Colgate-Palmolive Company (NYSE: CL) is an American diversified multinational corporation focused on the production, distribution and provision of household, health care and personal products, such as soaps, detergents, and oral hygiene products . In 1806, William Colgate, himself a soap and candle maker, opened up a starch, soap, and candle factory on Dutch Street in New York City under the name of “William Colgate & Company”. In the 1840s, the firm began selling individual bars in uniform weights. In 1857, William Colgate died and the company was reorganized as “Colgate & Company” under the management of Samuel Colgate, his son.
In 1872, Colgate introduced Cashmere Bouquet, a perfumed soap. In 1873, the firm introduced its first toothpaste, an aromatic toothpaste sold in jars. His company sold the first toothpaste in a tube, Colgate Ribbon Dental Cream, in 1896. By 1908 they initiated mass selling of toothpaste in tubes. Colgate-Palmolive has long been in fierce competition with Procter & Gamble, the world’s largest soap and detergent maker. P;amp;G introduced its Tide laundry detergent shortly after World War II, and thousands of consumers turned from Colgate’s soaps to the new product.
Colgate lost its number one place in the toothpaste market when P&G started putting fluoride in its toothpaste. In the beginning of television, “Colgate-Palmolive” wished to compete with Procter & Gamble as a sponsor of soap operas. Although the company sponsored many shows in part, they were most famous for being the full sponsor of the serial The Doctors. Year Wise Details * 1873 – Aromatic toothpaste was first introduced. * 1896 – First dental cream was introduced in collapsible tube. * 1928 – Colgate merged with Palmolive Peet Company. * 1937 – Colgate Palmolive India limited was come in existence. 1949 – Colgate toothpaste launched in Indian market by CPIL. Company details * Fabian Garcio is the Chairmen and Roger D. Calmayer is the M. D Company.
* It acquired 75% equity in advance oral care product * Registered office is located at Mumbai. * Its total turn over is Rs. 1363 cr. * Its main business is manufacturing and marketing of oral care products toilet soaps, shaving products etc. * Its has captured highest share in the toothpaste brand in India. * Its manufacturing plant is situated at Baddi plant of Himachal Pradesh Colgate toothpaste * Launched in 1949 , Colgate is largest tooth paste in India . Colgate has been ranked as India most trusted brand across all Categories for four consecutive years from 2003 to 2007 by brand equities most trusted brand survey. Colgate was also rated as the no. 1 brand. * Colgate toothpaste has variety of products which includes : * Colgate dental cream * Colgate active salt * Colgate max fresh * Colgate total 12 * Colgate extra clean gum care * Colgate sensitive toothbrush * Colgate 360 toothbrush Total market share of Colgate in different years The leader in the oral-care category is positioned to capitalize on underpenetrated market segments through strong brands.
A 51% subsidiary of Colgate US, Colgate Palmolive (India) (CPIL) is a market leader in the Indian oralcare industry since decades. The company has products across variants and price points in toothpaste, toothpowder, and toothbrushes, and has leadership in each of these. CPIL’s two brands of toothpastes — Colgate and Cibaca — are targeted at the urban and rural markets, respectively. CPIL’s toothpaste sales volume increased 11% and toothbrush 41% in the September 2008 quarter, expanding its overall market share to 37. 7% in the January-August 2008 period. The company boosted the toothpowder market share to 48. % in the January-August 2008 period. These increases were driven by tight focus on getting closer to consumers everywhere, strengthening partnerships with the dental profession and customers in the trade and fostering innovation in all areas of business. The launch of innovative products such as Colgate Active Salt, Colgate Maxfresh and Colgate 360° toothbrush also contributed to the growth of the market share. Penetration of modern oral-care products below 55% is low in India as many people in rural India still clean their teeth with traditional products like twigs of neem tree, salt, ash, and other herbal items.
Per capita consumption of toothpaste in India is among the lowest globally. While India’s per capita consumption of toothpaste is 92 grams, even countries like China and Malaysia consume much at 219 grams and 285 grams, respectively. Also, just 7% of the population here brushes twice a day as compared with 61% in China. Increasing awareness on the benefits of oral care and brushing twice daily would work in favour of CPIL. In the current scenario of economic slowdown, there may be a reduction in demand for premium products and higher demand for value-for-money products.
