Introduction
With only one other opinion so far on this toothpaste, I felt it was my duty to write another! It
is currently on offer in Boots at £1.16 for a 100ml tube (usually about £1.60 I think) so I
thought I'd snap some up. I was attracted by the herbal factor, being a clean living healthy
kind of girl! It clearly states on the packaging that it has chamomile, sage, myrrh and
eucalyptus as its main 'herbal' ingredients.
I'm not sure what the main benefits of having these herbs flavouring a toothpaste are but I
suppose they are added to offer a different flavour? (so you may as well stick to mint if you
are happy with this as this is more expensive than the usual range!). The packaging is
well....very green, although still with the very distinctive Colgate logo. They have kindly
provided some pictures of some flowers (presumably the herbs but they look like daisies to
me!).
On to the taste.....yuk! I expect something a bit more 'herby'! I am sitting here in the name of
research tasting this stuff...and its very potent! It tastes exactly like Liquorice Allsorts. Fine if
you like liquorice but I can't stand it and it leaves a rather sweet taste in your mouth. As for
cleaning...well a toothpaste is a toothpaste isn't it! It works, but then again so does Tesco
Value!!
Another strange aspect of it is the colour of the toothpaste itself. It is actually striped but not
like the usual striped stuff - these stripes are all uneven (I'm picky aren't I!). Try as I might I
cannot squeeze the stuff slower to make even stripes (maybe I have a dodgey tube??).
The tube is plastic but I much preferred the metal tubes of years ago (am I showing my
age?). They held their shape better and it was much easier to get the remaining squeeze
out! I also have a problem with toothpaste manufacturers putting strong plastic tubes in
boxes - what a total waste of packaging (the tube itself is unlikely to split as they are coated
inside with metal). Very environmentally unfriendly (I know there are a few that do not do
this, although it would be nice if the big manufacturers thought about it!).
Anyway to conclude, as far as the taste goes you may as well be munching on liquorice -
great if you like it, disgusting if you don't! I don't see the benefits from having herbal stuff - it
doesn't seem better for you or the environment (or at least Colgate doesn't state this on its
packaging!). Very pretty packaging but I will be sticking to my usual minty stuff - cheaper,
tastier and leaves my mouth feeling much fresher. I feel I have been conned!
An hour on.....I actually have a really sickly taste in my mouth - I'm off to clean my
teeth....with some proper stuff this time!
The Product
Product variety - Colgate Herbal White is part of the range of toothpastes offered by Colgate
Palmolive in India, which is led by Its flagship brand Colgate Dental Cream (CDC). The
brand was launched in 2001 and is essentially targeted at traditional consumers who seek
natural ingredients (such as in semi-urban and rural towns)
Quality – Being a popular segment product and an offering by Colgate-Palmolive quality
parameters are thoroughly tested to ensure consumer satisfaction.
Features – Herbal White promises a ‘unique formula’ including a special blend of
eucalyptus, calcium and minerals and ;lemon extracts.
Brand Name – The use of Herbal in the brand name is self-explanatory. Herbal ‘White’ has
been highlighted to stress their brand proposition of ensuring ‘pearly white teeth’.
Packaging – The green-coloured packaging enhances the ‘herbalness’ of the product, while
the pneumonics of mint leaves, lemon and eucalyptus supplement the ingredients which lend
uniqueness to the product. The colours red and the word ‘new’ in blue are the two colours
researched to be the most eye-catching on the shop shelf and aid the choice of the product
during the purchase decision process. Standard fonts and colours of Colgate and associated
pneumonics serve to maintain familiarity with the brand and capitalise on positive
associations such as that of being one of the most trusted brands in the country (Brand Equity
survey).
Sizes – It is available in three sizes as most others in the segment - 50g, 100g and 200g..
Warranties and Returns – Are not offered on the product.
Price
List Price – The list price of the product is Rs. 12.50 for the 50g pack, Rs. For the 100g pack,
and Rs. For the 200g pack. The product is in the popular segment which is priced higher to
only the economy segment and lower than the gel and premium segments in the toothpaste
market.
Discounts/Allowances – No promotional discounts are allowed for.
Payment period/Credit terms – Being an off-the-shelf FMCG, in line with the category, no
credit is allowed by the company (though the store allows credit on purchase of all items).
Promotion
Sales Promotion – None at the retailer level apart from
possible recommendation by the shopkeeper.
Advertising – Advertising is in the form of TVCs
(television commercials) and uses the beaver ‘gillu’ as a
mascot of the product.
Sales Force – Sales force consists of the company’s
distributor’[s who are instrumental I ensuring that the
product is stocked by the retailers, which is made easier by the range of product offerings
supplied by the same distributor of Colgate Palmolive.
Public Relations – PR campaigns were undertaken extensively during the launch of the brand
in leading newspapers and magazines, though they were focused more directly on enhancing
the image of the parent company in the eyes of stakeholders like shareholders potential
investors, etc. that in consumers.
Direct Marketing – Direct marketing to the consumer was not done at this retail outlet.
Place
Channels – The products is sold in retail outlets like Kirana stores, supermarkets, medical
shops, co-operative stores etc. It is distributed through the supply chain of company
distributor to wholesaler to retailer to final consumers.
