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Published by eng.rasolanki, 2017-08-12 11:44:26

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9-311-120

REV: AUGUST 2, 2011

REBECCA M. HENDERSON

RYAN JOHNSON

Colgate-Palmolive: Staying Ahead in Oral Care

In 2011, Colgate-Palmolive (Colgate) was the global leader in oral care, with a dominant market
share lead in toothpaste and a growing presence in toothbrushes and mouthwash. However, the firm
faced stiff competition from perennial rivals Procter and Gamble (P&G), which had increased its
focus on oral care and in emerging markets where Colgate had traditionally been untouchable. To
defend its lead, Colgate attempted to cover all fronts by leveraging brand equity, fostering close
relationships with dental professionals, focusing innovation on product categories with high growth
potential, using its global network to quickly move products to market, and reinvesting steadily in its
brand. The firm had grown market share in oral care for seven straight years and hoped it could
continue that steady growth and strong positioning.

Company Background

Headquartered in New York City, Colgate was a leading consumer products company with 2010
revenues of $15.5 billion.1 Colgate developed products in oral care, home care, personal care, and pet
nutrition, and marketed its products in over 200 countries. The firm’s top brands included Colgate,
Palmolive, Ajax, Irish Spring, Hill’s Science Diet, Softsoap, Speed Stick, Suavitel, and Tom’s of Maine.2

Founded in 1806 by William Colgate as a starch, soap, and candle business, Colgate grew on the
back of its famous Colgate toothpaste. In the 1980s and 1990s, Colgate expanded its reach through
more oral care brands and into the personal care sector with the acquisition of Softsoap brand liquid
soap (1987), and Mennenbrand deodorants and antiperspirants (1992).3

Oral, personal, and home care products made up the majority of sales (87%) for Colgate with Pet
Nutrition accounting for the remainder.4 Oral care was its largest segment, making up 43% of sales in
2010, followed by home care (22%), personal care (22%) and pet nutrition (13%).5 Additionally,
approximately 75% of Colgate’s revenue came from outside the United States, and more than 40%
came from developing markets. In the oral, personal, and home care products categories, Latin
America made up 32% of Colgate’s total revenues, followed by Europe/South Pacific (24%), North
America (22%) and Greater Asia/Africa (22%).6 Oral care was Colgate’s strongest category.Bath and
shower products came next, followed by hair care and deodorants, categories in which the company
had weaker positions, spotty global presence and strong competition from industry leaders.7 (See
Exhibits 1 and 2.)

________________________________________________________________________________________________________________

Professor Rebecca M. Henderson and Reseach Associate Ryan Johnson of the Global Research Group prepared this case. This case was developed
from published sources. HBS cases are developed solely as the basis for class discussion. Cases are not intended to serve as endorsements,
sources of primary data, or illustrations of effective or ineffective management.

Copyright © 2011 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-545-7685,
write Harvard Business School Publishing, Boston, MA 02163, or go to www.hbsp.harvard.edu/educators. This publication may not be digitized,
photocopied, or otherwise reproduced, posted, or transmitted, without the permission of Harvard Business School.

311-120 Colgate-Palmolive: Staying Ahead in Oral Care

Competing in Oral Care

Colgate held 45% of the global toothpaste market share and 32% of the manual toothbrush market
share. Overall, its global oral care market share grew from 22.4% in 2001 to 24.4% in 2009.8 In the U.S.,
Colgate was second in market share in toothpaste and toothbrushes behind P&G. However, across
Europe and in many emerging markets, especially Latin America (49%), Colgate held strong market
share positions. Emerging markets comprised about 60% of its oral care sales, which dwarfed the
industry average of 36%. Colgate had undergone consistent growth in seven of its top 10 toothpaste
markets since 2004.9 (See Exhibit 3.)