CPIL will be at a significant competitive advantage as it has one of the strongest brands in the lower priced toothpaste segment. The company has improved its presence in the value-for-money segment through an increase in market share of Cibaca from 5% in the year ended March 2005 (FY 2005) to 7. 3% in FY 2008. The markets for advanced oral products like mouth wash, dental floss and teeth whitening products are at a nascent stage in India. These products find limited usage with consumer concentration in urban areas. CPIL caters to these products and has an upper hand in the development of this market as they evolve in future.
The company has also made attempts to widen its product basket through entry into shower gels and body washes and has been steadily expanding its offerings in the Palmolive Naturals as well as Palmolive Thermal Spa range. To make effective use of capital, address overcapitalisation and reward shareholders, CPIL cut its share capital from Rs 136 crore to Rs 13. 6 crore in the fiscal ended March 2008 (FY 2008). Though the number of shares outstanding and the shareholding structure have remained unchanged, this reduction has substantially improved the return ratios like return on capital employed (RoCE) and return on equity (RoE).
RoCE spurted to 129. 95% in FY 2008 from 90. 01% in FY 2007. RoNW improved to 104. 67% from 71. 23%. CPIL aims at margin gains through efficient supply-chain management and bringing down cost of operations. It has expanded its Baddi (tax-efficient zone), Himachal Pradesh, capacity to 66,000 tonnes in FY 2009 from 40,000 tonnes in FY 2007. This plant enjoys excise and income-tax exemption. These benefits will boost margin. With most commodity prices falling, CPIL’s raw material, packing and transport costs will also come down, helping it to increase margin as also expand ad budgets to boost volume growth.
Net sales increased 16% to Rs 863. 06 crore in the half year ended September 2008. Operating profit margin declined 96 basis points to 18. 9% and operating profit grew 10% to Rs 162. 95 crore. Total tax outgo fell 11% to Rs 28 crore, which lifted net profit 17% to Rs 135. 40 crore. Company expect CPIL to register EPS of Rs 19. 7 in FY 2009. The share price trades at Rs 405. P/E is 20. 6. Cost of advertisement incurred by colgate toothpaste in different years. Strong rural off take for FMCG products and Colgate’s expanding market shares in oral care suggest that the company could sustain strong topline growth over the next 2-3 years.
Colgate’s profit growth may outpace sales growth, as it widens its product mix and lowers tax incidence by shifting more of its production to tax-free zones. At the current market price, the stock trades at about 19 times its expected earnings for 2008-09 and about 16 times expected earnings for 2009-10, at par with FMCG peers. The company’s strong cash coffers, rising dividends and high dividend yield also make the stock a good defensive pick in a volatile market. Colgate Palmolive India, which holds a 49. 2 per cent market share in toothpastes and a 35. 2 per cent share in toothbrushes, is the dominant player in the Indian oral care market.
Oral care products have seen strong volume growth over the past year, driven by consumer upgrading (from toothpowder to paste) and strong rural offtake. As the only other FMCG company apart from Hindustan Unilever to have an extensive rural distribution network, Colgate appears well placed to capitalise on strong rural demand for FMCGs, which is being driven by buoyancy in rural incomes and spending power. In the past year, Colgate has been able to expand its oral care market share on the back of new product launches and a strong presence in the economy segment where rival Hindustan Unilever does not have a major presence.
Given its dominant market share, Colgate enjoys considerable pricing power to pass on input cost increases to consumers. The company has also made attempts to widen its relatively narrow product basket through an entry into shower gels and body washes and has been steadily expanding its offerings under the “Palmolive Naturals” as well as “Palmolive Thermal Spa” range. Shower gel is a high growth segment which offers superior profit margins. Colgate’s strategy of shifting from outsourcing to own manufacture of products and locating new facilities in tax-free zones, has also led to steadily improving profitability.