Coverage – The product is available in the all-India market, including semi-urban and rural
markets which is their primary focus.
Locations – The product is placed at just below eye-level at the store surveyed among other
brand clutter, unlike at most other supermarkets, where product placement at eye level and
near the payment counter is generally preferred for such relatively low-involvement products,
especially in the case of small packs which might be impulse purchases on a trial basis.
Inventory - The retailer stock varied by size. The store surveyed contained 15 items as
turnover of the product is not very high
A SWOT analysis
A name synonymous with the Indian oral care industry, Colgate (COLGd.BO,
news) , is the undisputed market leader in toothpastes with over 45% share in the Rs
21 bn (90,000 TPA) oral care segment. The company's parent has a presence in
over 200 countries worldwide. In India, Colgate ranks No.1 in top of the mind recall in
many consumer surveys. Let's take a look at the company's journey over the years
and what's in for it in the future.
Background
Promoted by Colgate-Palmolive USA, the parent operates through its 51%
subsidiary and has a presence in India since last 50 years. The company's flagship
product, Colgate Dental Cream is the largest selling toothpaste in India, with an
estimated market share of over 30%. The company acquired Hindustan Ciba Geigy
(Cibaca) in the year 1994, which helped it increase its market share. The company
also has a significant marketshare in the toothbrush category. This and shaving
brushes accounted for 10% of its FY04 revenues.
The toothpaste segment can be divided into two broad categories: White's, which
accounts for a dominant share of the Indian oral care market. Gels are estimated to
be only about 15% plus of the market.
Colgate is considerably backward integrated. It has captive manufacturing facilities
for flavor and other ingredients, which yield significant cost savings. It has also set
up a world-class facility for manufacture of Di-calcium Phosphate, a key ingredient in
toothpaste.
The journey over the years�
(Rs m) FY00 FY01 FY02 FY03 FY04 CAGR 9mFY05
Sales 10,896 11,769 11,609 9,474 9,392 -4% 7,242
Other Income 228.9 295 310 358 299 7% 217
Expenditure 10,231 10,801 10,544 8,170 7,928 -6% 5,995
EBDIT 665 968 1,065 1,304 1,464 22% 1,247
OPM % 6.1% 8.2% 9.2% 13.8% 15.6% ~ 17.2%
Net profit after tax(loss) 518 625 698 887 1,080 20% 809
From the above table, we infer that although topline has shown a degrowth of 4% on
a compounded basis over the 5 year period, bottomline has grown at a good 20%
rate in the same period. The company has been able to curtail its expenditure, which
went down by 6% during the period under consideration. Operating margins have
been increasing YoY and in 9mFY05 touched a peak of 17%.
The key reason for a significant improvement in operating margins over the years is
the reduction of advertising expenditure (see chart).
The company has lost significant market share in toothpaste that had peaked at 65%
in FY95, as compared to 45% plus today. Most of this has been lost to HLL and
smaller players like Dabur and Anchor.
The potential
As per our estimates, 12.2% of the total world population lives in rural India.
Currently, only a small portion (about 15%-20%) of region has been tapped.
Although, expansion in rural areas requires huge investments, it is a market that
cannot be overlooked and has huge potential. To put things in perspective, the per
capita consumption of toothpaste in India is only 82 gms, as compared to 262 gms
for Thailand, 376 gms for Mexico and 518 gms for USA (Source: Colgate,
Equitymaster Research). In India, urban per capita consumption is 153 gms whereas
rural consumption is a mere 38 gms.
Competition
The company has been facing immense competition from organised as well as
unorganised players. HLL is the closet rival of Colgate with a share of 34% with its
Pepsodent and Close-up (gel where it has a lion's share) brands.
The latest entrant in the organised sector is LG that has ventured into the FMCG
market and launched premium consumer products across 8 categories including
toothpastes, shampoos, soaps, detergents, etc. Also, there has been speculation
from sometime now that P&G (its worldwide rival) would debut its billion-dollar-plus
toothpaste brand Crest in India. This could intensify competition in the segment.
Concerns
The company has high reliance on a single category (Oral Care), which accounts for
94% of its sales and 98% of its profits (FY04). A large part of the company's product
folio consists of premium products, which do not have a large potential market in
India. This is evident as new launches by the parent in India have been much lower
than other markets. In the last couple of years, the company's topline has stopped
growing and in order to achieve growth, Colgate cut prices of its products by an
average 17% in April 2003 (Source: Company Annual Report). The company has
been able to increase its margins by continuously cutting advertising expenses,
which cannot go below a certain point, owing to its single product dependence.
