Colgate-Palmolive’s premiumisation strategy
A large chunk of growth of most FMCG companies has come on the back of their premium portfolio. Colgate-Palmolive’s impressive 26.4% growth in profits in the last fiscal can also be attributed to its premiumisation strategy. “Our premium portfolio from a growth perspective contributes to half of our growth. It is critical for us. The growth comes from the channels of the future such as modern trade and ecommerce,” says Prabha Narasimhan, MD & CEO of the ₹5,644 crore Colgate-Palmolive.
Narasimhan says the growth potential in oral care is immense as category penetration is relatively low. “The reason why it’s a large opportunity for oral care is that most FMCG categories (such as hair care and skin care) actually have 25%-30% of the category sitting above the ₹140 pricing mix, in oral care it is just 12%. So, there is so much headroom for us to approach the level of some of the other categories.”
The company’s first move towards premiumisation was to give a facelift to its largest sub-brand, Colgate Total. It positioned the brand as the best anti-bacterial protection that one could get from a toothpaste by infusing arginine technology into it. “It is a proven technology to help re-mineralise your teeth. Every time you eat you lose a little bit of calcium and minerals from your teeth, and this technology helps to re-mineralise the loss that leads to cavities,” explains Narasimhan.
Colgate has also forayed into whitening, a segment which didn’t exist in India. “Oral beauty has a huge opportunity,” she says. The company is also focusing on therapeutics with its gum healing toothpaste, Periogard. “These are the three spokes of our premiumisation wheel. These three products grow at 3X compared to the rest of the products and we hope to accelerate this further,” Narasimhan further adds.
The company has also used the premiumisation brush for its personal care brand, Palmolive. Though well-known, Palmolive had been underserved and was clearly a challenger brand. So, instead of looking at volumes, value growth made more sense. “Body wash has a penetration of just 3% and is growing rapidly. Therefore, our sweet spot is in the area of body wash and hand wash, that’s where we have zeroed down. We have tried to build superior products.”
Though a significant portion of Colgate-Palmolive’s growth is indeed coming from its premium portfolio, its flagship brand, Colgate Strong Teeth has managed to stay afloat even in rural India. Rural sales for most FMCG brands had de-grown in the last couple of years. “Rural didn’t degrow for us, but we had been used to a situation where rural used to grow faster than urban. We saw a slowdown, we are seeing that come back,” says Narasimhan.
Though the company sells across 1.7 million stores, only one out of two rural consumers brush their teeth. It means ample opportunity to grow the category. Narasimhan says the company did so by micro-targeting regions and localities. “We looked at each and every store, its consumption history and the surroundings of that store. We found out the income levels of consumers in that area and were able to judge what should be the portfolio in that store. This has helped us in rural areas to make the right assortment available in the right place and helped us to drive offtake of both toothpastes and toothbrushes.”