Its operating profit margins have moved up from 17-18 per cent to 22 per cent over the past 3 years. The company closed the nine months ended December 2007 with a 14-per cent growth in sales and a 30-per cent growth in net profit (excluding one-off items), despite significantly higher advertising spends. COMAPANY’S SALES IN LAST 3 YEARS Amounts spend by all toothpaste brands on advertisement (InRs. Crs. ) From the above data we can say that Colgate gives preference to TV media and very small share of advertisement budget is spent on print media Toothpaste penetration
Talking about penetration Colgate concentrates more on urban India, so there is scope to expand business and market share in rural India . Cost of advertisement incurred by different toothpaste brands Even when we will compare Colgate with its competitors in terms of amount spent on marketing we can see that we can clearly see that colgate is the one who spends highest amount on advertising i. e. 40 % of entire market spending on advertisement. Competitor who stood second in spending is PEPSODENT . PEPSODENT spends 22% on advertisement capturing 22. 8 %of the total market share. Followed by CLOSEUP whos is third in
Product mix Strong Teeth Decay Protection | Colgate Strong | Complete 12 Hr Protection | Colgate Total | Cooling Crystal Freshness | Colgate Max Fresh | Fresher Breath | Colgate Energy Gel | Plaque &Removal | Colgate Herbal | Total Oral Care | Colgate Cibacea | Stains Preventing & Shiny | Colgate Advanced Whitening | Germ Fighters | Colgate Salt | Fruity Bubble Gam Flavour | Colgate Kids | Price Mix The Regular segment: Volume(64,922 tons) | The Low price point segment Volume(21,641 tons) | Price Range | | Price Range | | 50 gms | Rs 12. 5-24 | 50 gms | Rs. 8-10 | 100 gms | Rs. 25-30 | 100 gms | Rs. 4-20 | 150 gms | Rs. 35-45 | 150 gms | Rs. 25 | Prominent brands: | Prominent brands: |
• Colgate • Pepsodent • Close-up • Meswak • Dabur Red | • Colgate Cibaca • Babool • Anchor • Ajanta | Place mix * Colgate palmolive spread all over country. It has 3. 5 million retail outlets and 4235 direct distribution channel. * It has cover 75 % of urban market and 39 % of rural market of its total market share. * Colgate toothpaste are available at all most every retail shops in pune. * The Company is tying up with initiatives like E- Chupal and Disha to further strengthen its distribution network. Shubham Enterprises * Add. 16 no. , New kalebari, Meera complex ground floor pune (411033) Dealer margin : 10 Rs (per carton) Retailer margin Per box 6 – 7 Rs. (Per box ) box 50 gm. – 24 piece box 100 gm. – 12 piece box 200 gm – 6 piece promotion mix * Colgate has use various promotion strategy like discount , offers such as 20% extra on colgate strong , free tooth brush with cibaca toothpaste . * It has adopted various medium of advertisement like TV ads, oral care campaign * It has tied up with IDA * It has given free check up by introducing oral health month.
Steps taken: Segmentation * CPIL has segmented market on the basis of product features * 1 Geographic segmentation – * Rural area – Colgate herbal &Cibaca toothpaste. * Urban area – Colgate Gel ,Colgate max fresh, Colgate strong etc. Demographic segmentation * A) Age – 2 year & above * B) Gender – M/F * C) Income – Rs. 5000 & above * D) Family life cycle – Young single, married, with children , old people * E) Education – Both educated on non educated people Psychographic Segmentations * A) Life style – * Sustainer – Colgate Strong Colgate dental Achiever – Colgate energy gel * Experimental – Colgate citrus blast * Health Conscious – Colgate herbal Behavioral Segmentation * A) Value segmentation – Good quality , benefits, value for money
* B) User status – Regular user, first time * C) Loyalty – Medium , strongly * D) Uses rate – light & Medium Targeting * Company has mainly targeted children& youth all over the country . Since a child involves it’s whole family so their parents also use it. * For youths they have launched Colgate max fresh & Colgate energy Gel for modern & adventures generation. Positioning As the “dental expert” Colgate has identified different oral needs and Offers the customer a toothpaste that full fill their desired needs. * It has established its brand image in customer mind so customer has total faith on it. Conclusion & Recommendations * CIPL is doing extremely well in all the areas of its operations and this is the reason for its being the market leader. * It is no. 1 brand of toothpaste in India it has capture more than 39% market share. * The company should focuse on more promotional strategies and Distribution system through effective SCM to beat its competitor .
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