Colgate Palmolive is a household name and market leader for many segments within the FMCG sector which include oral care, personal care, surface care and fabric care. Some of its most popular brands are Colgate toothpaste, Palmolive line of soap and shampoos, dishwashing bar Lemon Max and washing powder Bonus.
Pakistan's FMCG sectors - oral, fabric & dishwashing
Within oral care, Colgate Palmolive is the market leader with 36 percent market share in 2016. Factors influencing increase in consumption of products within oral care are adoption of toothpaste in untouched segments and brand loyalty.
Within the fabric care segment, bar detergents are mostly used by lower income rural and urban households, most of which who do not own washing machines. Some consumers prefer to use shredded bar detergents in washing machines under the assumption that bar soaps are gentler on clothes than powder detergents. However, with increased awareness and urbanization, a shift away from bar detergents is expected.
Another factor impacting fabric care is heavy investment in marketing drives by MNCs such as Unilever for fabric softness. This category is expected to be the most dynamic within laundry care in terms of sales growth, as per Euromonitor.
While Unilever's Surf Excel remained the market leader for premium laundry detergents brand in 2017, Colgate Palmolive led the overall laundry care category as per Euromonitor, with Bonus being its most successful brand while Brite and Express brands made key contributions to its leading position.
Hand dishwashing, versus automatic dishwashing, will continue to dominate in the foreseeable future as most middle income and high income households hire domestic maids for such mundane chores. Within this category, bars are expected to be the dominant format rather than liquids and pastes since market penetration and awareness of these alternatives remain low.
Colgate Palmolive was the market leader in 2017 thanks to Lemon Max's continued success, leading to the decline of its competitor, Unilever's Vim. Though both Vim and Lemon Max have similar price points, marketing efforts of Lemon Max to convince consumers of the brand's stain and grease removal abilities were more successful than Vim's. Though smaller cheaper brands have mushroomed in this category, Colgate Palmolive and Unilever account for the lion's share of the market. Smaller brands find more space in regional areas and attract budget-conscious consumers.
Financial overview
Colgate Palmolive's turnover and profits have been increasing steadily and consistently. In FY16, volume growth was being generated by timely spending on media, effective promotions and engaging brand activations. Lower oil prices contributed to reduced material costs, utilities and freight costs.
These trends continued in FY17 with all categories contributing to increased revenue stemming from an effective product mix and strong media support behind brands. Despite selling and distribution costs increasing as a result of higher media and promotion spend, profit from operations continued to rise resulting in an increase in earnings of 15.5 percent in FY17
9MFY18 Financials
In 9MFY18, turnover increased by double digits due to growth in volume across all categories and selective price adjustments in some categories. Gross profit margins saw a marginal decline due to an increase in commodity prices, increase in logistic costs, as well as an adverse effect of devaluation of the currency.
Enhancing its product offerings in its oral care line, COLG introduced two variants of toothpaste: Colgate Total - Advanced Health and Charcoal Deep Clean, both positioned in the premium toothpaste category.
Within fabric care, Colgate Palmolive faced intense competition in the form of reduced prices from competitors to increase volume and market share in the lower price segments. To defend its market share, the company invested in new media campaigns, consumer activations, and trade activities, which resulted in the increase in marketing costs.
Selling and distribution costs increased in 9MFY18 as the company is an FMCG and needs to support revenue growth through aggressive spending on media and promotion campaigns. Employee related costs and depreciation made up the bulk of the increase in administrative expenses. As a result of increase in costs overall, its increase in net profit margin was negligible.
Future outlook
With rising population, higher household incomes and urbanization, dishwashing continues to see stable growth in demand with Lemon Max being the soap of choice. In the oral care department, Colgate leads with its wide range of tooth pastes and recently introduced brushes.
There has been an increase in shift from unbranded to branded laundry care in recent years. Laundry care is expected to grow steadily, driven by Pakistan's increasing population and rising usage of washing machines. Consumers are also expected to switch from unbranded to branded products, with increasing disposable income, female literacy and female employment. Though price competition has put pressure on Colgate's margins, the trend of strong volume sales, especially of Bonus brand, is expected to continue.
However, with the rupee devaluations and increase in cost of raw materials and commodity prices, Colgate Palmolive expects pressure on margins. Despite this, the company anticipates an increase in average selling prices and top line growth, which should enable it to continue on its enhanced growth trajectory.
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Colgate Palmolive-financial snapshot
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Rs (mn) 9MFY18 9MFY17 YoY
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Turnover 30,656 27,713 11%
Cost of goods sold 22,083 19,529 13%
Gross Profit 8,573 8,184 5%
Selling & distribution costs 4,774 4,273 12%
Administrative expenses 339 282 20%
Profit from operations 3,456 3,571 -3%
Profit After tax 2,484 2,481 0.1%
EPS 51.80 51.75 0.1%
Gross profit margin 27.97% 29.53% -5.3%
Net profit margin 8% 9% -9.5%
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Source: company accounts
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Pattern of shareholding
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Categories of Shareholders Shares Held %
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Directors, Chief Executive Officer, and their
spouses and minor children 2,338,893 5
Associated Companies, undertakings and related parties 27,795,811 58
NIT and ICP 201 -
Banks, Development Financial Institutions,
Non Banking Financial Institutions, Insurance 2,287 0.01
Modarabas and Mutual Funds 1,016 -
Shareholders holding 10% 40,685,648 84
General Public
a. Local 833,892 2
b. Foreign 0
Others 16,982,829 35
Shareholders holding 5% and above
Siza (Pvt) Limited 8,334,616 17%
Siza Services (Pvt) Limited 12,123,267 25%
Premier Fashions (Pvt) Limited 5,841,299 12%
Iqbal Ali Lakhani 2,327,687 5%
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