How Colgate keeps its smile on

Life has barely been smooth for Colgate in the last few quarters with the competitive intensity in oralcare only going up with every passing day.

Almost all key players including Hindustan Unilever, Dabur, Procter & Gamble and GlaxoSmithKline Consumer have mounted pressure on the giant with new products and aggressive marketing.

Yet, the Mumbai-based market leader has hardly ceded ground.

If anything, it has only gained in market share.

It has steadily gained volume share in the Rs 5,000-crore (Rs 50-billion) toothpaste market, despite its lead of over 50 per cent, gaining 170 basis points in January-April, 2014 over the the corresponding period last year and 150 basis points in Jan-Dec, 2013 over the year before.

In the Rs 3,000-crore (Rs 30-billion) toothbrush market, Colgate's volume share increased by 100 basis points to 42.3 per cent over the same period last year.

In Jan-Dec, 2013, it had 41.5 per cent share in toothbrushes while in Jan-Dec, 2012, it had 39.8 per cent.

The share gains has also occurred against the backdrop of a consumer slowdown.

After months of almost 9-10 per cent volume growth in toothpaste, Colgate's volume sales for the three months ending in March, 2014, came down to about 7 per cent.

Abneesh Roy, associate director, research, institutional equities, Edelweiss, "Colgate has done a combination of things -- from consumer awareness, innovation to plugging product gaps.

"It has also pushed the product aggressively in rural areas through outreach programmes, as well as expanded distribution. These are helping it gain share."

Colgate's marketing spends as a percentage of sales in the last few quarters has hovered around 11-13 per cent.

In the fourth quarter of FY-14, Colgate's ad spends as a percentage of sales came down to about 10.8 per cent (almost 300 basis points lower than spends seen in Q3 of FY-14) as the company attempted to bring down the pressure on operating margins.

Despite the slightly muted quarter advertising-wise, the company has gown its volumes.

Amnish Aggarwal and Gaurav Jogani, research analysts at brokerage Prabhudas Liladhar in a recent report, say that new launches such as its Visible White and Active White Salt have enabled Colgate to sustain momentum in the crucial toothpaste category.

Analysts such as V Srinivasan of Angel Broking say that Colgate's market share gain has been the result of growth seen across Colgate's toothpaste brands, pointing to the brand being chosen over others despite the competitive intensity.

In a statement following its fourth quarter results on Friday, Colgate has said, "The flagship brands Colgate Dental Cream, Active Salt, Max Fresh and Colgate Total, alongwith the recently launched Visible White, have contributed to share growth."

Road ahead not easy

Analysts say that it might be some bumps ahead.

Colgate will have to contend with heightened competition in the next quarters, too, as P&G digs its heels deeper with its Oral-B toothpaste.

The latter has articulated in the past that it remains committed to India and is expected to set up a manufacturing facility in India for toothpastes, to bring down its dependence on imports and the resultant costs.

The company has also raised its ad spends on Oral-B, endorsed by actor Madhuri Dixit.

Dabur, which has seen a 17.3 per cent growth in its oralcare portfolio in the quarter ended March, 2014, is expected to continue mounting pressure as sales traction for products such as its Meswak and Dabur Red toothpaste grows.

GSK Consumer, according to its MD Zubair Ahmed, is contemplating new launches in oralcare after introducing brands such as Sensodyne and Parodontax in the last two to three years.

The new launches, Ahmed has said, are expected to help the company keep the momentum going, following success seen in segments such as sensitivity.

Market experts say that Sensodyne is already a Rs 150-crore (Rs 1.5 billion) brand in three years and is expected to touch Rs 200 crore in the next few quarters.

That leaves Hindustan Unilever, which is now offering a toothbrush worth Rs 40 with its high-end Pepsodent Expert Protection, in a bid to arrest share loss.

While HUL does not share market share details of any of its categories, persons in the know say that HUL has a share of about 25-26 per cent in oralcare, and is positioned as a strong runner-up.

That has come under threat from Colgate's efforts on one hand, and Dabur's on the other. But with the company continuing to increase its promotional spends on Pepsodent, Colgate will have to watch out.