Colgate-Palmolive’s Indian Market Share Unlikely To Be Hurt By P&G’s Entry

Oral care giant Colgate-Palmolive (NYSE:CL) is the leader in the Indian oral care market with a share of over 50%. It is the top consumer products brand in the country with the highest consumer reach. However, Procter & Gamble‘s (NYSE:PG) recent entry into the Indian toothpaste market with its Oral-B Pro-Health toothpaste has sparked concerns about the company’s prospects in the country. ^[1]

India’s $1 billion oral care market is forecast to grow at a CAGR of about 14% during 2011–2015, which is much higher than the global growth rate. ^[2] This has led to an increase in the number of oral care companies entering the space, thereby stiffening the competition. P&G has made a similar move by launching its first toothpaste in the country under the Oral-B brand, which commands close to 30% share in the toothbrush market. Although Oral-B has a strong brand recall in India, we believe Colgate-Palmolive has positioned itself well to defend its market share:

1. Increasing penetration in rural India: While P&G is selling the Oral-B toothpaste in urban India, Colgate is striving to increase its penetration in rural areas. Although only 42% of the people living in India’s villages and small towns use toothpaste, the proportion is expected to increase with rising rural income and greater awareness about oral hygiene through advertisements, dental camps and free dental checkups. ^[3] Colgate has done well in this regard by building strong distribution strength across rural India. It now has the highest reach among all consumer products companies in the country.

2. Launching products that directly compete with P&G’s new launches: More than 30% of India’s population suffers from gum sensitivity and oral hygiene problems. Thus, India’s urban population is continuously upgrading from regular toothpastes to dental creams due to which the category is growing at 30%–40% annually. ^[3] This could benefit P&G, whose toothpastes are globally known for their functional properties, including sensitivity and teeth whitening. However, in the last couple of years, Colgate has launched innovative products such as Colgate Total Pro Gum Health and Colgate Sensitive which will help it compete with Oral-B Pro-Health.

3. Building a substantial presence ahead of P&G’s entry: P&G’s toothpaste launch has been long awaited. Although it was expected to occur in 2010, the company’s increased focus on core developed markets caused the delay. During this time, Colgate launched several products and a new production facility in India. To support its products in the wake of rising competition, the company also increased its advertising spend by 31% during the first half of 2013. This has resulted in market share gains in toothpastes, which has growth from 52% in 2012 to 56% presently.

4. Maintaining its strong brand equity: Colgate has been present in India for decades. With products across all oral care categories and price points, it is one of the most popular and preferred oral hygiene brands in the country. Compared to P&G, Colgate offers a much larger assortment of oral care products in a wide price range. This allows consumers to trade up and down gradually depending on macroeconomic conditions without impacting Colgate’s sales volume. (Read: Why Colgate Beats P&G In Oral Care)

The Brazil Experience

Colgate-Palmolive was faced with a similar situation in Brazil where it commands over 70% market share. When P&G entered the country’s oral care market in 2009, a majority of its market share gains came from smaller competitors and overall category growth rather than from Colgate, which continued to maintain strong brand equity among consumers. ^[4] In our view, P&G’s market share gains in India will also come from smaller competitors such as HUL and Dabur given that Brazil and India are quite similar in terms of economic growth and where Colgate-Palmolive has a dominating presence.

Understand How a Company’s Products Impact its Stock Price at Trefis

1. P&G To Launch Oral-B Toothpaste Tomorrow, Business Standard, July 1, 2013 [↩]
2. Indian Oral Care Market Forecast To 2015, Research and Markets, June 2012 [↩]
3. P&G Invokes Bollywood In India Toothpaste Battle, Bloomberg, July 4, 2013 [↩] [↩]
4. With Oral-B, Procter&Gamble  Stalks South America, Cincinnati Business Courier, Mar 2012 [↩]