colgate

COLGATE-PALMOLIVE CO IN BEAUTY AND PERSONAL CARE (WORLD)July 2011

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© Euromonitor International PASSPORT 2BEAUTY AND PERSONAL CARE: COLGATE-PALMOLIVE CO

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DisclaimerMuch of the information in this briefing is of a statistical nature and, while every attempt has been made to ensure accuracy and reliability, Euromonitor International cannot be held responsible for omissions or errors.

Figures in tables and analyses are calculated from unrounded data and may not sum. Analyses found in the briefings may not totally reflect the companies’ opinions, reader discretion is advised.

Colgate-Palmolive dominates oral care, a position it has achieved through a truly global presence, continuous new product development and strong ties with the dental profession. The company is a much smaller player in deodorants, a category that is dominated by Unilever. In bath and shower, it also faces strong competition from Unilever, as well as strengthening private label. Truly innovative NPD would be required for Colgate-Palmolive to gain share in these highly competitive categories.

ScopeSCOPE OF THE REPORT

All values expressed in this report are in US dollar terms, using a fixed exchange rate (2010). 2010 figures are based on part-year estimates. All forecast data are expressed in constant terms; inflationary effects are discounted. Conversely, all historical data are expressed in current terms; inflationary effects are taken into account.

Beauty and Personal Care US$382.2 bn

Oral Care US$35.9 bn

Deodorants US$18.1 bn

Bath and Shower US$33.8 bn

Baby Care US$7.6 bn

Hair Care US$67.6 bn

Men’s Grooming US$29.6 bn

KEY FINDINGS

COMPETITIVE POSITIONING

MARKET ASSESSMENT

CATEGORY AND GEOGRAPHIC OPPORTUNITIES

BRAND STRATEGY

OPERATIONS

RECOMMENDATIONS



Colgate-Palmolive is the world’s number one oral care company, dominating the category with a near 26% value share in 2010 – a share that has steadily increased since 2005. The company has achieved this enviable position through a truly global presence, as well as strong ties with the dental profession. Colgate-Palmolive is a smaller player in deodorants, a category that is dominated by Unilever. In bath and shower, the company also faces strong competition from Unilever, as well as private label. More ground-breaking innovation would be required for Colgate-Palmolive to gain share in these highly competitive categories.Colgate-Palmolive reported a 1.5% increase in net sales in 2010, with unit volume rising by 3%, partially offset by a negative foreign exchange impact of 1.5%. Operating profit was negatively impacted by a one-time charge of US$271 million as a result of the transition to hyperinflationary accounting in Venezuela. Furthermore, the company increased its adspend by 8% in 2010. Excluding one-off charges, 2010 operating profit increased by 5%.

Key company factsKEY FINDINGS

Colgate-Palmolive Co

Headquarters New York, USRegional involvement Global

Category involvement

Baby care, bath and shower, deodorants, fragrances, hair care, men’s grooming, oral care

World BPC share 2010 3.7%Value growth 2010 5.3%



STRENGTHS

OPPORTUNITIES

WEAKNESSES

THREATS

Colgate-Palmolive dominates oral care, a position that can be attributed to its truly global presence, high consumer brand loyalty and strong ties with the dental profession across the world.

Oral care dominance

Basic oral care products i.e. toothpaste and toothbrushes proved to be relatively recession-resilient, which to some extent insulates Colgate-Palmolive from economic conditions.

Recession-resilient

The company has also recorded a comparatively weak performance in bath and shower, where its global share largely stagnated, while Unilever – and private label – steamed ahead.

Bath and shower

Colgate-Palmolive is in a weaker competitive position in deodorants, a category in which it lost share throughout the review period to more innovative competitors, most notably Unilever.

Deodorants

There is still plenty of potential to increase usage of secondary oral care products such as dental floss even in developed markets by attracting new consumers through educational campaigns.

Secondary oral care

Emerging markets offer significant long-term growth opportunities for Colgate-Palmolive’s key products of toothpaste and toothbrushes, with per capita consumption still far below developed markets.

Emerging markets

The threat from private label is also increasing, with beauty and personal care a priority area for many retailers. Private label competition is particularly intense in bath and shower.

