, Ashland Times-Gazette, August 13th, 2009. http://www.times-gazette.com/news/article/4646958 Barbasolhas grand opening for Ashland facility; Christ, Ginger, Ashland Times-Gazette, May 20th 2010. http://www.timesgazette.com/news/article/4830421 Barbasol gives Syracuse the brush-off, picks Ohio for new plant, By Marie Morelli Syracuse.com - The Post-Standard, Published: Friday, August 07, 2009. http://www.syracuse.com/news/index.ssf/2009/08/barbasol_gives_syracuse_the_br.html Barbasol coming to Ohio, News Home Executive Team, Vindy.com, A service of The Vindicator Published: Tue, May 26, 2009. http://www.vindy.com/news/2009/may/26/barbasol-coming-to-ohio Mintel Reports USA “Shaving and Hair Removal products – US – May 2008”, Accessed 12th December 2010. http://academic.mintel.com.ezproxy.bu.edu/sinatra/oxygen_academic/my_reports/display/id=482893&anchor=atom/display/id=548163 Mintel Reports USA “Men’s Grooming – US – September 2010”. Accessed 12th December 2010. http://academic.mintel.com.ezproxy.bu.edu/sinatra/oxygen_academic/my_reports/display/id=296601&anchor=atom/display/id=343845 AC Nielsen database, The Nielsen Company - United States, Accessed 12th December 2010. Barbasol press release: May 25, 2010. http://perfectshave.blogspot.com/2010/05/new-barbasol-plant-opens-in-ashland THE "GREAT RECESSION" AND SHIFTS IN CONSUMER BEHAVIOR, BERNSTEIN RESEARCH; 2009. Mckinsey & Co., Compustat: MckinseyTeam Analysis. Today's Facility Manage, August 2009 issue, By Anne Vazquez http://www.todaysfacilitymanager.com/articles/manufacturing-case-study-room-to-grow.php Industry profile; Personal Care Products Manufacturing, quarterly update; 8.9.2010 SIC CODES: 2844 - NAICS CODES: 325620, First Research, a D&B company. Professor Aimin Yan, OB 713 Lecture notes, MBA Class 2012 - Boston University School of Management – Cohort (C). Tom Gallerani, Former VP of Shaving Technology Lab, Gillette Company, Personal Interview. Select International Announces Benchmarks, Successes with New Client Barbasol, May 17, 2010 . http://www.free-press-release.com/news-select-international-announces-benchmarks-successes-with-new-client-barbasol-1274109461.html A Framework for Marketing Management 4th ed. (2009), by Philip Kotler and Kevin Keller Westervin.com, A Fine Design: Old Stuff, Posted: February 19th, 2010 Author: Brian | Filed under: A Fine Design | Tags: 50's, 60's, advertisement, past, shaving, time travel, vintage | http://www.westervin.com/blog/tag/past Town and Country Hobbies, Billboards; Barbasol Shaving Cream (2602-36). www.towncountryhobbies.com/Billboard_pictures/2602-36 Barbasol home page; Accessed 12th December 2010. www.barbasol.coms Ashland Times-Gazette “Barbasol breaks ground”; Christ, Ginger, August 13th, 2009. http://www.times-gazette.com/news/article/4646958 Barbasol gel can designed by José Luis GarcíaEguiguren | Jan 20, 2010 | Country: Spain©2010 | Published by Lovely Package® http://lovelypackage.com/student-work-jose-luis-garcia-eguiguren/#more-10446 Images: