Case Presentation on Colgate Palmolive

1. Case Analysis- Colgate Palmolive
PRESENTED BY-
SOURABH VERMA
IIM-CALCUTTA

2. Company’s Background
Colgate Palmolive
Net Sales- $6.06 B (1991)
Gross Profit- $2.7 B (1991)
Gross Profit Margins- 45%
Annual Growth Vol- 5%
International Sales- 64% of total
International Profits- 67% of total
5 yr plan: New Prod Launches,
New Geographies, improved
Efficacies in manufacturing &
distribution.
Oral Care Range
US OC Market- $2.9 B; GR- 6.1%
Colgate Palmolive MS:
- 43% of world toothpaste market
- 16% of world tooth brush market
Value- $1.3 B (22% of CP’s total
Sales);
GR: 12 %
Tooth Brush Market
US Tooth Brush Sales- $77M
MS- 19% of US OCR
Operating Profits- $9.8 M (12.7%)
Profits- CP’s- Market Leader
(23.3% MS)
New Launch- Colgate Precision
Tooth Brush
Existing Brands- Colgate Classic
(Value Segment) & Colgate Plus
(professional Segment)
Competition- P&G, Uni-Liver, L’oreal, Henkel, Keo

3. Marketing Environment (Tooth Brush)
Media, 31, 31%
Consumer
Promotions, 39,
39%
Trade
Promotions, 30,
30%
Promotional ExpensesMacro Environment Micro Environment Internal
Environment
Media Commercials Dentists Research &
Innovative launches
Display Stands/
Promotions
Distributors Coupons
Endorsements Food Stores Refunds
Retail Shops Offers

4. Marketing Environment (Tooth Brush)
Competition Landscape
Brand Launch Brands MS (unit) MS (Value) SKUs Marketing Strategy
Gillette 1960 Oral-B 23.1% 30.7% 27 Professional Endorsements, 1 on 2
promotions, Media Commercials
J & J 1970 Reach, Prevent, Glow
Reach, Adv design reach
19.4% 21.8% 18 Customer promotions, Media
Commercials, Coupons and 1 on 2
offers
P & G Aug-91 Crest Complete 2% (E) 2.6% (E) 10 Coupons, Media Commercials, Display
Promotions
SKB Aug-91 Aquafresh flex 0.9% 1.1% 6 2 on 1 offers, Media Commercials
Lever -- Pepsodent Pro/Reg 7.2% 6.6% 9 --
Pfizer -- Plux Brush 1.8% -- 3 --
Sunstar -- Butler 2% -- -- Dentists

5. Market Segmentation
Therpapeutic
Brushes…
Cosmetic
Brushes
21%
Uninvolved customers
33%
Tooth Brush Users Customer Segmentation
Category Super Premium
Brushes
Professional
Brushes
Value
Brushes
Price Range $2.29 - $2.89 $1.59 - $2.09 $1.29
Unit Market
Share
35% 41% 24%
Value Market
Share
46% 42% 12%
Players Oral-B (New-
P&G, SKB)
CP, J&J LeverFull Size
head
70%
Compact
Head
17%
Child
head
13%
Bristle
Type
8%
Medium
Bristle
39%
Soft Bristle
48%
Extra Soft
Bristle
5%
Type of Brush

6. Targeting & Positioning- Precision Toothbrush
Niche Positioning Main Stream Positioning
Product Innovative product, entry for CP to super-premium
range. For people concerned about their gums
Most effective brush available in
the market
Promotion 35% more effective on surface teeth and100% more
effective at gum line/between teeth at removing
plaque when compared to product offerings from
the competition
Best of the mainstream offerings
Price $2.13; Premium over oral B regular and at parity with
Oral B Indicator
$1.85; at parity with Oral B regular
Place Majority through food & drug stores where people
will be searching for the best protection against gum
disease
Greater proportion of sales
through Mass merchandisers, club
stores

7. What Changes are occurring in the toothbrush
category? Assess CP’s Competitive Position
 Emergence of another category called super-premium brushes other than professional and value.
 Oral-B and Johnson & Johnson trying to capture more market in super-premium range
 Awareness increasing for healthy gum and plaque removal techniques as compared to traditional
thinking of just cleaning the teeth.
 Consumers were willing to pay a premium for the new products addressing issues regarding the
health of their gums
 48% consumers claimed to change their brushes at least every three months
 Consumers chose their brand based on features, comforts and professional recommendations
 Competitors offering coupons, refunds etc. to get an edge
 Sizeable revenues spent on advertisement (TV commercials, Store Displays, Banners, etc)

8. How is the toothbrush market segmented? Compare
consumer behavior for toothbrushes and toothpaste?
Tooth Brush Segmentation
Category Super Premium
Brushes
Professional
Brushes
Value
Brushes
Price Range $2.29 - $2.89 $1.59 - $2.09 $1.29
Unit Market
Share
35% 41% 24%
Value Market
Share
46% 42% 12%
Players Oral-B (New-
P&G, SKB)
CP, J&J Lever
- No much innovation need required in toothpaste
market as compared to toothbrush where
continuous innovation was seen to improve the
efficacy.
- Toothpaste MS- 46%
- Toothbrush MS- 15.5%
- Toothbrush is more profitable, high margin
business

9. What are the arguments for launching precision as (a) a
niche product and (b) a mainstream brand?
Niche Market Mainstream Market
Affect on Other CP Brands No affect; compete with
Oral-B
20% Cannibalization of
Colgate Plus
Target Segment Therapeutic (46% of
Market
Therapeutic, Cosmetic,
Uninvolved
Factory Price (per unit) $2.13 $1.85
Market Share 3% for 1993, 5% for 1994 10% for 1993, 14.7% for
1994
Positioning Acts on Gum diseases Premium product on the
market
Distribution Drug Stores, Dentists Retail Stores, Food & Drug
stores, etc
Retail Price $2.89 $2.49

10. What marketing recommendations would you make
to Steinberg?
 A technically Innovative product
 The Precision Tooth Brush has a competitive edge over other leading toothbrushes due to
technology innovations, features & benefits offered.
 Focused on maintaining healthy gums, higher efficacy- removes 35% more plaque than any
other toothbrush
 Precision toothbrush should be marketed to Mainstream segment-
Justification:
 It will cannibalize 20% sales of Colgate Plus i.e ($8.3M *.2= $1.66M)
 But being in Mainstream category it will capture 10% MS in yr. 1 and 14.75% MS in yr. 2
(approx. 6.17M),

11. Prepare a P&L statement using both positioning and
two years projections.
Year 1 Year 2 Year 1 Year 2
Unit Sales 2000000 15000000 27000000 44000000
Planned Capacity 13000000 20000000 42000000 59000000
Investment in Capacity 3,250,000.00$ 1,300,000.00$ 9,400,000.00$ 3,100,000.00$
Depreciation Costs 316667 450000 866667 1270000
Gross Margin/ unit 1.47 1.21
Value Margin 2,940,000.00$ 22,050,000.00$ 32,670,000.00$ 53,240,000.00$
Advertising 5000000 5000000 15000000 12000000
Consumer Promotions 4600000 4000000 13000000 10000000
Trade Promotions 1600000 2700000 4800000 7000000 20% Sales of CP
Expenses 11,516,667.00$ 13,450,000.00$ 43,066,667.00$ 33,370,000.00$ 1,660,000.00$
P/L (8,576,667.00)$ 8,600,000.00$ (10,396,667.00)$ 19,870,000.00$
Net Profit in 2Years
Niche Promotions Mainstream Promotion
Cannabilization of Colagte Plus
23,333.00$ 7,813,333.00$