Private label

With Procter & Gamble looking to expand globally in more prospective markets, Colgate faces strong competitive challenges and needs to continue investing in product development.

Procter & Gamble

SWOT - Colgate-Palmolive CoKEY FINDINGS



The company has stepped up advertising in its efforts to gain market share. In 2010, its adspend increased by 8% to reach nearly US$1.7 billion. Advertising includes traditional media advertising as well as in-store advertising to support new products and encourage trial purchases.Digital media also play an increasingly important role. In some markets, up to 15% of the company’s media spending is on digital initiatives.

Strong relationships with dentists form an integral part of Colgate-Palmolive’s strategy to gain share in developed as well as to penetrate emerging markets. This approach also helps increase the success rate of new products, such as Colgate Sensitive Pro-Relief, which, according to the company, has made Colgate the most recommended sensitive brand in Brazil in 2010, displacing long-standing number one Sensodyne. The company also tailors its advertising to highlight the approval of its products by dentists.

Education campaigns are a key part of Colgate-Palmolive’s growth strategy in emerging markets, where per capita consumption of basic oral care products such as toothpaste and toothbrushes is still far below developed markets. A particular focus is on children, to raise awareness of dental hygiene at an early age, an approach that also helps establish potentially lifelong brand loyalty.

Already with an established reputation for mainstream products, Colgate-Palmolive has expanded focus to premium variants with a stronger ‘medical’ image such as the new ProClinical line (launched in 2010). Another focus area is gum sensitivity, with products such as Colgate Sensitive Pro-Relief toothpaste. This approach is necessary as consumers are increasingly demanding more than basic functions from their oral care products.

Education Premiumisation

Strong ties with dental profession Advertising

Key strategic challenges and objectivesKEY FINDINGS

KEY FINDINGS


MARKET ASSESSMENT


BRAND STRATEGY

OPERATIONS

RECOMMENDATIONS



While company growth is largely in line with the global BPC market over 2006-2007, Colgate-Palmolive powers ahead in 2008, exceeding global market growth by over one percentage point. A strong performance in BRIC markets (as well as Mexico) helps offset weakness in North America and Western Europe.

Company and BPC market growth return to pre-recession levels. BPC market growth accelerates as a result of the recovery of categories such as fragrances and premium cosmetics. A slowdown in growth in Brazil and sales declines in North America meanwhile drag down Colgate-Palmolive’s global growth.

Colgate-Palmolive’s growth accelerates further in 2009 – while the global BPC market is hit by the economic downturn, registering its worst performance over the review period. Colgate-Palmolive is not immune to the recession, posting sales declines in Western Europe and weak growth in North America. However, this is more than offset by continued strong emerging market growth, specifically in Brazil.

Above-market performance for most of review periodCOMPETITIVE POSITIONING



BPC: Top 10 Global Companies by Value, 2006-2010

Company 5-year trend 20

06

2007

2008

2009

2010

2010 %

share

Procter & Gamble Co, The 1 1 1 1 1 11.6

L’Oréal Groupe 2 2 2 2 2 9.8

Unilever Group 3 3 3 3 3 6.9

Colgate-PalmoliveCo 4 4 4 4 4 3.7

Avon Products Inc 6 6 5 5 5 3.4

Beiersdorf AG 7 7 7 6 6 3.2

Estée Lauder Cos Inc 5 5 6 7 7 2.9

Johnson & Johnson Inc 9 8 8 8 8 2.8

Shiseido Co Ltd 8 9 9 9 9 2.6

Kao Corp 10 10 10 10 10 2.1

Uniformity of strategy characterises competition The global market for beauty and personal care was fairly static at the top in recent years. Market stability was helped by the unusually high value shares of the leading players, with the top three accounting for nearly 30% of the global market, and the scale of these shares limits erratic movement. The leading companies are primarily global rather than local brand operators, and have all followed basically the same development strategies. This has meant pushing into emerging markets, in particular China, a focus on more natural ingredients and premiumisation where possible, typically with fashion-led marketing or the promise of functionality.Colgate-Palmolive is in line with this through its strategy to further penetrate emerging markets through education campaigns aimed at increasing usage, as well as its focus on premium oral care to encourage trading up in developed markets.