Products

Colgate’s products in the oral care sector included Colgate Total, Colgate Max Fresh, Colgate
Sensitive Pro-Relief, Colgate 360° manual toothbrushes, Colgate and Colgate Plax dental rinses,
Colgate dental floss, Colgate Wisp, various pharmaceutical products for dentists, Elmex, Kolynos,
Meridol, and Tom’s of Maine natural toothpaste and mouthwash.10

Competition

In oral care, Colgate competed with global, regional and local competitors in each market. Its top
competitor was P&G (which owned oral car brands Crest and Oral-B), the leading oral care company
in North America. Other global competitors included Church & Dwight (Aim, Arm & Hammer),
GlaxoSmithKline (Aquafresh, Macleans), Johnson & Johnson (Listerine, Reach), and Unilever (Signal,
Close Up).11 There was also rising competition from retailer’s own store brands, though store brands
were yet to be a significant player, especially in toothpaste.

By 2011, analysts noted that both P&G and Unilever overlapped Colgate in many categories and
both firms were reducing prices and increasing ad spending.12 In oral care, analysts pointed to P&G’s
statement that gaining share in toothpaste was a top corporate priority as a key competitive risk for
Colgate. P&G hoped to use the Oral-B brand, purchased as part of its acquisition of Gillette in 2005, to
promote gains both in toothbrushes (where Oral-B was already a leader) and toothpaste (where P&G
trailed Colgate).13

Defending Market Leadership

Colgate had become known for its ability to sustain its strong position in oral care. The firm
focused on defendable positions, such as winning the majority of dental endorsements and repeatable
approaches such as education in emerging markets.14 These efforts, paired with Colgate’s substantial
global reach, helped to ensure that its brand equity remained strong and made it challenging for
competitors to gain share.15 Furthermore, Colgate leveraged its brand strength and widespread name
recognition by selling nearly all of its oral care products under the Colgate name (including whitening,
natural products, floss, and mouthwash) allowing Colgate to quickly produce and scale in emerging
products.16

Strong Brand Equity

Through years of marketing, advertising, strong product placement and consistency, the Colgate
brand had become synonymous with oral care. The brand was well recognized not only in North
America, where the term “Colgate smile” meant a bright, white, beautiful smile but around the

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Colgate-Palmolive: Staying Ahead in Oral Care 311-120

world, including in emerging markets. As one Colgate manager pointed out, “what's consistent is the
brand equity. It stands for trust and family and, increasingly, innovation.”17 Analysts noted that the
Colgate brand was one of the most valued brands in the world and the top brand in oral care.18

Colgate marketers and researchers reached out to consumers to learn about their lives and habits
to maintain its standing with consumers. One example was work done in India by Colgate, where
researchers studied villagers’ oral care habits and recognized that mothers hoped that their children
would be healthy and have a strong education. Through this insight, Colgate created a campaign to
promote kids’ oral care health in India and paired that with scholarship offerings for children.19

By 2011, Colgate had also launched a strong digital media effort aimed at connecting with
consumers in their homes and at their workplace by offering informative websites as well as online
videos featuring consumer testimonials. When promoting the Colgate Wisp, a portable mini-
toothbrush, Colgate used digital marketing efforts to engage consumers, making use of Facebook and
YouTube platforms to deliver content and interactive opportunities to reach a younger generation of
consumers who were the target audience for the Wisp.20

On top of strong digital efforts, Colgate believed that more than half of consumer’s purchasing
decisions were made in the store and therefore invested heavily in in-store advertising and
promotion.21 Overall, Colgate spent approximately 10% of sales revenue on advertising, on par with
the industry average, but significantly less in total dollar value when compared to competitors P&G
and Unilever.22 Colgate’s strong digital efforts paired with more traditional media, in-store and
promotional events kept the Colgate brand strong, present and trusted in the mind of the consumer.

