01 Sep 2015 19:55 IST

Innovate new brands while maintaining the core

IIM Trichy duo wins BL Case Study Contest on Colgate. The two will receive gift vouchers from Hidesign

Colgate has been, and currently is, the leader in India’s oral care market. But, with the rise of niche brands such as Sensodyne (from GSK), and mass brands such as Pepsodent (from HUL), it is time for Colgate to rethink its strategy.

Amit Kumar and Vishal Wagh

Avoid brand myopia: Don't be another Crest:

It is a remarkable coincidence that the strategy which competitors chose to dislodge market leader Colgate in India, bears similarities with what Colgate did in the late ’90s to dislodge P&G's Crest in the US. Crest was a market leader in the US for more than three decades. In 1997, Colgate launched the FDA-approved Colgate Total, which claimed to fight every problem — cavity, plaque, tartar, gingivitis, bad breath — and gained 30 per cent market share in just one year, while Crest kept fighting cavities. Other players also launched niche brands like anti-sensitivity and whitening products. P&G responded to it by launching Crest MultiCare, Crest Extra Whitening, but in vain. It took Crest not less than 10 years, and $2 billion in ad spend (which was $1 billion more than what Colgate spent) to reclaim its leadership in 2007.

In India, the situation is strikingly similar. Colgate has been a leader for a long time, but is now facing sizeable competition from Sensodyne and Pepsodent. Like Crest, Colgate has responded by launching Colgate Sensitive, Colgate Gel and others.

Continuing with a single umbrella brand strategy will be akin to what Crest did in 1997, and everyone knows the result going down that road. We believe Colgate should change the single umbrella brand strategy, and create different brands to fight niche competition.

The biggest disadvantage with following an umbrella brand is that the identity of the established brand is lost. Today, Colgate is: Old gum fighter (Colgate), and sensitive reliever (Colgate Sensitive), and whitener (Colgate Visible White).

Innovating new brands: Key questions

Will new brands cannibalise the Colgate brand itself?

Toothpaste is a perfectly substitutable product, which means that a person won't buy two different brands of toothpaste for simultaneous use, just as you don't buy shoes of different sizes. So, if Colgate launches a different niche brand to fight competition, and a person buys that brand, it means that the new brand is not cannibalising old Colgate, but snatching sales from the competition.

What will be the positioning of old Colgate?

Just as Crest kept fighting gums, Colgate should continue its current proposition. This way, Colgate’s loyal customers would hold onto it, while its new brands will keep its customer base from going to competitors.

What will be the positioning of new brands?

Sensodyne is a successful brand now, and even Colgate, with its Colgate Sensitive brand, is finding it difficult to beat it. GSK was the first to identify this need of customers, and leveraged on the first mover advantage. Hence, to stop the next Sensodyne, Colgate has to keep an eye on new consumer trends, hidden opportunities, and keep launching brands to cater to them.

Will Colgate be an innovator or follower? An innovator definitely.

In the oral care segment, niche brands become successful if they are launched first; the brands that follow are seen as laggards. This is why Colgate Sensitive or Colgate Plax are marginal successes at best, while innovator brands such as Listerine and Sensodyne completely dominate the market share. Colgate should follow the innovator strategy in launching new brands — it has to be the first.

Won't the launch of new brands be costly? Yes, but benefits will outweigh costs.

As we learnt from Crest, reclaiming the market share from competitors by advertising is also costly; it’s better to spend on brand building than advertising.

Other benefits of multiple niche brands:

* Even if a new brand is received negatively, the old brand will remain safe.

* In a single umbrella brand, the competitor can attack all brands in a single ad, while in a multi-brand case, competitors will have to attack brands individually. Therefore the old brand will stay intact.

Amit Kumar and Vishal Wagh are pursuing PGPM from IIM Tiruchirappalli