Market stability underpinned by scale of playersCOMPETITIVE POSITIONING



Oral care is highly consolidated, with the top four players (Colgate-Palmolive, Procter & Gamble, GlaxoSmithKline and Unilever) accounting for nearly 62% of total category value sales in 2010. Moreover, their share has steadily increased since 2005, with smaller companies (listed as “Others” in the charts below) not able to compete against them in terms of marketing and product innovation.Most of the share lost by smaller companies over the review period has been claimed by leading player Colgate-Palmolive, which gained a further three percentage points in share over 2005-2010. Of the top players, Colgate-Palmolive is by far the most focused on oral care, which accounts for 65% of its total BPC retail sales, compared to 16% for Procter & Gamble and 9% for Unilever. As such, Colgate-Palmolive ploughs considerable resources into marketing and product innovation into this category. Private label is present but remains low in importance, as branded products enjoy high consumer trust and loyalty, which they were largely able to retain also during the economic downturn (aided by price promotional campaigns).

Oral care a consolidated categoryCOMPETITIVE POSITIONING



Colgate-Palmolive: Oral care leadership in majority of countriesCOMPETITIVE POSITIONING

Notes:Colgate-Palmolive is the number one oral care company in 45 countries (of 80 countries researched by

Euromonitor Int.) as of 2010, leading all regions but North America.Procter & Gamble has leadership in 11 countries, notably the key US market. Unilever leads in 12 countries, mostly developing markets such as Indonesia and Vietnam.GlaxoSmithKline has limited leadership; however, this includes key country Germany.

KEY FINDINGS


MARKET ASSESSMENT


BRAND STRATEGY

OPERATIONS

RECOMMENDATIONS



Category focus is an integral part of Colgate-Palmolive’s growth strategy, with the company intent on remaining “sharply focused on existing categories”, i.e. oral care, personal care and, beyond beauty and personal care, pet nutrition and home care. Oral care accounted for 65% of its total BPC retail sales in 2010. As such, Colgate-Palmolive is highly exposed to one of the most mature categories, which is set to record below BPC-average growth over 2010-2015. On the other hand, it is also one of the most recession-resilient categories, especially for basic products such as toothpaste and toothbrushes (Colgate-Palmolive’s key areas). Moreover, growth opportunities continue to be presented in both developed and emerging markets. Its other main BPC categories in terms of retail sales are bath and shower, hair care and deodorants. Deodorants offers good growth opportunities, in particular in Brazil, which is expected to account for 42% of global category growth – an opportunity Colgate-Palmolive should look to capitalise on.

Cross-category presence but oral care keyMARKET ASSESSMENT

Bubble size shows company share of category in 2010, range displayed: 0.1-25.7%



Colgate-Palmolive is a truly global company, with a presence in over 200 countries across all world regions. All regions continue to offer growth opportunities for beauty and personal care, although unsurprisingly, less mature regions i.e. Asia Pacific, Latin America, Eastern Europe and Middle East and Africa will record the most dynamic growth over 2010-2015. However, across these emerging regions, beauty and personal care growth will to a significant extent be driven by higher-value products such as fragrances and skin care, rather than more basic oral care products. This is testament to the rising purchasing power across emerging markets where the middle class is rapidly expanding. Nevertheless, oral care is also expected to record positive value growth across these markets, and significant growth opportunities exist by increasing usage of oral care among the (still large) low-income group, as well as encouraging those consumers with higher disposable incomes to trade up to more premium oral care products such as Colgate Sensitive Pro-Relief.

Emerging markets will drive beauty and personal care growthMARKET ASSESSMENT

Middle East and Africa

Eastern Europe

Australasia

Latin America

North America

Asia Pacific

Western Europe

Bubble size shows company share of region in 2010, range displayed: 2.3-7.4%

KEY FINDINGS


MARKET ASSESSMENT


BRAND STRATEGY

OPERATIONS

RECOMMENDATIONS



Herbal and natural products will gain more attention as consumers become more health conscious and view these products to be healthier. The use of herbal ingredients will therefore become more prevalent for toothpaste, such as in China with lotus leaves. Even for whitening purposes, there will be more interest in natural ingredients, such as sage in Italy.

