Colgate puts up a strong fight against Patanjali

Sales growth rides herbal innovations, aggressive marketing and distribution

Oral care major Colgate is fending off Patanjali, yoga guru Ramdev's ayurvedic consumer products company, by taking the fight to its doorstep.

India-specific innovations like the Active Salt Neem toothpaste are pushing up sales.

For the three months ended March, Colgate reported a four per cent sales growth, the highest in four quarters. Toothpaste sales grew three per cent in the quarter under review. This was higher than the previous three quarters.

In an analyst call last week, Colgate's India Managing Director Issam Bachaalani said its Active Salt Neem toothpaste was shaping well, with a 1.1 per cent market share nationally.

Bachaalani, who took over in October 2014, said Colgate would build its naturals portfolio with new launches in 2016-17. In 2015-16, Colgate launched two other herbal toothpastes containing clove oil and based on charcoal, which it said were doing well in modern trade. The company also launched an express pain relief gel in February 2016. Bachaalani said these innovations would continue.

He also said the number of vans making trips to rural areas had grown three times to 1,031 from 340 a few years ago. For the March 2016 quarter, rural sales contributed 35 per cent to Colgate's top line.

Analysts expect this number to increase. "Around 300 million consumers still do not use toothpaste. And in urban areas, less than 20 per cent urban households brush twice a day," Bachaalani said.

Brand investments also significantly increased for Colgate, with advertising and sales promotion expenditure touching 18.1 per cent of sales in the March quarter, up from 15 per cent in the same period a year ago. Bachaalani said this momentum would be sustained.

He admitted Colgate's share of the toothpaste market had slipped to 55.7 per cent in the March quarter from 57.3 per cent in the December 2015 quarter. "The demand scenario is improving for Colgate, which is showing in improved volume growth. While Patanjali and Dabur pose a challenge, the herbal segment is a part of the overall toothpaste market. To improve share, Colgate will have to participate across segments, which is what the management said it would do," said Krishnan Sambamoorthy, analyst, Motilal Oswal.

In the March quarter, Bachaalani said barring multi-use and low-priced packs, segments like freshness, whitening, naturals and family toothpastes had posted strong growth.

Colgate derives nearly 70-80 per cent of its Indian revenue from toothpastes and remains the leading player in the category. The Colgate stock price has moved up nearly 3 per cent in the last one week. The spike is even sharper at nearly six per cent if the price from May 23 is taken into account.

Today, the stock closed at Rs 858.80 on the Bombay Stock Exchange (BSE), up 0.74 per cent.