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Global brands from Colgate

Feb 19, 2001

Colgate India is planning to widen its oral care and personal product portfolio. It aims to bring in some of its global brands in categories as diverse as household surface care, fabric care, personal care and pet foods. Presently personal care contributes a marginal 10% to Colgate India’s (CIL) revenues. It has leading brands such as ‘Palmolive’ ‘Halo’ and ‘Axion’ (dish washing detergent) in India. Its Palmolive brand has only 1% market share while in shaving gels and creams, it claims to have a 20% share. CIL has introduced its Halo shampoo brand as a low profile product to grow the revenues through volumes. However, the brand failed to capture market share in the wake of stiff competition. Similarly, Optima (shampoo brand) has been scrapped and Charmis (cold cream brand) commands a negligible market share.

In contrast, Colgate’s parent has a diverse products portfolio in categories like household surface care, fabric care and personal care. The long-term strategy of CIL is to enter into these areas for growth opportunities. The products in India will be launched after test marketing and will either be manufactured or imported.

Lets have a glance at Colgate’s worldwide brand portfolio in fabric care, household care and personal care.

Fabric care:
Colgate holds a leadership position in fabric softeners in almost every region with a wide choice of detergents, from laundry bars for hand washing, to powders and liquids. In fabric care Colgate’s brands include Ajax, ABC, Arctic, Dynamo and Fab detergents. Among fabric softeners, it has the Dunlet, Softlan and Soupline brands.

Household care:
In this segment Colgate has wide array of all-purpose cleaners, dish liquids and bleaches. It has brands like Palmolive dishwashing liquid and Ajax household cleaners.

Personal care:
Colgate is a worldwide leader in personal care products with quality brand names like Palmolive, Mennen, Irish Spring, Softsoap, Caprice and Protex.

Pet nutrition:
Hill's Pet Nutrition, Inc., a subsidiary of Colgate, is one of the world's leading pet food manufacturers. It is a pioneer in clinical nutrition for dogs and cats with its ‘Prescription Diet’ and ‘Science Diet’ brands. The segment accounts for 12% of Colgate’s worldwide sales.

Needless to mention that globally Colgate is a leader in the oral care products.

During the year ended December ’00, the $ 9.4 bn company reported an excellent performance with 6% volume growth. Colgate’s strong focus in launching new products and widespread market share gains coupled with operating efficiencies enabled it to achieve a sparkling 14% growth in profits. The company commands a share of 32.6% in the US toothpaste markets (US contributes 25% of its sales).

Snapshot of Colgate’s performance
(Rs m) FY00 FY01 Change
Sales 424,179 435,330 2.6%
Expenditure 351,319 354,343 0.9%
Operating Profit (EBDIT) 72,860 80,987 11.2%
Operating Profit Margin (%) 17.2% 18.6%  
Interest 7,983 8,062 1.0%
Profit before Tax 64,877 72,925 12.4%
Tax 21,274 23,418 10.1%
Profit after Tax/(Loss) 43,603 49,507 13.5%
Net profit margin (%) 10.3% 11.4%  
No. of Shares (eoy) (m) 638.8 627.3  
Diluted Earnings per share 69.51 78.92  
P/E (at current price)   35  

Back to India, CIL’s topline showed an encouraging growth of 10% during the nine months ended December ’00 and profits jumped by 22%. The company will continue to focus on oral care segments as there exists a tremendous opportunity in the country with penetration level of less than 30%. CIL is adopting advanced technology across all product categories. The company is leveraging on its parent’s global technology to develop new products with local consumer insights. Continuous product innovation, speed to market, driving cost out of supply chain and e-commerce will help the company in delivering enhanced shareholder value. These efforts would also go a long way in re-building the company.

Colgate India currently, quotes at P/E of 43 times its FY01 projected earnings with a market cap to sales ratio of 2 times. Worldwide the parent, Colgate, gets a P/E of 35 on a market cap to sales ratio of 4 times. Investors’ perception about the stock is likely to change gradually with the company’s improved financial performance and its implementation of aggressive strategies.

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