The view will continue to shift on oral care products beyond simply offering a health function to also enhancing attractiveness. This will boost sales of various oral care products.Whitening products on the whole are set to benefit from the vanity trend. Whitening toothpaste will do well in various countries, and tooth whitening in others. Price will be a major factor in consumer choice between these products.

With stronger awareness of dental hygiene, consumers will be more discerning about the results provided by the oral care products they purchase.Growth for power toothbrushes will benefit from perceived efficacy compared to manual toothbrushes, and more consumers will upgrade their toothbrushes as income levels rise.

Targeting specific consumer groups will support category growth, especially in developed markets. Products targeted at children are likely to increase further in popularity. The children’s segment is still not yet fully tapped with the majority of toothbrushes and toothpaste still universal products.With increased mobility and travel, toothbrushes and toothpaste designed for travel purposes in small sizes are also likely to grow in demand.

Efficacy Segmentation

Vanity Natural and organic

Efficacy and segmentation key in oral careCATEGORY AND GEOGRAPHIC OPPORTUNITIES



Basic products, i.e. toothpaste and toothbrushes, account for nearly 80% of total category sales. Basic oral care products are already mature; however, growth still comes from increasing frequency of usage, especially in developing countries. Growth for such products is also still achievable in highly developed markets, e.g. by encouraging more frequent replacement purchases for toothbrushes as well as the trading up to more premium products. Moreover, even when it comes to basic oral care products, most consumers remain loyal to brands (e.g. in North America, private label had a marginal share of much less than 1% of toothpaste, largely unchanged since 2005) and as such, the threat from private label is less severe than in other categories such as bath and shower. Secondary oral care products also hold further growth potential, as many products are still not used regularly and overall penetration is still low, in developing but also in many developed markets. For instance, in many Western European markets (e.g. the UK) usage of dental floss remains below the US and there is therefore significant potential if usage can be increased by positioning these products as essential to dental hygiene.

Basic and secondary oral care offer growth opportunitiesCATEGORY AND GEOGRAPHIC OPPORTUNITIES

Dental floss

Mouthwashes/dental rinses

ToothbrushesToothpaste

Tooth whiteners

Mouth fresheners




Despite its maturity, oral care continues to offer growth opportunities across all world regions – although in some, most notably Australasia, growth will be very modest. As with beauty and personal care overall, emerging market regions have the best growth potential; however, even in developed markets such as Western Europe, value growth is still to be found, driven by premium product innovation. Latin America and Asia Pacific, however, are the more attractive regions in terms of overall growth potential, with the two regions combined predicted to account for 66% of global category growth over 2010-2015. Colgate-Palmolive is particularly well positioned in Latin America, as the dominant player with a near 50% value share. While it also leads in Asia Pacific, the gap to second-ranking Procter & Gamble is less wide there, and growth potential would be even greater for Colgate-Palmolive if it could increase its share.Middle East and Africa has very strong long-term potential. If Colgate-Palmolive is successful in its endeavours to increase usage of oral care products through educational campaigns, the market size could be massively increased.

Oral care expected to continue to grow across all world regionsCATEGORY AND GEOGRAPHIC OPPORTUNITIES

Asia Pacific

Western Europe

Latin America

Eastern Europe

Middle East and Africa

Australasia

Bubble size shows company share of region in 2010, range displayed: 16.9-49.5%



Brazil and China to lead global oral care growthCATEGORY AND GEOGRAPHIC OPPORTUNITIES

Figures: Oral care, 2010/2015 absolute retail growth – US$ mn fixed ex rate

+US$723 mn

+US$680 mn

> US$300 mnUS$200-300 mnUS$100-199 mnUS$50-99 mnUS$0-49 mnNegative growth



Considering the still much lower per capita consumption and spend on basic oral care products in developing markets compared to developed markets, long-term growth potential in developing markets is massive. Per capita spend on toothpaste in all developing markets combined stood at just US$1.7 in 2010, compared to US$8 in developed markets. Combined with the large population in developing markets, even a small increase in average per capita consumption rates would have a significant impact on total sales. Colgate-Palmolive is highly active in emerging markets, where it has a long-standing presence. The company sees huge further growth potential in these markets by not just tapping into the growing middle-class segment, but also making oral care products accessible to the vast low-income group (e.g. in Kenya, average disposable income per capita is less than US$2 per day), for instance, by offering toothpaste in smaller pack sizes. Colgate-Palmolive follows a tiered product strategy with products at all price points, which allows it to capitalise on middle-class growth, as well as being able to reach the lowest earners.

