Colgate Leads Oral Care Pack Through “Relentless” Innovation
This article was originally published in The Tan Sheet
Executive Summary
Colgate eked out 2% net sales growth for the October-December period and for the full year in a sluggish macroeconomic environment due to the firm’s “relentless focus” on innovation, says VP Bina Thompson.
Strong product launches helped Colgate-Palmolive Co. grow market share across oral care categories and markets in the firm’s fiscal 2013 fourth quarter, according to the firm.
“We've maintained our leadership share of the toothpaste category, with strong market-share performance virtually everywhere in the world,” said Senior VP of Investor Relations Bina Thompson on Jan. 30 during the firm's earnings call.
Despite slower category growth and an increasingly competitive playing field, new oral care products helped make the quarter Colgate's strongest in organic sales for the year, with growth on the high end of the company’s targeted 5%-7% range, Thompson added.
Overall, net sales grew 2% to $4.36 billion for the quarter and by the same rate for the full year to $17.4 billion. Net income for the quarter fell 5.7% to $564 million, reflecting $133 million in charges related to the firm's efficiency program. For the year, net income slipped 9.3% to $2.24 billion.
Looking ahead, Thompson said the influence from innovation programs that fueled the New York-based firm’s 2013 performance should “continue into 2014 across all our categories.”
Mouthwash Making Gains
Mouthwash products performed particularly well across the globe, boosting the firm’s market share in the segment 130 basis points to secure a record-high 17% for the year, according to Colgate.
Colgate's leading worldwide share in toothpaste remained at 44.9% on a year-to-date basis, with solid performances from Colgate Total, Colgate Max Fresh Cool Scrub, Colgate Sensitive SmartFoam with Whitening and Tom's of Maine toothpastes spurring volume gains.
In North America, the launches of Colgate Optic White and Colgate Optic White Dual Action toothpaste drove market share for the Colgate White brand up 20 basis points to 5.3% in the quarter, the firm noted.
Colgate gained share in the mouthwash category within the past year and a half with the introduction of Colgate Optic White mouthwash and Colgate Total Advanced mouthwash. Together the products captured a combined share of 7% of the U.S. mouthwash market during the quarter, the firm says.
Retail support behind Colgate Total Advanced mouthwash has been at “record levels,” Thompson said.
“Growth in the category has been totally driven by this new product and added nicely to retail sales. Over half of the mouthwash buyers are either new to the category or trading up, which drives incrementally.”
In Latin America, Colgate recorded its strongest organic sales growth for the year during the quarter at 12.5%. “Our leadership continues in toothpaste and manual toothbrushes, and our mouthwash share is closely approaching the leading competitor,” Thompson said.
Colgate toothpaste brands in Brazil nabbed a record market share of 71.5% for the quarter, bolstered by the performance of Colgate Luminous White and the launch of Colgate Maximum Cavity Protection with Neutrazucar technology.
Colgate Maximum Cavity Protection with Neutrazucar rolled out in Brazil in the fourth quarter. The acid-neutralizing toothpaste is touted as reducing tooth decay by half (Also see "Colgate Pushes Acid-Neutralizing Toothpaste As Emerging Market Driver" - Pink Sheet, 28 Oct, 2013.).
Colgate’s slice of Mexico’s toothpaste market grew to 80%. “Both Brazil and Mexico achieved record shares as we continue to offer the consumers a wide range of offerings at all price points,” the senior VP said.
Meanwhile, in Asian markets the firm has gained a stronger foothold in oral care, with both its China and India businesses increasing their organic sales by double digits despite slowing growth in both countries. “Across the region, our year-to date toothbrush share/toothpaste share increased 20 basis points,” Thompson said.
The company recently introduced Colgate Plax Jasmine tea in Asia, “developed for the consumer who wants to use mouthwash to help keep their breath fresh but who doesn't like a strong and burning mouth feel,” she said.
In India, the company's toothpaste/toothbrush share was up 70 basis points to 54.1%, representing gains across all price points, Thompson noted. In China, share increased 30 basis points to almost 34%.
The firm said as consumers in China long have believed in the antibacterial properties of charcoal, it recently introduced Colgate Slim Soft Charcoal toothbrush and is preparing to introduce Colgate 360 Charcoal Deep Clean toothpaste along with a toothbrush.
Investments Shrink Earnings
North American net sales, excluding pet nutrition, increased 2.4% in the quarter to $772 million. For the year, sales in the region, which accounts for 18% of the firm's business, were up 3.4% to $3.07 billion.
Sales in Latin America, which contributes 29% of overall sales, were flat for the quarter at $1.27 billion and for the year at $5 billion.
Sales in Asia, 14% of Colgate’s business, rose 4.5% to $572 million for the quarter, while organic sales advanced 9%. For the year, net sales in the region grew 9.2% to $2.47 billion.
In a Jan. 30 analyst report, Deutsche Bank analyst Bill Schmitz said among its peers, Colgate “remains the steady hand in the group,” with its leading market shares and accelerating restructuring savings enabling it to withstand currency fluctuations better than most competitors.
Schmitz noted the “threat from [Procter & Gamble Co.’s] oral-care globalization is overdone.” With a “best-in-class” positioning, Colgate should continue to deliver mid-single-digit organic sales growth, the analyst said.