Colgate-Palmolive (NYSE:CL) has been in the consumer goods business for more than 200 years since it was established in 1806. The company operates in more than 200 countries worldwide with revenues exceeding $17 billion distributed among its four major operating segments – oral care, personal care, home care and pet care.
Colgate-Palmolive’s personal care segment constitutes of three categories – shampoos, soaps and deodorants. It has established strong brands in each of these categories like Caprice, Palmolive, Softsoap, Irish Spring, Speed Stick and Lady Speed Stick. According to the company’s latest annual report, the personal care segment constitutes almost 21% of its total revenues. In this article, we will detail our forecast for this segment of the company.
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- Appreciating US Dollar & The Potential Scrapping Of TPP To Have An Adverse Impact On Consumer Good Companies
- Colgate Palmolive’s Q3 Results: Company Likely To Rely On Advertising And Premium Products Going Forward
- Colgate Palmolive’s Q3 Earnings Preview: Weak Macro Environment Continues To Put Pressure On Sales But Cost Savings Can Help Lift Bottom Line
- Colgate’s Oral Care EBITDA Should Continue To Strengthen In The Future
Global Market Size Forecast
The total market size for the shampoos, soaps and deodorants in 2012 was about $75 billion, and it will grow to about $112 billion in the next six years, a compounded growth rate of ~6.9% per annum.    Much of this growth would come from two sources: 1) higher prices as global economic conditions improve, and 2) higher volumes sold as the depth and breadth of the market increases.
Shifts in product mix towards premium category
With the growth in personal disposable income due to improving economic conditions, consumers will more frequently opt for premium brands resulting in higher average price per product sold. Last year, Colgate-Palmolive helped drive market growth as consumers switched from private labels to brands like Protex Men and Palmolive Naturals Pomegranate bar soaps, Speed Stick Naturals & Protect deodorant. In 2012, Colgate-Palmolive increased its prices by 3% over the year 2011,  and peers like Unilever and Procter & Gamble did the same with a price increase of 4.8% and 4% respectively.  ((Procter and Gamble 10K))
Higher penetration to help increase market size
Emerging markets like Brazil, China and India still have a huge potential and companies will see growth in their total volumes as they further expand their distribution networks in these countries. The revenues from emerging markets grew by 10% in Q4 2012, over the previous quarter for Colgate-Palmolive compared to company-wide revenue growth of 4%.  Also, technological improvements and innovative products will help companies in further penetrating their existing markets leading to a higher consumption per consumer.
Colgate-Palmolive’s Market Share
Colgate-Palmolive’s total revenue from the personal care segment was ~$3.5 billion in the previous year, which represented a market share of ~4.8%. We expect the market share to remain around this level through the end of our forecast period given the competition from other leading players such as Unilever and P&G in emerging markets.
The company has tried to expand its market share in this segment by acquisitions. In June 2011, Colgate-Palmolive acquired Sanex, a manufacturer of shower gels and deodorants, with net sales of €187 million in 2010.  We estimate that the company will maintain its market share in the personal care segment, primarily by focusing on enhanced products and through marketing campaigns in traditional as well as non-traditional channels.
We have a $56 price estimate for Colgate Palmolive, which is at par with the current market price.Notes:
- Global Deodorants Market is Expected to Reach USD 15.78 Bn by 2018, Reports GIA, Global Industry Analysts, March 2013 [↩]
- Lucintel Forecasts Good Growth for the Global Hair Care Products Industry, Lucintel Global Management Consulting and Market Research Firm, June 2013 [↩]
- Global Bath & Shower Products. A Comprehensive Industry Profile with Forecasts to 2015, Research and Markets, December 2011 [↩]
- Colgate 2012 Results [↩]
- Unilever 2012 results [↩]
- Stronger Pricing Lifts Colgate Despite Softness In Latin America, Trefis, February 2013 [↩]
- “Unilever sells Sanex to Colgate in £580m deal“, The Telegraph, March 2011 [↩]