01 Sep 2015 20:00 IST

The Case

Will Colgate’s branding strategy beat the competition?

The brand holds a 55 per cent share of the toothpaste market but rivals are snapping at its heels

Colgate has been one of the most trusted toothpaste brands for decades. It is not only the older generation that grew up with Colgate, it has been a first brand even for the young, when it comes to oral care. The brand has faced bursts of competition from time to time and has fought back effectively to regain market share. In the 1960s and 1970s, Forhans was the challenger brand but it is completely forgotten today. Binaca, which later became Cibaca and finally got taken over by Colgate, was another challenger.

However, maybe because of the dominance of Colgate in India, this category has a fewer number of brands than, say, soaps. Given that neither soaps nor toothpaste have any technological barriers to entry and most entry barriers are created by marketing muscle, one would have expected to see many more brands in the fray.

Despite the strong brand and Colgate’s focus on oral care, in the late 1980s Close-Up changed the way toothpaste looked and felt in the mouth. High on freshness ingredients, the transparent look and the youth-centric approach gave Colgate some sleepless nights at the time. Close-Up gained a significant share of the market, forcing Colgate to launch a similar product and alter its strategies for some time. Colgate has regained its share since then, but Close-Up continues to hold a majority share in the gel category, with Colgate Gel remaining a distant second.

Unilever also attacked Colgate on the ‘healthy teeth’ platform with Pepsodent, thereby attacking on two fronts. Currently, despite Colgate accounting for about 55 per cent share of the toothpaste market, Pepsodent and Close-up are still sniping at its heels with intermittent attacks.

Oral products market

The oral products market in India consists of toothpaste, toothbrush, tooth-powder, and mouthwash. According to IRS data (2011), 66 per cent of Indian households use toothpaste, 24 per cent use toothpowder, and 18 per cent are non-dentifrice users.

The toothpaste market in India is estimated at ₹6,000 crore, growing at 19 per cent y-o-y. There are different segments in the market like gel, sensitivity, whitening, and so on. India’s per capita consumption is reportedly almost one-fourth that of the US, and less than half that of other emerging markets. Toothpaste has a high penetration of around 78 per cent in urban India. Colgate is the overall market leader, with a share of 55.9 per cent.

The broad segments are:

Germ and Tooth Decay: This is the biggest segment; Colgate gets its major share from this segment. Of late, Pepsodent has begun attacking this segment with its Germicheck variant. As per a recent media report, more than half of Colgate’s overall share comes from Colgate Strong Teeth, which competes in this segment (and the focus of Pepsodent’s Ad).

Sensitivity: This is the fastest growing segment, already at ₹950 crore, and is growing at 30-40 per cent a year. GSK’s Sensodyne has a slight lead

Gel: The second biggest segment (₹1,500 crore) and the only one where Colgate significantly trails the leader Close-Up (60 per cent market share)

Gum: Another upcoming segment where GSK’s Paradontax is making much progress.

Whitening: A segment which has seen renewed emphasis from Colgate with Colgate Visible White

Multi-Benefits: Another segment dominated by Colgate with its Total variant. This segment enjoyed great significance at one point in the US and was responsible for Colgate becoming No.1 in the US between 1998-2007 before P&G’s Crest reclaimed the lead

Taking on other brands

Besides the direct attack from Pepsodent, entry of a large international player like Oral B has further intensified competition in the general toothpaste category. Brands such as Sensodyne and Paradontax have come in with aggressive marketing strategies and have created small sub-categories for themselves, possibly at the cost of Colgate. Colgate responded with Colgate Sensitive but Sensodyne still has a larger share of the sensitive toothpaste market.

Colgate has over the years tried to fight the sub-segments through a sub-branding strategy and has launched sub-brands such as Colgate Gel, Colgate Sensitive, Colgate Herbal, Colgate Active Salt and Colgate Total. It is clear that the other players, besides Unilever and P&G, are not very keen to take Colgate head-on in its main product line. Hence, they have started carving smaller segments for themselves and, with a focused strategy, are managing to remain leaders in their respective sub-segments.

Their efforts are therefore to slowly grow these categories as well as their shares in the market. While larger players such as Unilever are trying to grow the market and capture shares, players such as GSK have created a niche for themselves in the sensitive toothpaste market.

Through a series of extensions, Colgate has increased its share of the market from 52.4 per cent in 2011 to 54.5 per cent in 2012. While the extension strategy seems to have worked in retaining and marginally growing its share, analysts wonder whether, in the long run, this strategy will be effective. In other countries Colgate has other brands, such as Elmex and Dentagard, but in India it has followed a single-brand strategy, apart from its acquisition of Cibaca. With competition set to intensify in the main category, and small players creating their own niches, will Colgate be risking its main brands by over-extension and thereby lose share to, say, Oral B or Pepsodent?

What you need to do

You are the Brand Manager for Colgate and you have been asked to decide its future brand strategy. You have to specifically advise the CEO on whether the company should continue with a single-brand strategy in the increasingly competitive scenario or create different brands to fight the diverse competition more effectively. The key objective of the brand is to defend and grow its market share rather than expand the market.

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