FORE SCHOOL OF MANAGEMENT, NEW DELHI

Toothpaste Industry &

Colgate
Strategic Management-1
Submitted to : Prof. Anil Kumar Singh

Submitted By,
Group 3
Members:
Jashandeep Singh
Kirti Obhan
Naveen Kumar
Pulkit Sehra
Radhika Modi
Rohan Sachdeva

231069
231076
231094
231106
231109
231118

Acknowledgement
Apart from the efforts of the group, the success of any project depends largely on the
encouragement and guidelines of many others. We take this opportunity to express our gratitude to
the people who have been instrumental in completion of this project. We would like to show our
greatest appreciation to Prof. Anil Kumar Singh (FORE School of Management). We can't thank him
enough for his tremendous support and help. Without his encouragement and guidance this project
would not have got materialized. We would also like to thank our friends for their support and
cooperation. Our appreciation also goes to the FORE School Of Management for allowing us access
to various resources, and to the College Library.

Contents
Acknowledgement ................................................................................................................................. 1
FMCG Industry .................................................................................................................................... 3
Toothpaste Industry ............................................................................................................................... 3
Porters 5 Forces for Toothpaste Industry .......................................................................................... 4
Competitive Rivalry within Industry: .............................................................................................. 4
Bargaining Power of Suppliers: ....................................................................................................... 4
Threat of New Entrants: .................................................................................................................. 4
Threat of Substitute Products: ........................................................................................................ 4
Bargaining power of Customers:..................................................................................................... 4
Value-Chain Model of Colgate ................................................................................................................ 5
Primary ................................................................................................................................................ 5
Secondary............................................................................................................................................ 5
Infrastructure .................................................................................................................................. 5
Human Resources ........................................................................................................................... 6
Technology Development ............................................................................................................... 6
Procurement ................................................................................................................................... 6
References .............................................................................................................................................. 7

FMCG Industry
India is one of the largest economies in the world in terms of purchasing power and increasing
consumer spending, next to China. The Indian FMCG industry, with an estimated market size of ~Rs.
2 trillion, accounts for the fourth largest sector in India. In the last decade, the FMCG sector has
grown at an average of 11% a year; in the last five years, annual growth accelerated at
compounded rate of ~14.7%. The sector is characterized by strong presence of global businesses,
intense competition between organized and unorganized players, well established distribution
network and low operational cost.

Revenuewise Market share

4%

2%

5%
Food Products

4%

Personal Care
8%
43%

Fabric Care
Hair Care
Households

12%

OTC Products
Baby Care
Others
22%

Source: www.ibef.com
Growing awareness, easier access, and changing lifestyles and with rise in disposable incomes, midand high-income consumers in urban areas have shifted their purchasing trend from essential to
premium products. In response, firms have started enhancing their premium products portfolio.
Rural demand & demand in tier 2 tier 3 cities is set to rise with rising incomes and greater awareness
of brands.

Toothpaste Industry
The toothpaste history in India can be tracked back from 1975 with 1200 tons of toothpaste
produced by the toothpaste industry. Prior to the toothpastes Oral Hygiene was the domain of local
homemade powders and Ayurveda practitioners. With the entry of Colgate in Indian marketplace
the awareness about Oral care and the importance of oral care took-off. In recent years the Industry
has shown impressive growth rate of 18.6% (this growth is calculated in terms of value growth in Rs.)
The growth in the urban market has been largely by the Gel Segment. Presently, a large chunk of the
Market is still held by Colgate. The major players in the toothpaste Industry being Colgate Palmolive
and Hindustan Lever Limited and several minor players like Dabur, Balsara hygiene etc. Presently

Colgate Dental Cream holds 52% of market share. HULs Close up and Pepsodent lies far behind with
23% of the existing market share. The third player in the marketplace in terms of market share is
Colgate Gel with 10.5% of the market share. That leaves 14.5% market share for other Brands like
Pepsodent, Pepsodent G, Promise, Babool, Sensofoam, Forhans, Cibaca, Neem, Vicco etc. The
toothpaste market is presently (2014) valued at Rs. 750 crores out of which the Gel segment has
already bagged 1/3rd portion of it. The Gel segment presently stands at Rs. 248 crores and is
growing at a rate much faster than Cream. In India toothpaste usage as compared to other countries
is very low which signifies about the potential of the market. In Urban India the usage of toothpaste
per person per year is just 190gms. Whereas it is 200gms of toothpaste per person per year in
developing countries as Indonesia and Thailand. In developed countries as USA and other European
countries the toothpaste usage is 375 gms per person year. In India the toothpastes companies are
going in for advertising on a heavy note, on an average the companies managing this FMCG category
are spending 6.15% of their sales on development.