Building Relationships with Dentists

By 2010, Colgate was the most recommended brand by dentists worldwide (a claim it made
through its slogan: “Number 1 recommended by dentists”), garnering a 43% recommendation rate
compared to 15% for its closest competitor.23 (See Exhibit 4.) Colgate saw professional endorsements
as crucial for building the equity of Colgate’s brand, increasing brand awareness and facilitating new
product trials. Additionally, relationships with dentists were defendable which made it harder for
competitors to close the gap Colgate had established.24 Colgate made relationship building with
dental professionals a priority worldwide and used a 10-point plan that would help ensure scientific
support and recommendation for Colgate oral products. The plan focused on sales, marketing and
promotional activities, participating in Oral Health Month, and attending and presenting at dental
conventions to explain the science and research behind Colgate products as well as offering samples,
and obtaining dental seals of approval for products.25

In 2009, Colgate developed a training program for its sales force members who visited dental
offices. The program aimed to turn the sales force into “oral care consultants” who could effectively
communicate the scientific benefits of Colgate products to dental professionals.26 Colgate hoped these
efforts would increase cross selling and help ensure that dentists recommended Colgate products. To
further consolidate its relationships with dental professionals, the company rolled out a U.S.-based
Oral Health Advisor program in 2010. The program formed partnerships with dental hygienists,
offering them educational tools, presence at major dental conventions and an opportunity to consult
on major issues in dental hygiene.27

3

311-120 Colgate-Palmolive: Staying Ahead in Oral Care

History and Strength in Emerging Markets

Colgate held strong shares in high growth markets; in toothpaste it had 70% of the market in
Brazil, 51% in India, 35% in Russia and 32% in China.28 The firm also built relationships with
emerging market dental professionals. By 2011, 77% of dental professionals in Brazil, 81% in India,
and 85% in China were recommending Colgate to patients ahead of other brands.29

The growth in these markets was significantly higher than developed markets (an 8% CAGR
compared to 2.1% in developed markets).30 Continued success there mattered to the firm: emerging
markets comprised approximately 60% of Colgate’s oral care sales, well above the industry average
of 36%.31

Colgate had a long history in emerging markets, establishing itself as the market leader in oral
care as well as growing the notoriety and reputation of its brand. By 2011, it had been in Latin
America for over 75 years and in Asia for over 50 years. Decades of experience gave Colgate a unique
understanding of local preferences and taste.32 The deep consumer and market knowledge developed
in these geographies had helped the company further refine its global marketing. Further, Colgate’s
early and expansive positioning in emerging markets placed the firm on track to benefit from
expected strong growth in developing markets which had low per capita consumption when
compared to developed markets. Per capita consumption of toothpaste was 542 grams in the U.S., or
1.35 brushes a day; in emerging markets these numbers were lower, with Mexico at 339 grams, Russia
at 307 grams, China at 255 grams and India (at 118 grams), implying that the typical consumer
brushed less than once a day. Analysts expected the numbers to grow.33

To further drive consumption in emerging markets, Colgate aimed to educate consumers about
oral hygiene. First established in the early 1990s, Colgate’s “Bright Smiles, Bright Futures” global oral
health education program promoted good oral health habits amongst children and had reached over
500 million children in 80 countries by 2011.34 With “Bright Smiles, Bright Futures,” Colgate had
developed an effective emerging markets education platform making it easier to repeat this approach
in new markets quickly and at scale.35

Focused Portfolio Optimization

Compared to competitors Unilever and P&G, Colgate was a smaller company and more
focusedon a single line of products. Oral care made up 43% of Colgate’s sales mix, compared to
approximately 6% for P&G.36 Additionally, Colgate was conservative and extremely targeted with
large acquisitions and divestures. Colgate had made four acquisitions valued at over $100 million
from 1991 to 2011, three of which were oral care companies. It had also made nine divestures, none of
which were oral care businesses, and publicly stated that its M&A strategy was based on driving
growth in oral care while limiting exposure to low margin businesses such as laundry detergent.37

In 1995, Colgate acquired Kolynos, a popular Latin American oral care brand, for $1.04 billion,
increasing its Latin American presence, particularly in Brazil, Argentina, Peru and Paraguay.38 In
2004, Colgate spent $850 million on GABA, a European oral care business with strong channels in
pharmacies and close ties to dental professionals.39 Finally, in 2006, Colgate bought Tom’s of Maine,
the leading manufacturer of natural toothpaste, for $100 million, securing a position in the fast
growing natural care categories and access to new retailers Whole Foods and Trader Joe’s.40

4

Colgate-Palmolive: Staying Ahead in Oral Care 311-120

Continued Innovation and Speed to Market

In oral care, Colgate continued to innovate by attempting to develop products that addressed
specific needs of the consumer, and helped the company grow into previously underutilized areas,
avoiding cannibalization while growing exposure.41 One example was the Colgate Wisp which
allowed for water free brushing and cleaning on the go. The product, which looked to enter a space in
which P&G had previously failed with tooth wipes, was an attempt to grow a new segment of the
toothbrush market that had not been successfully commercialized.

