Colgate’s Oral Care EBITDA Should Continue To Strengthen In The Future

by Trefis Team
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Colgate-Palmolive
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Colgate Palmolive (NYSE:CL) has been a leader in world’s oral care hygiene market, with 45% of its revenues coming from this division in 2015. Historically, EBITDA contribution of oral care division in Colgate’s total EBITDA increased by 2.5 percentage points from 43.0% in 2010 to around 45.5% in 2015. With Colgate still dominating the world’s Oral Care market, we expect this contribution to increase to 47.0% in 2021.

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Aging Population, Innovations And Regional Adaption To Drive The Growth In The Segment

The primary reason for this is the expected growth in elderly population of the world, as elderly people are expected to encounter more oral problems than the young ones. According to a UN report, people aged more than 60 will outnumber the children between the ages of 0-9 years by 2030. Other than this, Colgate is focusing on regionally specific products to cater to the needs of local population. For instance they have launched Colgate Active Salt with Neem in India and Colgate Bamboo Charcoal for South East Asia. This can help them to increase their market share in coming years, as locals will get quickly acquainted with Colgate’s products.

Regionally, the company derives a major part of its revenues (around 57%, excluding Hill’s Pet Nutrition), coming in from faster growing emerging markets.  This is in contrast to its more saturated developed markets.  There is thus an opportunity for Colgate to strengthen its hold in these newer markets. This comes with the fact that even big players like Procter & Gamble have not been able to pose a significant competition to Colgate in the emerging markets.  This was clear in India, where P&G’s Oral B toothpastes have been discontinued due to weak custtomer response. Colgate has been leveraging innovation to boost market share growth in North America.  One eample is the product Colgate Total, a premium product that offer an opportunity to boost margins and EBIDTA of its oral care business.

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