Mumbai: Colgate, the flagship brand ofColgate-Palmolive (India) Ltd, is losing ground in the toothpaste market with its market share falling marginally in terms of volumes in an expanding market. However, it appears to have retained its market share in terms of value.
According to market research firm AC Nielsen, the market share of Colgate (inlcuidng its variants) has remained stagnant at 41.2% over two years, 2006-07 and 2007-08, even as the market has grown 14% a year to Rs2,263 crore in the same period. In terms of volumes, its share has declined from 38% in 2005-06 to 37% in 2006-07 and 36.9% in 2007-08. The market grew 10% in terms of volumes in 2007-08. Colgate-Palmolive did not respond to an email questionnaire on the performance of its brand.
A shopper at a grocery store in Mumbai. Colgate’s market share has stayed stagnant over two years, 2006-07 and 2007-08
To be sure, Colgate still dominates the fast growing consumer products segment but the data from AC Nielsen show that its share has not grown in tandem with the industry and even its rivals. Close-Up, owned by the country’s largest consumer products firm Hindustan Unilever Ltd (HUL), increased its share by 1 percentage point to 16.1% (in value terms) between 2006-07 and 2007-08, while homegrown fast moving consumer goods firm Dabur India Ltd’s Babool grew its share by 2.4 percentage points to 5.4%.
Interestingly, even Cibaca, a low-priced brand that is owned by Colgate-Palmolive, has seen its share increase by 1.5 percentage points to 7.3% in the past two years.
In terms of volume, Close-Up increased its share from 11.7% in 2005-06 to 12.1% in 2006-07 and 12.7% in 2007-08. Similarly, Babool’s share grew from 5.1% in 2005-06 to 8.4% in 2007-08. Cibaca’s volume share rose from 10.4% to 12% and to 12.3% in the three years.
“We attribute our growth to the niche we have chosen to operate in, which is the herbal and the economy platform. Dabur has also invested in marketing the brands much more aggressively,” said V.S. Sitaram, chief operating officer, consumer care, at Dabur.
Colgate-Palmolive, which also sells home and personal care products, posted a net profit of Rs176.8 crore in the nine months ended December 2007 on revenues of Rs1,082 crore. It is yet to report its full-year results for 2007-08. In 2006-07, its sales grew 15% to Rs1,295 crore, and its net profits, 47% to Rs202.66 crore.
Analysts say the closure of Sewri factory in the second quarter of 2006-07 and an increase in production at its plant in Baddi have contributed to an increase in sales. “The tax benefits accruing out of the plant at Baddi boosted Colgate-Palmolive’s bottom line and improved profit margins too. Volumes, however, contributed only 8-9% to the sales growth while price hikes drove the rest,” said Anand Shah, an analyst at Angel Broking Ltd.
And the numbers show that much of that volume growth was on account of Cibaca.
While in other product categories, there has been a clear trend of consumers moving from mass to premium brands, the trend is opposite in the case of toothpastes, say analysts. “In rural markets that are driving the consumption in personal care product categories, consumers... prefer mass brands with lower price tags,” said Sameer Deshmukh, analyst at brokerage firm IL&FS Investsmart Securities Ltd.
Colgate Total is the most expensive product in the category priced at Rs59 for 150 gm. Close-Up’s 150 gm pack sells for Rs48, while both Babool and Pepsodent cost Rs48 for a 200 gm pack. Colgate’s basic white toothpaste, priced at Rs79 for 300 gm, is the costliest option in the mass segment.
“HUL has been pushing Close-Up with aggressive marketing innovation and communication, while Colgate has been running (the same) advertisement for past many quarters. In (the) competitive consumer product categories, smart and consistent consumer communication is vital,” Deshmukh added.
Colgate’s strategy to check the market decline and to supplement Cibaca’s growth is not clear but a sales officer at the company who did not wish to be named said: “We will continue to push Colgate because 12 packs of Cibaca sold are as good as two packs of Colgate, for our profitability”.
Colgate-Palmolive’s shares closed at Rs446.55 each Thursday in a weak Mumbai market. In the year to March, the shares rose 14.84%, as compared to the BSE FMCG index that rose 35.42%. The stock’s 52-week high is Rs521 and low, Rs326.