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Colgate eyes personal care biz

Arti Sharma | September 06, 2003

In the first week of August, the cafeteria in the Mumbai headquarters of Colgate Palmolive India, the Rs 1,056.9 crore (Rs 10.569 billion) FMCG company, was decked up to resemble an aroma therapy clinic with brass pots sporting fragrant candles, fresh, floating flowers and the works.

Next to each of the displays was a card that encouraged employees to unleash flower power.

The next day about 150 employees were put into teams to play games involving jigsaw puzzles made of artpulls and promotional material. This was followed by a self-evaluation stress test via the company's intranet.

Later, to add colour to these in-house activities, a purple flower greeted each employee at his/her desk with a tag reading "Welcome to Anti-Stress Day".

Why was the company creating a hoopla around anti-stress? The purpose was a familiarisation activity for employees centered around a new launch.

After three years of battling it out in the oral care market to protect its market share from regional competitors like Anchor and multinationals like the Rs 10,000 crore (Rs 100 billion) Hindustan Lever, Colgate Palmolive is finally shifting focus to its lesser child -- the personal care segment.

In order to gain in the segment the company has rolled out a soap, shower gel and liquid hand wash range from its global product basket called the Palmolive Aromatherapy range.

The move is a clear sign that the company is looking at growth through other avenues. In the last three years, the Rs 2,000-crore (Rs 20 billion) oral care segment has seen no growth whatsoever.

Currently the oral care category contributes 93 per cent to the Indian subsidiary's turnover while the personal care segment accounts for a mere 7 per cent.

"Personal care was definitely not a focus area earlier but it is now," says Vikram Kaushik, executive vice president, marketing, Colgate Palmolive.

Globally, the $9.3 billion US parent derives as much as 24 per cent of its revenue from the personal care segment.

Says a Mumbai-based FMCG analyst, "The Indian company has been extremely lax in managing the personal care portfolio."

With this launch, which covers 23 metros and mini-metros, Colgate is hoping that it will be able to up the contribution to turnover from the personal care segment significantly in the next three to five years.

Analysts tracking the sector say that apart from the stagnation in the oral care market, there are other reasons for the shift.

"Value realisations have dwindled due to low offtake, downtrading, realigning of prices and the emergence of cheaper options by regional players," says Nikhil Vora, senior vice president, research, at Mumbai-based broking firm ASK Raymond James.

The company indulged in a value pricing game, cutting prices 17 per cent in toothpastes, which is why it was able to achieve a 27.1 per cent growth in net profit of Rs 88.7 crore (Rs 887 million) over the previous year even as sales in the oral care category actually fell 7.75 per cent over the last year.

At the same time, sales in the personal care segment declined 29 per cent. Of the 24 new launches and relaunches since 2000, 17 were in the oral care category.

Roughly 70 per cent of the ad spend in the last three years has been on oral care products.

Due to these factors and HLL's process of realigning its oral care business, Colgate managed to retain its value and volume market shares.

Meanwhile HLL's value market share went from 36 per cent in 2000-01 to 33.3 per cent today.

"In a stagnant market, for Colgate to grow further and boost topline, it needs to tap into newer markets and rope in newer consumer sets," says a Mumbai-based FMCG analyst.

But it is not going to be easy. The personal care market is already saturated with players and products. And the herbal trend caught on last year itself. Even HLL introduced a herbal range -- Ayur.

"HLL and other players are quasi- medicinal products catering to traditionalists. We are more contemporary," says Kaushik. The aromatherapy range imported from the parent company is available in two variants -- energy and anti-stress.

Also, Colgate has a negligible market share in the personal care segment. Its market share in the Rs 4,700-crore (Rs billion) soap market is under 1 per cent and it has a 11 per cent volume market share in the shaving market which is down from 14.3 per cent in 2000-01.

Secondly, the company has launched products in a very niche segment. "The fact is that when a category is resurrected it has to reach the lowest common denominator in order to yield lucrative results," says Vora. But Kaushik disagrees.

"We've found, like in the west, the aromatherapy craze has picked up in India as well and is in every major beauty parlour. This product makes aromatherapy user friendly and affordable."

The range comprises of a 250 ml shower gel priced at Rs 90, a 300 ml liquid hand wash also for Rs 90 and a 100 gm bar soap for Rs 22.

However, currently the shower gel market in India accounts for barely one per cent sales of the total soap market.

Also, the soap market witnessed a value degrowth of 5.5 per cent in the last year.

This year, however, the industry is hoping that good monsoons will lead to an estimated 3 per cent growth rate in the soap market.

"While Colgate has its strengths in oral care, it is safe to say that it has weaknesses in the personal care segment," says Vora.

"Where is the company as far as personal care is concerned? Gels and hand washes are such a limited market," says Nirjhar Handa, Parag Parikh Financial Advisory Services, a Mumbai-based broking house.

Even company distributors feel that till now all the accent has been on the oral care segment. "They just haven't invested seriously enough in the existing or new launches made in personal care," says one distributor.

However, this time Kaushik and team are optimistic. "We will be investing seriously in the category now to make our presence felt," says Kaushik.

The company will conduct various promotional schemes like giving out sachets in lifestyle and film magazines, and separate de-stress zones in retail outlets like Lifestyle where free aromatherapy massages will be offered.

Alongside, the emphasis on oral care and streamlining will continue. It has recently launched a new Colgate herbal variant toothpaste called Herbal White and will also be coming out with fresh flavours for Colgate Fresh Energy Gel.

In addition, with things like rationalisation of suppliers, standardisation of process across locations and suppliers, process improvements, re-engineering equipment to avoid wastage, reduction in procurement costs, optimised logistics and distribution which led to a Rs 62.8 crore (Rs 628 million) cost saving coupled with a 20 per cent cut in adspend to the current Rs 184.80 crore (Rs 1.848 billion), the company claims it has everything in place to succeed.

"In this kind of market, we are feeling our way today. But there is every possibility it could surprise us," says Kaushik.



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