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Oral care: Expansion through education

Apr 6, 2002

The Indian fast moving consumer goods (FMCG) market is valued at Rs 180 bn. The 90,000 TPA oral care segment contributes around Rs 21 bn to this pie. The segment has many players in many sub-segments. The major players in the oral care market are Colgate (over 50% share), Hindustan Lever (36%), SmithKline Beecham (4-5%), Balsara, Dabur, Himalaya Drug, Anchor, Gillette and Forhan’s. It is apparent that Colgate and Hindustan Lever (HLL) call the shots in this segment, which has been traditionally growing 9-10%. However, in the last couple of years growth has turned sluggish at 3-5%. Infact, market leader Colgate has stated that growth has been stagnant in the last few months of FY02.

India being a price sensitive market, the growth strategy revolves around pricing strategies. Colgate prices some of its products at a premium to HLL. However, competition has expanded to product differentiation also (gels, gum care, calci guard, mouth wash, toothpowder and different type of flavours). Since these two companies dominate the segment, much of the tug of war over pricing, product segments and initiatives come from them. While HLL is constantly trying to inch up market share ladder, Colgate tries to hold onto its pie and consolidate. As a result, ad expenses are pretty high in the segment. While we don’t have figures for HLL’s advertisement support to its oral care business, Colgate spends over 20% of its revenues on promotions and advertisements.

But if the market is not growing, why are these two majors competing so fiercely? Because not withstanding the recent stagnation, the oral market has a huge potential to expand. As per estimates, an average Indian consumes 82 grams of toothpaste per annum. In contrast, Thailand consumes 262 grams, Mexico 376 grams and the US per capita consumption stands at over 6 times India levels (518 grams).

One reason for this stagnating growth could also be a huge urban-rural consumption mismatch. According to estimates, penetration of toothpaste is a healthy 75-80% in urban India, whereas it is only 15-20% in rural India. As a result, urban India contributes 65% to the total volumes in the oral care business. The per capita consumption of toothpaste in urban India is 153 grams per annum, almost 4 times of rural India. With urban India already highly penetrated incremental growth becomes difficult.

In order to reduce this mismatch, both Colgate and HLL have taken to the rural market with gusto. HLL already is the trendsetter in recognising rural potential. Colgate too has initiated operation ‘Jagruti’ to improve its rural penetration. The aim is to educate the masses about oral care and its benefits vis-à-vis traditional teeth cleaning methods like ‘datoon’ (neem plant).

The focus has also shifted to children. Corporates realise that oral care is a lifelong habit and once developed in a child, generates lifelong customers. So, oral care companies are tying up with schools to educate children on oral care. The focus of advertising in print and television has also shifted to children. Also, the focus is on brushing twice a day, in a bid to expand per capita volume growth.

Though market expansion has hit a roadblock in recent times, with improvement in rural economy and the measures taken by the industry to improve usage of products, the oral care market is likely to show an improvement in the long term.

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