Growth opportunities in India’s oral care market
This leading oral care company has been present in India since 1937. Its entrenched toothpaste 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. This oral care company has more than 52% share of the Indian market, 3x of its next largest competitor.
Under the new CEO, its relentless focus on brand building (it 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 the company 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 this oral care company is significant, as per-capita consumption of toothpaste in India is still only half of that in other developing markets. The company is also expected to grow in other personal care categories, with new launches in the Palmolive brand. Its strong franchise drives exceptional returns. Median return on capital employed (ROCE) is 91% over the last 15 years.
Oral care market is highly under-penetrated in India
Dominant market share and attractive return on capital employed (ROCEs) over 15 years
Source: Company presentations, FSSA Investment Managers, as at 31 May 2023. 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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