Until FY15, the company’s Bright Smiles Bright futures Program had reached a total of 12.5 Cr school children in nearly 300,000 schools across the country, including 1 Cr kids in nearly 30,000 schools in FY15 itself. In addition, the company’s Oral Health Month Program, in association with dentists, reached 5.5m people in villages last year. No other company in any Indian FMCG category has category development efforts on schools and villages anywhere even close to this scale. With over 30 Cr people in India not using modern oral care products, these programs are an excellent way of conversion. For a lot of the potential incremental customers, Colgate, because of such efforts, is the first and only oral care brand that they are aware of. India is one of the few global technology centres for Colgate. Unlike foods where products have to be customized to a large extent for local tastes, MNCs in personal care generally roll out the same products worldwide. Colgate has been an exception on that front and its Indian R&D center has enabled strong roll out of innovative products for India particularly in the herbal/ natural space even before the recent boom. This enables them to participate actively in the ongoing herbal segment boom in India. Colgate Active Salt and Colgate Active Salt Neem have over 7 % market share in toothpaste category, and over one-third share in herbal space, an area perceived to be a relatively weak for Colgate. Within this, Active Salt Neem launched just last year already has over 1 % market share. In addition, the company also has access to innovations as a result of the parent R&D spend of over USD 250m every year. Oral care is half of the parent sales. Its competitors in oral care in India have no such advantages. Colgate has by far the best in Advertising & Promotion in the category with an A&P spend of over Rs. 700 Cr or 17 % as a percentage to sales, among the highest for any player in any single category in Indian FMCG. Oral care forms 97 % of Colgate’s total sales unlike peers for whom the category is much lower in salience. For Dabur, the segment is only 10 % of sales, while for HUL oral care is only 6 % of sales. Consistently higher advertising ahead of peers creates higher awareness, strengthens brand power and facilitates immense support for new launches. Apart from the benefits of concentrated large advertising on oral care, unlike peers, Colgate also has access to the war chest of Operating Cash Flow between Rs. 500 Cr to 600 Cr every year to invest in the oral care business, unlike peers. Colgate will be spending Rs. 1,250 Cr between FY14-FY17 on first setting up state-of-the-art toothpaste and toothbrush facilities at Sanand and Sri City in FY14 and FY15, and subsequently expanding capacities substantially in both these centers in FY16 and FY17, also an indication of the parent’s confidence about the Indian entity’s prospects. These capital investments enable faster roll out of better quality and premium products, attain logistical benefits due to being closer to suppliers as well as customers unlike just the Baddi and Goa plants earlier. These investments will also help enhance scale advantages even further compared to oral care peers who cannot match such massive investments in a single category. With state-ofthe- art manufacturing, there is also potential to be a regional sourcing hub. With the widest distribution in the category, as discussed earlier, Colgate is also likely to be the only oral care brand available in many areas as well. Single category focus in oral care, a key area of strength both in India and globally, gives Colgate benefits of concentration of ad spend and cash flows which other players cannot match. This increases barriers to entry over other players. Colgate has done well in this regard by building strong distribution strength across rural India. Colgate now has the highest reach among all consumer products companies in the country.
|SALES (₹ Crs)||3,983.50||4,162.30||4,578.50||5,150.00|
|NET PROFIT (₹ Cr)||559.00||607.80||659.40||764.90|
So, grab a fresh hot cup of coffee, turn on your net & browse on to www.bhavikkshah.blogspot.in & take out few minutes to get to know the most interesting world of investment... Till then HAPPY INVESTING, don't forget to Share !!