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Teeth sparkling competition... - Views on News from Equitymaster
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  • Mar 18, 2000

    Teeth sparkling competition...

    India's per capita consumption of toothpaste is one of the lowest in the world, it currently stands at 70 grams as compared to the global average of 362 grams. This is because 74 percent of our population live in rural areas and are not well versed with personal health and hygiene. As the penetration level of this rural segment is at a low of 30 percent, this means that only 200 million of our 740 million rural population uses toothpaste.

    In the long term however toothpaste players have a tremendous potential to grow in this market. The reasons being that income levels are rising and the population is becoming more aware of personal hygiene. To add to this there is an increase in literacy levels across the country. As media will play an important role hence advertising keeping the rural Indian in mind will provide the much needed impetus for growth to this market.

    The two largest players in the toothpaste market are Colgate and Hindustan Lever and they are constantly battling for leadership in this segment. Colgate has a market share of 49 percent and Hindustan Lever has a market share of 36.5 percent. The two players are more concerned to increase their market share but have not focussed seriously on increasing their market penetration to achieve this. They have both been targeting the urban market more. Both HLL and Colgate have been concentrating their advertising and marketing expenditure towards this segment but despite this the toothpaste market is growing at only a single digit rate of 5 percent per annum, which shows that the urban segment is fairly saturated.

    Markets share of toothpaste kings

    The penetration levels of the rural toothpaste market is only 30 percent providing a gaping scope for improvement as compared to the urban market penetration of 70 percent. On an all India basis penetration is still low at 35 percent, due to higher population in the rural areas.

    The successful players in this segment will be those companies who will be able to change the mindset of rural India and convince them to change their habits of using local black powder and chewing sticks to toothpaste. They will without doubt emerge to be the winners in the growing toothpaste industry.

    These two players control around over 80 percent of India's oral care market. As they are spending heavily on advertising they will be unable to sustain these levels for a long time. Current estimates show that advertising and promotional spends in the toothpaste industry are pegged at around 25 percent of total sales. As the Indian consumer is still very price sensitive and would switch brands easily there is not too much scope for price increase. Therefore it may not be very feasible for these companies to continue to have such large advertising spends as they may not be able to pass on price increases.

    The players need to focus on educating the rural consumers by advertising specifically keeping this target in mind, by organising health camps to educate them and by giving them price incentives. As this segment is very price conscious they should churn product variants at lower prices to garner the market share of rural India. Between the two players the market share of Colgate is higher in the rural areas, it has a 53 percent market share in rural areas as compared to HLL which has only 34 percent market share here.

    Colgate dominates rural market share

    In terms of competition to Colgate who has dominated the Indian toothpaste market for over 60 years, HLL with its marketing and positioning strategy ate away 10 percent of Colgate's market share in the last four years. The bulk of this has been in the urban markets. This is despite the fact that in the last five years Colgate has expanded its product base from 2 to 10.

    Colgate has been firmly entrenched in the white toothpaste segment with its flagship product Colgate Dental Cream, however this brand lost market share to HLL. HLL's answer to this was "Pepsodent" in the white toothpaste segment. By effective strategy and advertising HLL managed to promote its brand "Pepsodent" and slowly garner up its market share.

    However since the past one year Colgate has gathered its act and is once again becoming a fierce competitor to HLL's brands. In the past year to counter HLL's presence in the toothpaste market Colgate launched three new brands: Colgate Double Protection, Colgate Total and Colgate Sensation Whitening. The company has also re-launched its flagship brand Colgate Dental Cream by improving on it and re-positioning this brand.



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