Long-term growth potential in developing marketsCATEGORY AND GEOGRAPHIC OPPORTUNITIES

Per Capita Disposable Income Comparison 2010 (US$)

Country Per capita annual disposable income

Average per day

US 33,903.6 91.2Brazil 6,789.1 18.6Russia 5,874.9 16.1China 2,377.9 6.5India 1,129.5 3.1Kenya 602.5 1.7



Health and hygiene education campaigns are also key to change emerging market consumers’ beauty and hygiene routines and switch from indigenous products to Western brands, and to raise overall awareness of dental hygiene. For instance, in Malawi, Colgate-Palmolive partnered with the Ministry of Health during Oral Health Month to help educate children and adults about good oral care habits.

Making products accessible to consumers is not a guarantee for their success. Local product adaptation is also important to attract consumers, and products need to be tailored to cultural preferences to strike a chord with consumers. Colgate-Palmolive tailors its oral care products to local consumer preferences - for instance, by offering different toothpaste flavours, such as propolis in Russia or tea flavour in China.

A large segment of the emerging market population are in the low-income band and are unable to afford foreign products. These consumers, due to their huge numbers, offer a significant growth opportunity, but to tap into this growth, keeping these products affordable for the low-income segment is essential. BPC players including Colgate-Palmolive are making their products accessible through micro selling, i.e. small pack sizes such as sachets.

Non-urban regions lack modern retail infrastructure and consumers tend to rely on kiosks for a variety of their daily needs, including soap, beauty products, detergents and food. The shopkeepers tend to share a close relationship with their customers and hence are in a position to motivate purchases. In order to develop greater market penetration, it is not only necessary for the brands to be present in these types of outlets, but also to train shopkeepers on the benefits of the products.

Accessibility Penetrating non-urban markets

Addressing cultural preferences Education campaigns

Emerging markets – success factorsCATEGORY AND GEOGRAPHIC OPPORTUNITIES



All key players are aware that consumer behaviour differs from market to market. For example, rural consumers in India use neem sticks to “brush” their teeth rather than toothbrushes and toothpaste. Oral care companies can initiate campaigns on the benefits of using toothpaste and toothbrushes and offer smaller pack sizes for these products with basic features at lower price points, making them more accessible to consumers used to indigenous hygiene practices.

As part of their marketing strategies, companies are focusing on developing closer ties with small shop owners. To increase availability, Colgate-Palmolive in Colombia trained shop owners on the benefits of Colgate Fresh Twister manual toothbrush. This was supported by a media campaign on the health benefits of its products, and strategic, visible in-store displays were erected. The combined effort of training shop owners, making consumers aware of the product benefits and clearly visible displays drove sales growth. According to the company, within three months its sales of toothbrushes in Colombia doubled.

Connecting with emerging market consumersCATEGORY AND GEOGRAPHIC OPPORTUNITIES



Compared to oral care, Colgate-Palmolive is a much smaller player in deodorants, a category that is dominated by Unilever. Moreover, Unilever managed to further extend its lead over its rivals over the review period, while Colgate-Palmolive’s share fell by nearly one percentage point. Nevertheless, Colgate-Palmolive considers deodorants to be a key category that forms an integral part of its growth strategy. By far the most attractive growth market over 2010-2015 is expected to be Brazil, which is predicted to account for 42% of global growth. Colgate-Palmolive faces very strong competition from dominant player Unilever; however, it has made small inroads with its Speed Stick brand. Innovation such as Speed Stick Waterproof may enable the company to claim a larger share of this attractive growth market. Other important growth markets include India and Germany, markets in which Colgate-Palmolive has no presence in the category, and where Unilever has also established itself as the dominant force. To claim a larger share of deodorants, truly breakthrough innovation will be key, similarly to Beiersdorf’s launch of deodorants under the Nivea brand (2010), which are claimed to control stress-induced sweat.

