Welcome to Scribd, the world's digital library. Read, publish, and share books and documents. See more
Download
Standard view
Full view
of .
Look up keyword
Like this
6Activity
0 of .
Results for:
No results containing your search query
P. 1
Colgate

Colgate

Ratings: (0)|Views: 127|Likes:
Published by Meghraj Mayank

More info:

Published by: Meghraj Mayank on Sep 11, 2010
Copyright:Attribution Non-commercial

Availability:

Read on Scribd mobile: iPhone, iPad and Android.
download as DOCX, PDF, TXT or read online from Scribd
See more
See less

10/20/2010

pdf

text

original

 
Top of Form
UTF-8 sfp
Bottom of Form
Colgate: A SWOT analysis
A name synonymous with the Indian oral care industry, Colgate (COLGd.BO, news) , is the undisputed market leader in toothpastes with over 45% share in the Rs 21 bn (90,000 TPA) oral caresegment. The company's parent has a presence in over 200 countries worldwide. In India, Colgate ranks No.1 in top of the mind recall in many consumer surveys. Let's take a look at the company's journeyover the years and what's in for it in the future.
Background
Promoted by Colgate-Palmolive USA, the parent operates through its 51% subsidiary and has a presencein India since last 50 years. The company's flagship product, Colgate Dental Cream is the largest sellingtoothpaste in India, with an estimated market share of over 30%. The company acquired Hindustan CibaGeigy (Cibaca) in the year 1994, which helped it increase its market share. The company also has asignificant marketshare in the toothbrush category. This and shaving brushes accounted for 10% of itsFY04 revenues.The toothpaste segment can be divided into two broad categories: White's, which accounts for adominant share of the Indian oral care market. Gels are estimated to be only about 15% plus of themarket.Colgate is considerably backward integrated. It has captive manufacturing facilities for flavor and other ingredients, which yield significant cost savings. It has also set up a world-class facility for manufactureof Di-calcium Phosphate, a key ingredient in toothpaste.
The journey over the years
(Rs m) FY00FY01FY02FY03FY04CAG9mFY05
Sales
10,89611,76911,6099,4749,392-4%7,242
Other Income
228.9295 310 3582997%217
Expenditure
10,23110,80110,5448,1707,928-6%5,995
EBDIT
665 968 1,0651,3041,46422%1,247
OPM %
6.1%8.2%9.2%13.8%15.6%~ 17.2%
Net profit after tax(loss)
518 625 698 8871,0820809
 
0 %
From the above table, we infer that although topline has shown a degrowth of 4% on a compounded basis over the 5 year period, bottomline has grown at a good 20% rate in the same period. The companyhas been able to curtail its expenditure, which went down by 6% during the period under consideration.Operating margins have been increasing YoY and in 9mFY05 touched a peak of 17%.The key reason for a significant improvement in operating margins over the years is the reduction of advertising expenditure (see chart).The company has lost significant market share in toothpaste that had peaked at 65% in FY95, ascompared to 45% plus today. Most of this has been lost to HLL and smaller players like Dabur andAnchor.
The potential
As per our estimates, 12.2% of the total world population lives in rural India. Currently, only a small portion (about 15%-20%) of region has been tapped. Although, expansion in rural areas requires hugeinvestments, it is a market that cannot be overlooked and has huge potential. To put things in perspective, the per capita consumption of toothpaste in India is only 82 gms, as compared to 262 gmsfor Thailand, 376 gms for Mexico and 518 gms for USA (Source: Colgate, Equitymaster Research). InIndia, urban per capita consumption is 153 gms whereas rural consumption is a mere 38 gms.
Competition
The company has been facing immense competition from organised as well as unorganised players. HLLis the closet rival of Colgate with a share of 34% with its Pepsodent and Close-up (gel where it has alion's share) brands.The latest entrant in the organised sector is LG that has ventured into the FMCG market and launched premium consumer products across 8 categories including toothpastes, shampoos, soaps, detergents, etc.Also, there has been speculation from sometime now that P&G (its worldwide rival) would debut its billion-dollar-plus toothpaste brand Crest in India. This could intensify competition in the segment.
Concerns
The company has high reliance on a single category (Oral Care), which accounts for 94% of its sales and98% of its profits (FY04). A large part of the company's product folio consists of premium products,which do not have a large potential market in India. This is evident as new launches by the parent inIndia have been much lower than other markets. In the last couple of years, the company's topline hasstopped growing and in order to achieve growth, Colgate cut prices of its products by an average 17% inApril 2003 (Source: Company Annual Report). The company has been able to increase its margins bycontinuously cutting advertising expenses, which cannot go below a certain point, owing to its single

You're Reading a Free Preview

Download
scribd
/*********** DO NOT ALTER ANYTHING BELOW THIS LINE ! ************/ var s_code=s.t();if(s_code)document.write(s_code)//-->