Colgate squeezing for more freshness gains

MUMBAI: Variant by variant, Colgate-Palmolive (India) is squeezing out more for itself in the toothpaste market.

The company, which hit pay dirt by introducing Max Fresh variants of its flagship Colgate Dental Cream last year, is planning more variants and line extensions to leverage the topline traction.

Last week, the FMCG major squeezed out a citrus-flavoured Max Fresh.  More variants would follow by May 2007, according to sources. Colgate’s new variant will have a pan-India presence with offerings ranging from small use and throw tubes to traditional packages such as 80 gms, 150 gms targeting both rural/ semi-urban and urban market.

Vinay Hegde, executive vice-president, marketing, Colgate-Palmolive (India), had last month said Max Fresh had doubled the company’s sales in the freshness segment. “Freshness is the fastest growing toothpaste segment, second only to the family segment in terms of value,” Hegde had said. Currently, Colgate enjoys half of the Rs 2,600 crore toothpaste market’s share, followed by Hindustan Lever with 30%.

In the overall oral care segment - which would include toothpowders, tooth brushes etc - Colgate has a 49% share. Its recent moves to tweak the flagship brand (apart from Max Fresh, which is aimed at the premium segment, the company has unveiled Advance White, Active Sal, too) has helped it garner an additional 5% market share in past 12 months.

The overall toothpaste market grew by 13% in the third quarter of the current financial year, Princy Singh and Pragati Khadse of Citigroup Global Markets said in a note to clients on Friday.

A lot of the brand extensions are seeing high degree of monetisation in the rural areas. In fact, Cibaca, Colgate’s other brand, has been having a good run in the hinterland.

Brand consultant Harish Bijoor said rural areas offer significant potential for lowest common denominator goods such as toothpastes.

“Out of the 133 million rural homes, 43 million with an average headcount of 5.5 have the same buying power as middle class familes in the urban market,” he said.

Therefore, Bijoor points out, multinationals are cutting down on adspends and going for more below-the-line activities to understand consumption behaviour in rural areas. “Differentiators like toothpaste with salt and neem twig are inspired by and aimed at the rural market,” he said.

Citigroup has predicted that Colgate’s sales earnings will grow at 12.4% CAGR and earning per share will improve 18% CAGR between the current financial year and 2009-10.

The research cites factors such as Cibaca’s strong footing in the rural/semi urban market, success of new variants, the cut in ad expenses and cost savings due to the closure of its plant in Sewri in central Mumbai as the reason for an upward revision in net profit target from Rs 177 crore to Rs 203 crore for the current fiscal.