Porters 5 Forces for Toothpaste Industry

Competitive Rivalry within Industry: A large number of firms such as Colgate, Hul, Dabur, etc
are already competing for market share. Competition is intensified with the entry of large
international players. Brands such as Sensodyne and Paradonax have come in with aggressive
marketing strategies and have created small sub categories for themselves. Switching costs for
costumers is quite low.
Bargaining Power of Suppliers: There are a large number of competitors in the market and
hence suppliers exert some power.
Threat of New Entrants: Threat from new entrants backed with enough capital to attack existing
marketing strategies of the likes of Colgate is high.
Threat of Substitute Products: Though toothpaste penetration in India has increased from 56%
(2008) to 71% (2012), there are still 30 crores people using conventional ways of brushing involving
use of toothpowder and non-dentifrice users. Flossing is still unpopular amongst the users.
Bargaining power of Customers: Although they have a lot to choose from, it's been an
observation that customers are loyal and less likely to switch their toothpaste often.

Bargaining
Power of
Customers
(low)

Bargaining
Power of
Suppliers
(Moderate)

Competitive
Rivalry within
Industry

Threat of
New
Entrants
(low)

(High)
Threat of
Substitute
Products
(Moderate)

Value-Chain Model of Colgate

The Value-Chain Model of Colgate comprises of Suppliers Suppliers, Suppliers, The Organization,
Distributors, Retailers, Customers and Consumers.
According to Porter, the Value-Chain can be divided into two activities

Primary
Colgates weekly supply-chain network handles 65 Ocean containers, 3800 US truckload
shipments, 1700 US less-than-truckload shipments, and 15000 pet food direct-store-delivery
shipments. Prior to 2006, Colgate plant in every country worked Self-Sufficiently. In US, 80% of
Colgate products were manufactured in Colgate-owned-and-operated manufacturing facilities,
which has now been dropped by 20% with contract manufacturers and co-packers. The distribution
channel of Colgate are continuously shifting and evolving and Internet sales are going up. The
company has shifted away from doing its own manufacturing to Contract manufacturing and
Colgate-operated plants.

Secondary
Infrastructure
Colgate has a support group of supply chain finance to support our decisions. It also has
capital investments in order to strengthen the financial levers of the supply chain.

Human Resources
Colgate believes in building talent systems and hiring from within. The company oversees
succession planning for the supply chain organization. When it comes to talent management, it is a
single threaded needle. Succession planning is done three times a year. It also values crossfunctional experiences.
Technology Development
The vast amount of data of Colgate is managed by SAP by SAP HANA Software. It provides
support and guidance for Fast, Risk-Free implementations. With the SAP Supply Chain Management
(SAP SCM) application, Colgate-Palmolive has transformed how it manages demand planning. Global
production efforts are now aligned to meet customer demands using levels of information for
orders, inventories, shipments, and vendor capabilities. Service and responsiveness to retail trade
and internal customers has been enhanced to improve Colgates profit margins.

98% Increase in on-time and complete orders

<1 day to complete the customer replenishment cycle
>99% Inventory accuracy

Procurement
95% of manufacturing is directly managed by the Colgate team and the company has taken
steps to vertically integrate some of the operations. For example, we make the tubes for our
toothpaste. This has allowed us to improve operating margin, and return on assets (ROA). The focus
is on Corporate Sustainability and Enterprise Risk Management for future vision.

Metrics
Average
2000-2003 2004-2007 2008-2011 2012
COGS & Revenue Ratio
0.43
0.45
0.44
0.42
0.42
Days of Inventory
65
59
67
68
70
Operating Margin
0.21
0.21
0.19
0.22
0.23
Return on Assets
18%
17%
16%
20%
18%
SG&A Margin
0.66
0.67
0.65
0.65
0.65
Year-over-Year Sales Growth
6%
3%
9%
5%
2%
Source: Supply Chain Insights LLC, Corporate Annual Reports 2000-2012
COGS & Revenue Ratio: (COGS) / (Revenue)
Days of Inventory: (Average Inventory / COGS) * 365
Operating Margin: (Operating Income) / (Revenue)
Return on Assets: (Net Income) / (Total Assets)
SG&A Margin: 1 (SGA) / (Revenue)
Year-over-Year Sales Growth: (Revenue Year y Revenue Year x) / (Revenue Year x)

Infrastructure (management, planning, finance, accounting, etc)

Human Resources (Succession Planning, Single-Threaded Needle)
Support
Activities

Technology Development (Digital & Mobile, e-commerce, Analytics)

Firm
Value
Chain

Procurement (Corporate Sustainability, Enterprise Risk Management)

Primary
Activities

Inbound
Logistics

Operations

Sales and
Marketing

Sourcing and
Procurement System

Suppliers
Suppliers

Service

Outbound
Logistics

Customer Relationship
Management System

Suppliers

Firm

Distributors

Customers

Fig: Colgate Value-Chain Model

References
1. Colgate: A Closer Look at Supply Chain Excellence, Lora Cecere, April 26, 2013
2. Colgate Logistics Delivers Smiles, Perry A. Trunick, May, 2011
3. http://www.sap.com/customer-testimonials/consumer/colgate-palmolive.html