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 50% share of the Indian market.
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. Average selling prices in India are also significantly lower. We believe this will change as consumers graduate from using the company’s basic toothpaste 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 revenues currently, while forming more than 20% of sales for the multinational parent company.
Oral care market is highly under-penetrated in India
Dominant market share and attractive ROCEs* over 15 years
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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