Colgate-Palmolive a smaller player in deodorantsCATEGORY AND GEOGRAPHIC OPPORTUNITIES



Bath and shower is a category that received significant attention from Colgate-Palmolive in 2010 with product relaunches (Palmolive Naturals, Palmolive Aroma Therapy and Thermal Spa), as well as the introduction of new products such as its Mediterranean-inspired Palmolive Authentics liquid hand soaps. As in deodorants, Colgate-Palmolive faces strong competition from leading player Unilever. Similarly to deodorants, Unilever managed to increase its global share of the category over the review period, while Colgate-Palmolive’s share stagnated. An important competitor in the category is furthermore private label, which reached a global share of almost 6% in 2010 (and nearly 15% in Western Europe). Private label bath and shower benefited from the economic downturn and consumer down-trading. Global bath and shower growth will be driven by the BRIC markets – combined, they are expected to account for around 60% of global category growth over 2010-2015. The company has established a presence in the category across these markets except for China. Penetrating the Chinese market and further strengthening its presence across these other key emerging markets could prove worthwhile.

BRIC markets key to bath and shower growthCATEGORY AND GEOGRAPHIC OPPORTUNITIES



Colgate-Palmolive has purchased the Sanex personal care business, sales of which are concentrated in Western Europe, from Unilever. The Sanex brand spans several categories, but is strongest in deodorants and bath and shower, which accounted for 91% of the brand’s total retail sales in 2010. Adding Sanex to its portfolio will help Colgate-Palmolive to increase its revenue by approximately US$450 million, equating to a 3% rise, with the company’s sales receiving a particular boost in France, Spain and the UK, as well as in a number of smaller markets (Belgium, Denmark and the Netherlands). While the acquisition will improve Colgate-Palmolive’s competitive position in Europe, the company should also consider extending the brand into more prospective regional markets, such as in dynamic Latin America, as well as investing in product development to keep up with competitors such as Unilever, Beiersdorf and L'Oréal.

Sanex acquisition will improve competitive position in EuropeCATEGORY AND GEOGRAPHIC OPPORTUNITIES



Brazil is one of the most attractive growth markets for beauty and personal care, with significant growth opportunities offered across the BPC market.Colgate-Palmolive has established a presence in this market across a large number of categories, although oral care continues to account for the vast majority of its total retail sales (65%). Indeed, Colgate-Palmolive is in a particular position of strength in oral care, which it dominates with a 46% value share in 2010, significantly ahead of second-ranked Procter & Gamble. As such, it will be the main beneficiary (and indeed a key driver) of the predicted US$680 million increase in category sales over 2010-2015.Deodorants and men’s grooming are other attractive growth categories in which Colgate-Palmolive still needs to establish a stronger presence, in order to be able to fully capitalise on the growth opportunities offered. However, gaining a greater share of these categories will be a challenge as they are both dominated by strong players, i.e. Procter & Gamble (men’s grooming) and Unilever (deodorants), and will thus require significant investment in terms of product innovation and marketing.

Brazil one of the most attractive BPC growth marketsCATEGORY AND GEOGRAPHIC OPPORTUNITIES

Hair careOral care

Bath and shower

Men’s groomingDeodorants

Baby care




China is another highly attractive growth market for beauty and personal care, offering significant opportunities across BPC categories. Growth in oral care will be supported by an increasing number of consumers upgrading within basic oral care products and increasingly incorporating secondary oral care products such as mouthwashes/dental rinses into their dental hygiene routines. Vanity will also be a driving factor for oral care in China. As consumers increasingly perceive oral care in terms of achieving greater attractiveness over hygienic function, whitening oral care products are also set to perform strongly in China, a trend which Colgate-Palmolive can tap into with products such as Plax Whitening. In contrast to other BRIC markets, while Colgate-Palmolive leads category sales, it does not dominate oral care to the same extent, having a strong competitor in Procter & Gamble. In order to defend its position, continued investment in the category is thus essential – and potentially more important for the time being than trying to diversify into other BPC categories, if Colgate-Palmolive has any ambition to claim the kind of oral care dominance in this market that is has achieved in Brazil and India.