Objective
I guess the more things change the more they stay the same. Here we are in the 21st
century and we are rediscovering the old uses for herbs and plants in culinary and medicinal
usage. Mint has been the standard flavouring for tooth pastes in recent years and in keeping
with our new age enlightenments its only to be expected that the commercial companies
would cash in on the idea. Colgate Herbal Flouride toothpaste to give the product its full
blown title comes in an attractive green, white and red package in the thick plastic
squeezable tube that is the norm these days, nothing too new age about that, but obviously
its the contents not the packaging that are the be all and end all of such a product. Inside is
100ml of light green and white striped freshness, the pungent aroma hinting at the flavours
to come as soon as you open the tube. The paste is flavoured with four herbs, Chamomile,
Sage, Myrrh and Eucalyptus and combine to make a refreshing sensation that washes round
the mouth and sends vaprs up your nose. Its sort of a cross between a tooth paste, mouth
wash and inhalant for colds. It reminds me of the Menthol Eucapyptus sweets that I used to
be given as a kid when I had a cold, and it leaves a lingering after taste in the mouth which
acts a s a breath freshener and stays with you for quite a while. After years of being used to
toothpaste tasting of mint, this comes as a welcome change, but may take a bit of getting
used to for some. It has a powerful kick to it and acts as a great pick me up in the morning.
Chamomile has been used for years as a prevention for infection throughout the
body as does Sage which also contains natural astringent tannins which account for
its traditional use in treating gum and throat disorders. Myrrh has been used in
toothpastes and mouth washes since ancient times, its taste is bitter but refreshing
and it helps fight the gum bacteria that causes gingivitis. Eucalyptus is probably the
flavour here best associated with healing and virus prevention and its antibacterial
action make it a perfect ingrediant for tooth paste.
All in all its one of the best pastes Ive come across and one that I will be sticking with from
now on. I use it in conjunction with a crest spinbrush, one of those new fangled battery type
brushes and the results are excellant. Not only does it leave your teeth looking white and
feeling well scrubbed, it leaves you mouth alive with the flavours of a kitchen garden. Go on
give it a go, as far as teeth are concerned "green" is the new white.
Conclution
In volatile times a defensive strategy is the best strategy. One sector that has stood
the test of time is the fast moving consumer goods sector (FMCG) and one company
that is already showing signs of resilience in the downturn facing Indian corporates is
Colgate Palmolive (CPIL). The company seems to have taken back control of the
Indian toothpaste market from Hindustan Lever (HLL) with its strategically
reorganized product portfolio, better brand building and improved efficiencies.
Operations
In the oral care segment, CPIL has a presence in the toothpaste, toothpowder and
toothbrush segments. The company's flagship brand Colgate is well entrenched and
has become generic for the toothpaste category. CPIL's strengths lie in its brands
and wide distribution network. Importantly, the company's brands enjoy high recall in
the rural areas where the penetration of modern dental care products is still relatively
low. Thus, CPIL is well placed to benefit from increase in rural penetration and the
resultant increase in the size of the overall market.
The company was the dominant leader in the toothpaste market and enjoyed a
marketshare of 60 per cent till the entry of HLL. HLL identified new niches and used
aggressive marketing to gain a foothold in the category. Subsequently, CPIL's
marketshare declined from the earlier levels and is currently estimated at around 50
per cent.
Oral Care Products
Oral care portfolio consists of following products
Product Segment
Colgate Sensational Whitening Premium
Colgate Total Premium
Colgate Fresh Energy Gel Gel segment
Colgate Super Shakti Calcium Popular segment
Colgate Herbal Popular segment
Colgate Cibaca Top Economy segment
Colgate tooth powder Economy segment
Toothpaste blockbuster brands:
Brand Market share (%)
Colgate dental cream 39.1
Colgate gel 5.2
Cibaca 4.1
Colgate Herbal 2.2
Financials
Colgate reported a net profit of Rs 15.8 crore in the first quarter of the current fiscal.
This is up around 18 per cent over first quarter of the previous year. Net sales have
increased by around seven per cent to Rs 306.6 crore during the quarter under
review. These results are much better than what Colgate declared in the last quarter
in terms of topline growth. Unit volume grew by three per cent led by flagship
'Colgate Dental Cream' brand. The two new brands ‘Colgate Herbal’ and ‘Colgate
Cibaca Top’ also contributed to this growth.
Scope
At around Rs 2,000 crore, India’s toothpaste market has barely grown three per cent
in 2000 (down from six per cent in the previous year and 12 per cent before that). In
rural India, households still uses non-dentrifice products such as ash, charcoal, salt,
husk & tobbaco. It could be seen at a big market to convert the non-users into the
first - time user category. Colgate did it with Rs 8 crore 'Operation Jagruti'-an
awareness programme & strong distribution network. Network of super stockist &
rural stockist helped to the reach over 55000 villages. There is thus a great deal of
more potential for growth in time to come.
Future Plans
Colgate has become a more aggressive player in the oral care market. In the
medium term, the company plans to achieve sales growth by increasing its media
spend and launching new products. The impact of this on profitability will depend on
the response of rural markets to the company's initiatives. The company is planning
to bring in some of its global brands in categories as diverse as household surface
care, fabric care, and personal care. The products will, however, be launched only
after test marketing them. They will either be manufactured here or imported. The
company has finalised plans to increase exports to Sri Lanka and Bangladesh. The
focus will be to continuously innovate, increase penetration, enlarge product portfolio
with innovative products and control costs.
Conclusion
The company is aiming at maintaining at least a 10 per cent growth in the top line
and bottom-line and with the new launches showing good growth, the stock is a good
defensive play.