Additionally, in 2009 Colgate introduced Colgate Sensitive Pro-Relief, which claimed to provide
immediate and long lasting relief to tooth sensitivity. The $1 billion global sensitive toothpaste
segment, an area in which Colgate did not have a significant presence, was projected to grow steadily
due to demographic shifts.42 Colgate rolled the product out swiftly and by the end of 2010 was selling
in 75% of the sensitivity market globally and gaining share in every market.43

Colgate also developed an organizational structure that supported both long-term and short-term
innovations. Colgate developed three long-term innovation centers, one for oral care, one for pet
nutrition and one for personal care. The oral care long-term innovation center was weighted heavily
toward marketing talent in an attempt to identify trends in dentistry and oral care, and was separate
from Colgate’s R&D group which focused on fundamental research around oral care technologies.44
Colgate also had mid-term innovation centers based around the world, which aimed to understand
local trends and develop innovations that could go-to-market within one to three years.45

Go-to-Market and Targeted Outreach

In addition to outreach to consumers and dental professionals, Colgate worked to build
relationships with retailers, its direct customer. Through the Joint Business Planning initiative,
Colgate and its retail partners set objectives in shopper marketing, customer service, and finance, and
aligned strategic priorities to give each the best chance to attract consumers and grow categories.46

Colgate also worked to continue finding ways to attract consumers to premium products, which
often involved working with retailers on ads and reminder placements in stores. One example was
placing shelf signs around red wine and coffee aisles that reminded shoppers to purchase teeth-
whitening products such as Colgate Max White toothpaste and Colgate Plax Whitening
mouthwash.47

Reinvestment of Cost Savings

In order to fund its innovation, marketing and growth effort, Colgate focused on reducing cost
through a program known as “Funding the Growth” which first started in the late 1990s. The
program offered direct investment back to brand managers who drive supply chain and other
operation efficiencies and saved the firm money. The program delivered an average annual saving of
$400 million through projects such as locating new and less expensive factories to supply global
markets and strategically reducing the number of SKUs offered (a 22% reduction since 2007) without
reducing the shelf space for Colgate products.

The Best Defense is a Good Offense

As Colgate tried to continue leading the oral care market, analysts were skeptical noting a more
competitive environment and expecting sales growth to continue for Colgate but at a slower pace.48

5

311-120 Colgate-Palmolive: Staying Ahead in Oral Care

Some analysts also questioned the likelihood of expanding per capita consumption of oral care in
emerging markets as a key to Colgate’s growth.49 However, Colgate held a commanding position and
was more focused and invested in oral care than its competitors. Colgate could be counted on to try
to expand its brand, develop relationships with dental professionals and retailers, focus its
innovation efforts on oral care and grow its market share in emerging markets.

6

Colgate-Palmolive: Staying Ahead in Oral Care 311-120

Exhibit 1 Colgate Positioning: Global vs. Local Relative Market Share (RMS)

2.50

Oral

Local 1.50

RMS

(weighted
by

company
RSV)

Laundry Skin cleansing
HHC
0.75

Dishwash

0.00 Deo 1.50 2.50
0.00 Pet food Global RMS
Wash & care

0.75

Source: Colgate Market Share Data, Euromonitor International, www.euromonitor.com, accessed 2009.
Note:
This plots relative market share (Colgate share vs. largest manufacturer). RMS <1 means you are smaller than the
leader. Local RMS is calculated at country level (so weighted average of where they actually play), Global RMS is
done on the global market share of the category so is influenced by how consolidated/consistent the competition is.