Widening gap to oral care rivals should be a priority in ChinaCATEGORY AND GEOGRAPHIC OPPORTUNITIES



In India, Colgate-Palmolive has established a presence in bath and shower as well as men’s grooming, apart from its key oral care category which accounted for 98% of its total retail sales in 2010. While bath and shower is by far the largest BPC category, growth is predicted to be comparatively moderate over 2010-2015. Moreover, Colgate-Palmolive is only a small player in bath and shower and further category penetration would require significant marketing investment – an endeavour which may not be worthwhile. Men’s grooming would be a more attractive growth category, but Colgate-Palmolive’s share and ranking slipped greatly over the review period and the category thus was clearly not a focus area for the company. Indeed, Colgate-Palmolive’s strategy in India is reportedly to focus more strongly on oral care, where it dominates with a value share of nearly 47% in 2010. The company aims to increase the frequency of usage for its oral care products in urban areas through campaigns such as “Brush twice a day”, while in rural areas, focus will be on introducing consumers to the concept of brushing their teeth regularly through trial-generating small SKUs and awareness-building school programmes.

Focus is on oral care in IndiaCATEGORY AND GEOGRAPHIC OPPORTUNITIES

KEY FINDINGS


MARKET ASSESSMENT


BRAND STRATEGY

OPERATIONS

RECOMMENDATIONS



Colgate-Palmolive has a relatively narrow portfolio of mass-market beauty and personal care brands and its operations in this market are based strongly on its two flagship labels - Colgate and Palmolive. These eponymous brands account for over 50% of its total BPC retail sales, a comparatively high figure. To drive up efficiency, over the review period, Colgate-Palmolive aimed to simplify its product portfolio by reducing the number of SKUs by nearly one quarter.While Colgate-Palmolive operates a number of secondary regional and local brands, such as Softsoap (North America and Australasia), it has been focusing on its flagship labels and looking to establish their global credentials. That said, there is flexibility in terms of adapting core brands to suit local trends. Further streamlining of the company’s brand portfolio would be possible. In particular the Sorriso oral care brand, only present in Brazil, recorded sales declines over the review period. Indeed, in 2010 Colgate-Palmolive discontinued the brand in certain oral care categories (dental floss and mouthwashes/dental rinses) to focus on its flagship Colgate brand instead.

Colgate-Palmolive banks on blockbuster brandsBRAND STRATEGY



With an almost 21% value share in 2010, Colgate is the world’s leading oral care brand. Indeed, in many countries, the brand is top-of-mind for toothpaste. The brand enjoys strong loyalty among consumers, and was able to further increase its share of global oral care over the review period, supported by product innovation, marketing and education campaigns, as well as by further strengthening its relationship with dental professionals. Key variants of the Colgate brand include Colgate Total, which offers enhanced total protection, and Colgate Plax, which addresses specific dental problems. A major new product launch over the review period was that of Colgate Sensitive Pro-Relief toothpaste in 2009, which enabled the company to more effectively compete in the important sensitivity segment. The launch has been highly successful –in Brazil, for instance, according to the company, as a result of the launch, Colgate became the most recommended sensitive brand in 2010, a position previously occupied by rival Sensodyne.

Colgate widens gap to oral care rival brandsBRAND STRATEGY

In 2010, the company relaunched its Colgate Total brand with a new formula and sensitivity benefits. Also in 2010 Colgate-Palmolive launched a new premium toothpaste range, Colgate ProClinical, marketed as offering professional oral care at mass prices. The line comprises three products, Daily Whitening, Daily Cleaning and Daily Enamel Renewal. The launch seems poised to capitalise on the trend for cash-strapped consumers to cut back on visits to professionals (including dentists) where possible and increasingly focus on at-home treatments instead.



Palmolive is Colgate-Palmolive’s other flagship brand and the world’s number three bath and shower label. It is also active in deodorants, hair care, men’s grooming and skin care. Like Colgate, there are several variants under the Palmolive umbrella, including Palmolive Naturals and Palmolive Aromatherapy and Thermal Spa. In contrast to the Colgate oral care brand, Palmolive registered no share gains over the review period –indeed, in 2010 its share of bath and shower was 0.2 percentage points below that achieved in 2005, while all major rivals managed to increase their shares. To boost growth, in 2010 Colgate-Palmolive relaunched its key Palmolive Naturals and Aromatherapy and Thermal Spa brands, as well as launching a new line of liquid hand soaps with Mediterranean-inspired scents. Further growth is achievable, especially considering that bath and shower is overall a still more fragmented category compared to oral care and significant share gains can thus still be achieved, especially from the large number of smaller brands.

