QUOTE AND NEWS
SeekingAlpha  5 hrs ago  Comment 
By Alpha Strategist: (click to enlarge) Source: Yahoo finance Colgate-Palmolive Co. (NYSE:CL) has proven to be a stable business that has not grown at an exponential rate but its financial performance shows that it has...
The Economic Times  Aug 22  Comment 
In its pursuit to push oral care brands, Colgate Palmolive India has probably lost sight of its personal products and household care brands.
Market Intelligence Center  Aug 20  Comment 
For a hedged play on Colgate-Palmolive Co (CL) MarketIntelligenceCenter.com’s patented trade-picking algorithms selected a Oct. '14 $65.00 covered call for a net debit in the $63.38 area. That is also the break-even stock price for the covered...
The Economic Times  Aug 20  Comment 
"Colgate Palmolive Ltd is a 'BUY' call with a target of Rs 1520 and a stop loss of Rs 1460."
The Times of India  Aug 19  Comment 
In a top level management reshuffle, oral care major Colgate-Palmolive has appointed Issam Bachaalani as the new managing director of India, while the current incumbent Prabha Parameswaran has been elevated to a regional role as president —...
The Hindu Business Line  Aug 18  Comment 
In a top level management change, FMCG major Colgate Palmolive India today appointed Issam Bachaalani as the Managing Director (MD) of the company for a period of five years with effect from Octob...
The Hindu Business Line  Aug 14  Comment 
What strategy would you evolve if you were the company’s brand manager? Go on, send your response. The best one gets a voucher from Hidesign




 


Colgate-Palmolive (NYSE: CL) is one of the world's largest Consumer Products companies by market share with commercial presence on six continents.[1] Since its 1806 founding, Colgate has grown into a multinational corporation known for its toothpaste and oral hygiene products.[2] As of 2011, the company holds a staggering 44.7% global market share with its flagship toothpaste line.[3]

Colgate's major advantages are the strength of its brand and its strong, global presence: over three quarters of its revenue comes from outside the United States. About half of sales came from rapidly growing emerging markets, with Latin America representing Colgate's single largest source of revenue in 2010.[3] Colgate's brand strength in foreign markets allows the company to command impressive market share and high profit margins. Colgate has been steadily expanding its operations throughout Latin America, Africa, and Asia, maintaining consistent positive sales growth in these regions.

Business Overview

Colgate has operations in North America, Latin America, Europe/South Pacific, and Greater Asia/Africa. The company divides its business into two product segments: Oral, Personal and Home Care, and Pet Nutrition.

  • Pet Nutrition (13.9% of net sales, 15.3% of operating income) [4] Colgate's Hill's Pet Nutrition makes specialty pet nutrition products for dogs and cats. Hill's pet products are marketed primarily under two brand names: Science Diet, a wide array of over-the-counter products for everyday use, and Prescription Diet, therapeutic products sold to help malnourished pets threatened by disease.

Product Sales by Region

Colgate also divides its operations into the following regions:

North America

mkkk North America is Colgate-Palmolive's oldest geographic region and one of its most mature markets, representing roughly 20% of total net sales.[5] [5] To maintain steady growth in this market, Colgate employs three principle strategies:

  • Continual rebranding--Colgate can convince customers to spend more and growing company sales by releasing new twists on under established brands. Examples: Colgate Luminous Mint Twist toothpaste, Softsoap Brand Pure Cashmere moisturizing body wash, Irish Spring MoistureBlast bar soap
  • Growth through external acquisition: Acquistions like the Tom's of Maine deal (2006) can help Colgate tap into hot new markets that Colgate itself has little or no expertise in. In Tom's case, it was the rapidly expanding organic personal care products market.

Latin America

Latin America represents Colgate's single largest geographical region by sales and has been the prime propeller of the company's growth over the past decade.[6] In all, Latin America represented 27% of Colgate's sales.[5] Despite the strong performance of this region in the past, analysts now fear that Colgate may be approaching a point of saturation in its Latin American region--if so, a noticeable slowdown in sales growth may be in the company's future.

Europe/South Pacific

The Europe/South Pacfic segment represents another of Colgate-Palmolive's more mature, slow-growing markets. Growth in this more mature market is driven primarily by rebranding and introducing new products such as Colgate Time Control, Colgate Max Fresh and Colgate Sensitive Multi-Protection toothpastes. Colgate also used its acquisition strategy to grow sales with its acquisition of GABA, a Swiss toothpaste maker, in 2003.

There are many ways to approach this proelbm starting with cost and sales analysis/trends, consumer focus groups as well as margin development. You must also understand the cultural acceptance of the process of oral hygiene and the acceptance of the brand or the non acceptance of the brand within the culture. Once the product has a perceived consumer value, see how it compares with competition and move to correct outstanding issues with product and /or pricing and packaging. You must then analyze your route to market and your distribution within the market. Expand your distribution base and your physical outlets. Insure your in store presence and merchandising is effective and your point of sale materials are well positioned. Coupled with a targeted marketing and advertising plan, you can turn any brand around. It seems difficult to think a plant for toothpaste in an market the size of China could possibly be shut down. Good approach, should be a great project. Including the fact Wes Bradely had recently been appointed CEO will see profits increase in the near future, when toothpaste adds a salty element.