Exhibit 2 Colgate Strength of Positions by Category

Colgate-Palmolive RSV (2008, €B) Total = €13.5B
2.3 1.6 1.2 1.1 0.7 0.6 0.5 0.8
100% 4.8

weak

80

contested

60

40

strong

20

0 Pet food Skin Laundry HHC Deo Other
Oral WasDihshwash
&
cleansing care

Source: Colgate Market Share Data, Euromonitor International, www.euromonitor.com, accessed 2009.
Note:
Category retail sales value (RSV) aggregated from local positions in geographies; Weak/contested & strong based on
relative market share of <0.75, 0.75-1.5, >1.5 respectively; Includes all categories where company has retail sales value.

7

311-120 Colgate-Palmolive: Staying Ahead in Oral Care

Exhibit 3a Oral Care Market Share Data

Source: Dara Mohsenian, Kevin Grundy, Scott Shapiro, Alison Lin, “Colgate-Palmolive Co, Equal-weight; Competitive Risk
limits upside,” Morgan Stanley, July 15, 2010, Thomson Reuters One Banker, accessed May 2011.

Exhibit 3b Colgate Growth vs. Relative Market Share (RMS)

% RSV: WEAK CONTESTED STRONG
8% 43% 49%

20%

Venezuela
Argentina

Attractiveness 10 Russia Canada China Brazil
0 Spain
MARKET India Mexico
GROWTH Poland Colombia

01-07 CAGR

Italy USA Germany Philippines
UK
France UnilevTehraialavnedrage
(5%Au) stralia
Taiwan

-10 0.75 1.50 2.50
0.00

D&E RMS (2008)
D
Competitiveness

Source: Colgate Market Share Data, Euromonitor International, www.euromonitor.com, accessed 2009.
Note:
This graph shows the individual markets and Colgate’s relative market share (x axis) vs market growth grates (y
axis). Size of bubble based on company market value; RMS capped at 2.5; Market growth limited to -10% to 20%.

8

Colgate-Palmolive: Staying Ahead in Oral Care 311-120

Exhibit 4 Toothpaste Recommended Most Often by Dentists Worldwide

Source: Dara Mohsenian, Kevin Grundy, Scott Shapiro, Alison Lin, “Colgate-Palmolive Co, Equal-weight; Competitive Risk
limits upside,” Morgan Stanley, July 15, 2010, Thomson Reuters One Banker, accessed May 2011.

9

311-120 Colgate-Palmolive: Staying Ahead in Oral Care

Endnotes

1 Colgate-Palmolive Company Overview, Hoover’s Inc., www.hoovers.com, accessed May 2011.
2 Ibid.
3 Colgate-Palmolive Company History, Hoover’s Inc., www.hoovers.com, accessed May 2011.
4 Colgate-Palmolive. 2010 Annual Report, http://www.colgate.com/app/Colgate/US/Corp/Annual-
Reports/2010/HomePage.cvsp, accessed May 2011.
5 Ibid.
6 Ibid.
7 Colgate-Palmolive Co in Beauty and Personal Care–World, Euromonitor International,
www.euromonitor.com, accessed June 2011.
8 Dara Mohsenian, Kevin Grundy, Scott Shapiro, Alison Lin, “Colgate-Palmolive Co, Equal-weight;
Competitive Risk limits upside,” Morgan Stanley, July 15, 2010, Thomson One Banker, accessed May 2011..
9 Ibid.
10 Jon R. Anderson, Ryan Sundby, “Colgate-Palmolive Company,” William Blair & Company Equity
Research, May 27 2010, Thomson One Banker, accessed May 2011.
11 Ibid.
12 Mohsenian, Grundy, Shapiro, Lin, “Colgate-Palmolive Co, Equal-weight; Competitive Risk limits upside,”
Morgan Stanley.
13 Ibid.
14 Colgate-Palmolive Co in Beauty and Personal Care–World, Euromonitor International,
www.euromonitor.com, accessed June 2011.
15 Ibid.
16 Ibid.
17 Diane Brady, “How Colgate Chomps the Competition,” Bloomberg Businessweek, August 6, 2001,
http://www.businessweek.com/magazine/content/01_32/b3744013.htm, accessed May 2011.
18 Ibid.
19 Colgate-Palmolive. 2010 Annual Report.
20 Anderson Sundby, “Colgate-Palmolive Company,” William Blair & Company Equity Research.
21 Ibid.
22 Ibid.
23 Mohsenian, Grundy, Shapiro, Lin, “Colgate-Palmolive Co, Equal-weight; Competitive Risk limits upside,”
Morgan Stanley.
24 Colgate-Palmolive Co in Beauty and Personal Care–World, Euromonitor International,
www.euromonitor.com, accessed June 2011.
25 Colgate-Palmolive. 2009 Annual Report, http://files.shareholder.com/downloads/CL/
1270725110x0x360920/cf624f2f-facd-452b-8f0f-7fd708c7902b/CL_2009AnnualReport.pdf, accessed May 2011.

