Colgate Group5

Cas

Casee AnaAnalyslysis:is: Brighter Smiles for the Masses

Brighter Smiles for the Masses – – ColgColgate ate vs.vs. P&GP&G

GroupV GroupV

PGP

PGP/20/2/20/25959 ANKITANKIT YYADAADAVV PGP/20/270 PRATIKSHA PGP/20/270 PRATIKSHA JHAWAR

JHAWAR PGP

PGP/20/20/28/2800 NISHNISHII RANJRANJANAN PGP

PGP/20/2/20/29090 RUPRUPALIALI PGP

PGP/20/3/20/30000 THAITHOILTHAITHOILUNGUNG THAIMEI THAIMEI PGP PGP/20/3/20/36969 HIMANSHUHIMANSHU VERMA VERMA

trat

Case facts

•  August 2002, P&G introduced Crest Whitestrips; an over the counter teeth • whitener

•  P&G claims that the new product is 10 times more effective as the leading

toothpaste, Colgate Tartar Control whitening

•  By 2002, P&G controlled 80% of the at-home tooth-whitening market •  Sept 2002, Colgate bounces back by introducing Simply White; a more

• convenient and cheaper product in the same segment

•  One month after introduction, Simply White captures half the market with

Crest WhiteStrips losing 50% market share

•  Even though consumers think otherwise, P&G engineers have reasons to

Rivalry among competitors Threat of new entrants

HIGH

Bargaining power of buyers

HIGH

Threat of Substitute s

HIGH

Bargaining power of suppliers

HIGH

Strengths/Weakness - P&G

Strengths

• Has the capacity to enter into new untapped markets and generate the revenues by constantly making innovative products. Eg Crest Whitestrips

• Strong Brand recognition: world’slargest consumer products company and significant amount of visibility in oral care segment

• R&D backed by sound finances; $130mn was spent on R&D and initial marketing of Whitestrips

• From Income statement: Decreasing cost of goods sold, Increase in Net Sales from 2000 to 2002, Increase in profits

Weakness

• Although there was growth in health care segment which included oral-care sector, given the high investment on R&D the segment’scontribution to net earnings was less in proportion to other segments(12% of sales)

Strengths/Weakness

 –

Colgate

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Strengths

• Strong R&D: As soon as P&G developed Crest Whitestrips, they replied back by making more easy-to-use product Simply White

• Strong global brand image: ranked among the top 5 in global consumer products

• New products formed40% of total sales

• From Income statement: Decreasing cost of sales, Increase in Net Sales from 2000 to 2002, Companyrunning in profits

• Oral care for which Colgate was known forcontributed to one third sales and

Toothpastewas itsstrongest product

• High operating margin(20%)

Weakness

SW T AN YSIS P G( hite tri s)

• Emerging new market • New product category • Competitive landscape • High Price • Difficult to use • Higher application time • First Mover Advantage • Patented Technology • More effective product STRENGTHS WEAKNESSES OPPORTUNITIES THREATS

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SWOT ANALYSIS Colg te (Simply White

• Emerging market share • Growing consumer loyalty • Ineffective product claim by P&G • No major differentiation in Simply white night

• Easy to use

• Lower price

STRENGTHS WEAKNESSES

OPPORTUNITIES THREATS

Did P&G made the Right move?

 Looking at the facts P&G captured a handsome 80% share in the market for the first 2 years and also made $200 Mn. in revenues

 the “first mover advantage” was definitely with P&G which unfortunately it was not able to capitalize on

 Probably P&G could have been a little bit more subtle with the initial advertisement which brought it in direct rivalry with Colgate

 Even after the introduction of Simply White, P&G had a reasonably good market share of 37% in October 2002 due to its early entry

Colgate’s

Reaction

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 Oral care contributed to one third of Colgate’soverall sales

 Toothpaste was the company’s strongest product

 With the introduction of Crest WhiteStrips, P&G directly attacked the Toothpaste product line of Colgate

 P&G would have definitely expected a bounce back from Colgate

 Colgate with it’s innovative strategy of bringing in a new product which played on the shortcomings of Crest WhiteStrips really proved to be very beneficial

Cost Analysis

 At-home tooth-whitening market worth in 2002 : $460 Mn Corresponding sales in last 2 months: 460*2/12 = $76.67 Mn

 Assuming 37% market share of P&G in the last 2 months of 2002 Sales: 37% of $76.67 Mn = $28.37 Mn

 Prospective sales, had SimplyWhite not been introduced: 80% of $76.67 Mn = $61.33 Mn

Loss in sales = $61.33 Mn - $28.37 = $32.96 Mn

Contribution Margin = $40 - $8 (variable cost) = $32

 Loss in Contribution Margin during these two months $32.96*32/40 = $26.37 Mn

Ayman

Ismail’s

Options

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 Getting on the offensive by challenging Colgate’sclaims in NAD

• Should be a good option since its confidential in nature and the proceedings

can go ahead without the normal getting to know about it

• this can turn out to be counterproductive since the b* value test that it relied

on was not universally accepted

• If the final decision goes in the favor of Colgate, it can really play into their

hands which they can further leverage to attach Crest WhiteStrips

 Increase P&G’s current marketing campaign

• Does not seem like a very favorable option since the problem is not with the

Brand visibility

 Drop in price and Comparitive Advertisement Campaign

• this seems to be a better option since the competitor is trying to undercut us

and drop in price together with the comparative Ads showing the superiority of Crest WhiteStrips should do the trick

Recommendations for P&G

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 Since P&G has already made a lot of profit with this product, its R&D cost of $130 Mn is more or less recovered

 The variable cost is same for both the products, P&G, having recovered its R&D cost, can now drop its price to compete with the Colgate’sproduct with the added advantage of superior quality

 Also now that the new markets are opening abroad, P&G might not be able to command the same premium which it enjoyed during the initial monopoly period and dropping the price should be the way ahead

Recommendation: P&G should Avoid attacking Colgate directly i.e. filing a complaint with NAD or suing Colgate for false ads might not be a smarter move, if they want to

 follow the mantra of hardball players, the more strategic step would be to drop in  prices andDevastate rival’s _{profit sanctuaries(i.e. Colgate’s Simply White) by}

McBride’s

Options

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 McBride should now focus on carrying the success of this product to new markets which are expanding like Europe, Asia Pacific etc.

 Fight back from P&G is expected pretty soon to save its Billion dollar brand

• McBride should try to improve the product probably by enhancing

the whitening capabilities

• He should also be careful about publishing controversial

advertisements so as to not give P&G any chance to challenge them in NAD

 Differentiating the two products Simply White and Simply White Night might help it to enhance the sales of the newly introduced brand