New Delhi: Consumer goods company Colgate Palmolive (India) Ltd has held on to its market share backed by product launches, and a significant increase in direct distribution, according to a recent report by brokerage Motilal Oswal Institutional Equities.
“Colgate’s market share has been stable over the past few quarters. Volume growth and market share expansion have taken precedence as part of its new strategy, even if it is at the cost of near-term profitability,” Motilal Oswal wrote in a note on Wednesday. To be sure, the maker of Colgate and Swarna Vedshakti toothpaste has a 52% market share in India’s toothpaste market but at its peak, the local arm of the American consumer goods company enjoyed a 58% share of market. Other brands in India’s oral care market include Dabur, Hindustan Unilever (Pepsodent) and Patanjali--a more recent entrant--whose popular Dant Kanti brand dented market share for most large companies in the oral care markets.
Makers of oral care have been facing stiff competition over the last few years, especially after Patanjali flooded the market and corned significant market share with its Dant Kanti brand of toothpaste. This prompted companies such as Colgate, Hindustan Unilever to launch more herbal and ayurvedic variants in the oral care segment. Moreover, a recent slowdown in India’s fast moving consumer goods market has impacted sales in both urban and rural markets with companies doling out more offers and launching lower priced products to keep sales intact.
“It was important for CLGT to arrest the hemorrhage in the toothpaste market share before resuming the growth path. In that regard, the company has done well over the past few quarters to maintain a stable market share of 51%-52%, although still below the peak of 58%,” the report added.
The company rolled out herbal products like Cibaca Vedshakti and Swarna Vedshakti, as well as a Colgate charcoal clean toothpaste, in the recent quarters. “This apart, it has a strong pipeline of products awaiting launch in both the herbal and non-herbal categories,” the report added. It also helps that Patanjali’s hold on India’s fast moving consumer goods market has been cooling off over the last few quarters. Colgate’s top management told analysts at Motilal Oswal, that "Patanjali has not been gaining share recently, even as Dabur has started doing well in south and west India...”
For the September quarter, the maker of Colgate and Vedshakti toothpaste posted a 4.5% jump in net sales to ₹1,213 crore. Profit for the quarter stood at ₹244 crore up from Rs196.4 crore in the year ago period.
Moreover, the company has done enough to widen its reach to more outlets. As a result, direct distribution expanded by 30% over the past year, the report added. “At a time when wholesale trade (both rural and urban) is facing pressure, this move would have helped arrest the hemorrhage and is likely to aid growth in market share,” it said.
In the second quarter of FY20, the company’s advertising and promotional spends jumped by 20% as it re-launched Colgate Dental Cream, Colgate Max Fresh with Cooling Crystals, apart from promoting its core Colgate brand. “Saver packs’ are now a year-round phenomenon rather than occasional earlier. Even ₹
100 toothpastes come with a brush now,” the report added.