Trends & Forces

Emerging Markets Key for Growth

Emerging markets across the globe present strong growth opportunities for Colgate-Palmolive. As populations grow wealthier in emerging markets such as Brazil, Russia, India and China, consumers are becoming ever more sophisticated shoppers. Colgate Palmolive's strong international brand presence means that it is much more highly exposed to emerging markets than its competitors. Generally, this exposure benefits Colgate--emerging markets can grow at three to four times the rate of developed markets such as the US, Western Europe and Japan, which means more profit opportunities and sales growth for Colgate. [7]

Latin America: Possible Market Saturation

One challenge that has arisen with Colgate's rapid expansion in Latin America is the company's overdependence youhou on growth in that region. Due to fast growth in the region, Latin America alone has contributed to 40% of Colgate's organic growth over the past few years. Because of this high dependence on Latin American growth, the company is highly vulnerable to Latin American economic slowdown and market saturation. This is particularly true of Mexico, where Colgate already has an 80% market share of the toothpaste market. [8]

Foreign Currency and the Dollar

Another trend affecting Colgate-Palmolive is the relative strength of the dollar. Although the company is based in the US, Colgate-Palmolive generates more than two thirds of its revenue outside United States.[6] Because of this, the company is very sensitive to the strength of the dollar, with a weaker dollar generally boosting sales.[9]

Colgate has broad exposure to foreign currencies and actively hedges a large portion of these to avoid wide swings in earnings from currency fluctations. Although this heding limits the potential upside of a weakening dollar, it also insulates the company from drastic upswings in the dollar's strength.

Retail Consolidation

The rise of a handful of powerful low-priced retailers has negatively impacted consumer products companies. A handful of big retailers have captured a large share of the market. These large retailers have shifted the balance of power within the supply chain. For example, Wal-Mart has exerted its power over other suppliers to their detriment in the past, such as forcing record companies to produce clean-label CDs and pulling adult magazines.[10] In addition, many retailers have pushed their own higher margin private label brands in competition with Colgate.

Rise of Private Labels Leads to More Competition

In the past decade, Colgate has faced competition from private label brands or "store brands" of large retailers such as Wal-Mart, Target, and supermarket chains. Private label products often sell at lower price points and earn higher margins because the retailers can control the cost of their production. For example, Wal-Mart offers 5,500 products through its "Great Value" brand, which has increasingly sold as consumers feel the recession squeeze on their disposable income.[11]

Large retailers are close to the consumers, have the point of sale data on consumer behavior and are in better position to understand consumer behavior. These strengths contribute to better private label product development, which directly compete with Colgate products. Retailers also promote their own brands as they earn higher margins on them. However, Colgate continues to maintain a 44.7% market share in toothpaste and a strong brand name,[1] which will make it difficult for private labels to erode Colgate's market leadership. In addition, many analysts believe that outside of home care, Colgate's exposure to private labels is limited. [12]

Competition

Colgate-Palmolive competes in the household consumer products industry indirectly with other companies that produce similar products.

Procter & Gamble provides the broadest and biggest portfolio of products in the household and personal care industry with 24 billion-dollar brands. P&G generates approximately one and half times the revenue than its closest competitor, Unilever (UL), and possesses a higher operating margin (20.30%) than any of its competitors as well. The company invests about $2 billion a year in R&D, nearly twice that of Unilever, and equal to the combined total of its other major competitors — Avon, Clorox Company (CLX), Colgate-Palmolive Company (CL), Energizer Holdings (ENR), Henkel, Kimberly-Clark (KMB), L'Oreal, and Reckitt Benckiser.[13]

Clorox is one of P&G's main competitors, specifically the two companies compete directly in the household products market, especially in household cleaning products. Although much of the two companies' product catalogs overlap, there are significant differences that prevent Clorox from being in complete, direct competition with P&G. For example, one of the largest sectors of P&G's business is beauty products, which are not part of Clorox's product offerings.

Kimberly-Clark competes with P&G in the household products market, particularly in tissues, paper towels, diapers, and feminine products. Major K-C brands include Huggies diapers, Kotex feminine products, Scott paper towels and Kleenex tissues. Kimberly Clark sells its products to both consumers and large businesses.

L'Oreal competes with P&G in the beauty products market. L'Oreal's two biggest product categories are skincare and haircare products. Unlike diversified companies like P&G, L'Oreal is purely a beauty and cosmetics company with its product catalog centered around skincare, haircare, make-up, perfume and other beauty products. However, the beauty industry has much higher margins than certain markets that P&G is involved in, which leads to high profits for L'Oreal.



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