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Colgate India: missed opportunities - Views on News from Equitymaster
 
 
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  • Apr 14, 2000

    Colgate India: missed opportunities

    While most global FMCG companies are looking at India as a major market for the future and their Indian subsidiaries form a healthy percentage of their global ambitions, why is Colgate, which entered India as early as 1937 still a laggard.

    Consider this:

    • Colgate Palmolive India contributes only 2.5% to the turnover of its parent Colgate Palmolive Company.
    • In terms of net profits, it forms a miniscule 1% of the parent's total profit worldwide.
    • Colgate India's total assets = 1.7% of Colgate Palmolive worldwide.

    (Rs m) Colgate worldwide
    Dec 31, 1999
    Colgate India
    Mar 31, 1999
    Colgate India
    as a % of parent
    Net sales 397,918 9,982 2.5%
    Cost of sales 184,335 9,043 4.9%
    Gross profit 213,583 939 0.4%
    Net profit 40,903 412 1.0%
    Total Assets 323,944 5,573 1.7%
    Gross proft margin 54% 9%  
    Net profit margin 10% 4%  

    Why is that?
    Today its contemporary Hindustan Lever, which entered India almost during the same period as Colgate, contributes a respectable 6% to Unilever's turnover and around 8.5% to its overall profit. So why did Colgate India lag behind?

    For detailed analysis click HLL: Unilever's pride

    The difference lies in their approach to the Indian markets. While, Unilever reposed faith in India early on and introduced a slew of products from its global product portfolio, Colgate chose to focus solely on the oral care part of its business and refrained from entering other product areas such as personal care and home cleaning segments early on.

    By the time it realised the folly of being a predominantly one-product company it was too late. When it did try to introduce its 'Optima' range of shampoos in the hair care segment and compete with HLL, the latter turned the tables on it by attacking Colgate's oral care turf. Severe competition from HLL and other players led to the company consistently losing market share from 65% in FY95 to current levels of 60%, and it finally withdrew Optima to concentrate on saving its oral care market share.

     

     

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