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Colgate gets aggressive - Views on News from Equitymaster
 
 
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  • Sep 24, 1999

    Colgate gets aggressive

    Colgate Palmolive India is giving its marketing effort a rural thrust and is also focusing on developing its export business in the neighbouring countries like Sri Lanka and Bangladesh.

    Colgate is the leader in oral care business in India. It markets toothpastes, toothpowders and toothbrushes. It also manufactures and markets hair care and personal products such as shaving creams, brushes and face creams. Its other brands include Charmis, Palmolive, Halo and Optima. It derives over 75% of its revenues from its oral care business.

    Severe competition from Hindustan Lever (HLL) has led to an erosion in Colgate's market share. Overall market share has fallen from 65% in FY95 to current levels of 46%. Colgate Dental Cream (CDC) which accounts for over 50% of sales and is the largest contributor to profit has seen its market share decline from 54% in FY94 to around 49% currently. In the fast-growing gel segment, it is facing stiff competition from Close-up and its variants.

    The move to focus on rural and export markets is a result of this intense competition with HLL, which has identified rural India as its key growth area. Focus on exports will increase Colgate's presence in the neighbouring countries and bring in additional revenues for the beleaguered company. The company's strategy is to prevent HLL's onslaught on its bottom line and markets.

    On the flip side, the company might be a little late in realising the rural potential. HLL already has a head start on this. On the exports front also, the going will not be easy for the company. Exports markets are fiercely competitive and derive thin margins.

    Market View:
    The stock has been rated as a 'Sell' as it has been consistently losing market. The company has had to step up its advertising budgets, which have had a bearing on its earnings.

     

     

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