10

Colgate-Palmolive: Staying Ahead in Oral Care 311-120

26 Ibid.

27 Colgate-Palmolive. 2010 Annual Report.

28 Mohsenian, Grundy, Shapiro, Lin, “Colgate-Palmolive Co, Equal-weight; Competitive Risk limits upside,”
Morgan Stanley.

29 Ibid.

30 Ibid.

31 Ibid.

32 Anderson, Sundby, “Colgate-Palmolive Company,” William Blair & Company Equity Research.

33 Ibid.

34 Colgate-Palmolive, “Bright Smiles, Bright Futures,” Colgate-Palmolive company website,
http://www.colgate.com/app/BrightSmilesBrightFutures/US/EN/HomePage.cvsp, accessed May 2011.

35 Colgate-Palmolive Co in Beauty and Personal Care–World, Euromonitor International,
www.euromonitor.com, accessed June 2011.

36 Mohsenian, Grundy, Shapiro, Lin, “Colgate-Palmolive Co, Equal-weight; Competitive Risk limits upside,”
Morgan Stanley.

37 “Colgate Purchasing Tom’s of Maine, Enters fast growing natural products segment,” March 21, 2006, via
PR Newswire, via Factiva, accessed May 2011.

38 “Colgate To Acquire Kolynos Expanding Its #1 Position In Global Oral Care,” Colgate-Palmolive press
release, January 9, 2005, http://investor.colgate.com/releasedetail.cfm?ReleaseID=96908, accessed May 2011.

39 “Colgate Announces Acquisition of GABA Holding AG - Strengthening its Oral Care Business in Europe &
Confirms 4th Qtr. & Full Year 2003 Earnings Estimates” Colgate-Palmolive press release, December 18, 2003,
http://investor.colgate.com/releasedetail.cfm?ReleaseID=124863, accessed May 2011.

40 Jack Neff, “Colgate-Palmolive Buys Tom’s of Maine Stake,” Advertising Age, March 21, 2006,
http://adage.com/article/news/colgate-palmolive-buys-tom-s-maine-stake/107954/, accessed May 2011.

41 Anderson, Sundby, “Colgate-Palmolive Company,” William Blair & Company Equity Research.

42 Mohsenian, Grundy, Shapiro, Lin, “Colgate-Palmolive Co, Equal-weight; Competitive Risk limits upside,”
Morgan Stanley.

43 “Colgate-Palmolive at RBC Capital Markets Consumer & Retail Conference,” via FD Disclosure newswire,
June 4, 2010, via Factiva, accessed May 2011.

44 Colgate-Palmolive, “Innovating Everywhere,” Colgate-Palmolive website, http://www.colgate.com/app/
Colgate/US/Corp/Annual-Reports/2008/Building-On-Global-Strength/Innovating-Everywhere.cvsp, accessed
May 2011.

45 Ibid

46 Colgate-Palmolive. 2009 Annual Report.

47 Ibid.

48 Mohsenian, Grundy, Shapiro, Lin, “Colgate-Palmolive Co, Equal-weight; Competitive Risk limits upside,”
Morgan Stanley.

49 Ibid.

11


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