Growth opportunities in India’s oral care market
Colgate-Palmolive (India) is a leading oral care company that has been present in India since 1937. Its entrenched Colgate brand occupies the number one spot across the country, has been ranked “Most Trusted Brand” in oral care for several years and is endorsed by more than 70% of dentists in India. Colgate has more than 50% share of the Indian market.
Under new CEO Ram Raghavan, its relentless focus on brand building (Colgate spends significantly more than peers on advertising and promotion) and its strong distribution advantage (reaching 240 million households across India via 6 million points of sales) has cemented its dominant market position. Rising commodity costs have led to concerns about profitability, but its dominant consumer brand should translate into strong pricing power, and we believe that Colgate should be able to increase its prices in response. The company has a long track record of improving its profitability consistently.
The potential growth opportunity for Colgate is significant, as per-capita consumption of toothpaste in India is still only half of that in other developing markets. Average selling prices in India are also significantly lower. We believe this will change as consumers graduate from using Colgate’s basic formulas to its premium brands. Over the medium term, there is also potential to capture consumption in other personal care categories such as skincare, which contributes less than 2% of Colgate India’s revenues currently, while forming more than 20% of sales for the parent Colgate-Palmolive Co.
Source: Company presentations, FSSA Investment Managers, as at March 2022. Return on Capital Employed (ROCE) is a measure of a company's profitability and the efficiency with which its capital is employed.
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