Rayovac 2003 Annual Report Download - page 21

In conjunction with the acquisition of the Remington business, we identified annual savings opportunities of approximately $23.5
million when fully realized, which we currently expect by 2006. These savings are primarily related to purchasing, supply chain
management, manufacturing and back office functions. We estimate we will incur total costs (cash and non-cash) of approximately
$35.0 million over the next two years to achieve these savings. Integration activities are currently underway and savings and cost
estimates will be further refined during fiscal 2004. We expect the North America and Europe/ROW geographies to benefit from
decreased costs and expenses resulting from these Remington initiatives to optimize the combined resources of Rayovac and
Remington.
Meeting Consumer Needs through Technology and Development We continue to focus our efforts on meeting con-
sumer needs for portable power, personal care, and lighting products through new product development and technology innovations.
Prior to the Remington acquisition, we announced improvements and new developments in our rechargeable, alkaline, hearing
aid, and lighting products product lines.
During fiscal 2001, we introduced a one-hour charger for nickel metal hydride (NiMH) batteries, and began selling higher perform-
ing NiMH batteries. In fiscal 2002, we announced the development of a revolutionary rechargeable NiMH battery system capable
of recharging batteries in as little as 15 minutes which was introduced in the retail market during fiscal 2003. These technological
advancements provide consumers with portable, rechargeable power as the use of digital cameras and other high drain devices
continues to grow.
In fiscal 2002, we launched our new, more powerful Rayovac Maximum Plus alkaline batteries, with bold new graphics. Also during
fiscal 2001 and fiscal 2002, we increased the performance of our hearing aid batteries, and launched innovative packaging allowing
consumers to more easily dispense the hearing aid batteries. In Europe during fiscal 2003, we launched our High Energy娃alkaline
batteries and upgraded our graphic designs for our MaxiTech娃and LongLife娃batteries, all marketed under the VARTA brand name.
Finally, we rejuvenated our lighting products product line through a series of new product launches designed to reach unique
markets within the mass and retail channels.
During fiscal 2003, we introduced to the United States marketplace a comprehensive pricing strategy for our alkaline battery product
portfolio. We simplified the battery buying decision process for consumers by offering fifty percent more of our AA and AAA batter-
ies for the same price as the competition. We believe this “fifty percent more” strategy will help redefine the value position of our
Maximum Plus娃alkaline products. This strategy will also match up with the consumer trend of buying larger pack size of batteries.
Research and development efforts at Remington allow us to maintain our unique manufacturing process in cutting systems for
shavers. Remington is continuously pursuing new innovations for its line of shavers including foil improvements and new cutting
and trimmer configurations. Remington also devotes resources to the development of new technologies for its other products.
During fiscal 2003 and prior to the acquisition, Remington introduced the Remington Titanium娃line of men’s MicroScreen威and
MicroFlex威shavers, a line of personal grooming products that utilize titanium-coated blades and trimmers.
We believe that our products are well poised to meet the portable power, lighting and electric personal care needs of consumers.
We will continue to focus on identifying new technologies necessary to meet consumer and retailer needs within the marketplace.
Competitive Landscape The alkaline battery business is highly competitive on a global scale. Within North America, Europe
and Latin America, there are four primary branded providers of alkaline batteries and a few local manufacturers within each geo-
graphic region. The alkaline marketplace has seen changes in recent years related to product line segmentation, with attempts to
segment the category into high-performance, regular and value positions, combined with the introduction of private label batteries
at certain retailers. In addition, market participants continue to engage in high levels of promotional and pricing activities to gain
market share. In the United States in 2003, Duracell, one of our competitors, announced they were lowering the prices of their
alkaline batteries. This action, in conjunction with our and Energizer’s responses, is expected to have a short-term impact on the
overall United States battery category growth.
Within Latin America, poor economic conditions have dramatically impacted battery sales especially within the zinc carbon product
line. Zinc carbon batteries continue to be the largest share of the battery market in Latin America in unit terms. In North America
and Europe, the majority of consumers purchase alkaline batteries.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Rayovac Corporation and Subsidiaries