Private label will be the strongest threat, in particular in developed markets where private label products became highly sophisticated and where private label became an attractive alternative to consumers during the economic downturn. With private label beauty and personal care high on retailers’ agendas, the strength of private label bath and shower could even further increase over the forecast period. Truly innovative product launches and establishing an emotional bond with consumers will be vital for brands including Palmolive to keep private label at bay.

Weaker performance by PalmoliveBRAND STRATEGY

KEY FINDINGS


MARKET ASSESSMENT


BRAND STRATEGY

OPERATIONS

RECOMMENDATIONS



Vast distribution network Production base consolidation

Colgate-Palmolive retails its beauty and personal care products via a vast distribution network, which includes the normal array of channels. Supermarkets/hypermarkets, convenience stores and chemists/drugstores are all key retail outlets. No one client, such as Wal-Mart, accounts for more than 10% of Colgate-Palmolive’s trade.Most recently, the company has been investing in its presence in small shops in emerging markets, in particular in China. These smaller retail outlets form a major part of the distribution landscape in large, fragmented markets such as China. In Brazil, the company has separated its manufacturing facilities from its distribution infrastructure as part of an efficiency-led development programme.Colgate-Palmolive enjoys strong links with dental professionals and as a result, its products are widely placed in dental practices, giving its brands invaluable equity among consumers.

Colgate-Palmolive has a major production base in the US, including oral, personal and home care plants in Morristown, New Jersey; Morristown, Tennessee; and Cambridge, Ohio. Key overseas oral, personal and home care production facilities are located in Australia, Brazil, China, Colombia, France, Italy, Mexico, Poland, South Africa, Thailand and Venezuela. As part of its 2004-2008 restructuring programme, Colgate-Palmolive rationalised its production base. Most recently, it has consolidated its European toothpaste production base, transferring activity from plants in the UK, Romania, Italy and Turkey to a new facility in Poland.Colgate-Palmolive’s oral, personal and home care research centre is situated in Piscataway, New Jersey. The company also has technology and category innovation centres in Latin America, Europe and Asia, including in the important BRIC markets, allowing it to tailor innovation to local needs and demands.

Colgate-Palmolive owns broad operation baseOPERATIONS

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In bath and shower, a category where competition is strengthening from private label, advertising and marketing campaigns that strengthen the emotional bond between the Palmolive brand and consumers will be crucial for the company to retain and further grow its market share. Advertising messages centred on the concepts of luxury/at-home pampering, naturalness or sustainability strike a chord with many consumers and should help keep the private label threat at bay.

Colgate-Palmolive, while the leading oral care player, is less dominant in China compared to other emerging markets and the company should look to further strengthen its competitive position to be able to fully capitalise on the long-term growth opportunities in this market. Further adapting products to more closely meet local consumer preferences may be beneficial, for instance, by incorporating TCM in product formulas. This would also help defend its share against local players such as Yunnan Baiyao.

Colgate-Palmolive will need to launch truly innovative products to be able to effectively compete in deodorants. Beiersdorf, for instance, developed a deodorant specifically for teenagers that is marketed as controlling stress-induced sweat. Unilever developed a “motion sense” technology, marketed as increasing the level of protection with increasing physical activity. Colgate will need to develop equally innovative technology to truly be able to compete.

Even in mature, developed markets significant further growth potential exists by increasing penetration of secondary oral care products. In many Western European countries, for instance, per capita consumption of dental floss remains below the US. Education campaigns highlighting that products such as dental floss are essential for optimum dental health (as well as helping reduce the need for dental treatments) would help raise awareness and thus uptake.

Shore up innovation in deodorants Further educate developed market consumers

Further local adaptation in China necessary Reinforce emotional bond in bath and shower

Key recommendationsRECOMMENDATIONS



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