Colgate Jumps On Weak Ad Market To Reconnect With Consumers

The company is capitalizing on the slumping ad market with lower-cost media buys to strengthen its “emotional connection” with consumers in the roughly 80 countries in which it advertises.

Colgate-Palmolive is capitalizing on the slumping ad market, purchasing media at a lower cost and launching campaigns to strengthen its emotional connection with consumers

In the current economy in which competitors have reduced or ceased ad spending, Colgate-Palmolive will maintain its "share of voice" behind ad initiatives around the world, the firm reported during an analyst briefing Jan. 29.

VP-Investor Relations Bina Thompson noted that "meaningful downward moves in the costs of advertising media" began in the fourth quarter and continue this year. The changes vary by type - broadcast, cable, print - and by country.

"We have seen reductions, anything from mid-single digits to north of 25 percent and those were available in select markets in the fourth quarter, and we took advantage of that and expect to take advantage of it further in 2009," Thompson said.

The company is exploring new ways to strengthen its "emotional connection" with consumers in the roughly 80 countries in which it advertises.

"Part of connecting with consumers is not just about the traditional broadcast media but is increasingly about the kind of messaging we put to the consumer at the store level," the executive said.

In select markets around the world where consumers are feeling the economic pinch, Colgate is connecting with them by promoting the "value proposition" of its products.

For example, Thompson said, consumers continue to be drawn to value-added products such as Colgate Total, which is advertised as offering a number of oral-care benefits.

In oral care and personal care in particular, "consumers have an emotional connection to the brands," the VP said.

Such products enable Colgate to retain market share in the current economy even though it increased prices across its portfolio last spring in order to offset higher commodity costs.

Colgate experienced lower unit volume in the quarter due to price increases it implemented in mid-2008, but it expects those numbers to improve in coming months.

"There has been some concern that in these tough economic times the consumer will trade down to lower-priced products, including private label," Thompson said.

However, "worldwide private-label penetration is in the low- to mid-single percentage and has not grown meaningfully in the majority of our categories."

She noted that in the U.S. private-label toothpaste accounts for about 0.5 percent of the category, while in Europe private label is less than 5 percent and in Latin America and greater Asia it is "essentially nonexistent."

According to Thompson, commodity costs that weighed on the company in recent quarters will lighten considerably in 2009.

Wisp: New grooves in oral care

Colgate will launch innovative products to help grow its North American business "modestly" in the first quarter and in mid-single digits for the year.

By the second quarter the company will introduce Colgate Wisp , a product positioned as a disposable toothbrush offering convenience for consumers who want to brush "on the go" but do not want to carry around a toothbrush and toothpaste.

The product consists of a mini-brush loaded with a breath-freshening "bead" that dissolves in the mouth while brushing and does not require consumers to rinse after use.

Wisp likely will appeal to consumers who depend on gum and mints to freshen breath, habits providing benefits that are usually "short-lived," according to Colgate.

The extent to which current pressures to be "green" will influence consumer reception of a disposable toothbrush remains to be seen.

Sales of oral-, personal- and home-care products in North America in the fourth quarter advanced roughly 1 percent to $709.3 million; operating profit for the sector grew 5.3 percent to $191.7 million.

For the year, North American oral, personal and home-care revenue increased approximately 4.8 percent to $2.9 billion, and operating profit was up 3.3 percent to 689.1 million.

Latin American sales in those categories rose 5.5 percent in the quarter to $996.1 million, and profits were up 11.5 percent to $293.8 million.

For the year, the region's sales totaled $4.08 billion, representing growth of 17.1 percent. Net profits increased 17.4 percent to $1.18 billion.

New products drove market-share gains worldwide for the year, with the company's global toothpaste share reaching an all-time record high of 44.8 percent, according to the company.

Colgate Total and Colgate Max Fresh toothpastes reached record-high market shares of 16 percent and 4.1 percent, respectively, for the year.

Net sales for the quarter grew 0.5 percent to $3.66 billion, and unit volume increased 1 percent. Organic sales excluding foreign exchange, acquisitions and divestments climbed 9 percent.

Growth in emerging markets drove profit higher than expected during the quarter - $527.5 million, representing an increase of 7 percent.

Full-year global sales were up 11 percent to $15.3 billion. Net income grew 12.6 percent to $1.96 billion.

- Eileen Francis

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