check the files attached. need a powerpoint presentation, on those 5 questions
COLGATE-PALMOLIVE CANADA: FIGHTING FOR A SHARE OF THE
R. Chandrasekhar wrote this case under the supervision of Professor Michael Taylor solely to provide material for class
discussion. The authors do not intend to illustrate either effective or ineffective handling of a managerial situation. The
authors may have disguised certain names and other identifying information to protect confidentiality.
This publication may not be transmitted, photocopied, digitized or otherwise reproduced in any form or by any means without the
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Copyright ? 2014, Richard Ivey School of Business Foundation
In January 2013, Richard Werner,1 vice-president of Customer Development, Colgate-Palmolive Canada
Inc. (Colgate Canada), was sitting at a circular table at the conference room in the company?s Toronto
headquarters. He was discussing the 2013 marketing budget for Colgate toothpaste with Mary Simons,
retail environment manager; Philip Marcos, team leader; and Rita Christopher, category manager (oral
care). Market share was a key metric at Colgate Canada. After several years of near steady state, the share
gap between Colgate Canada and its primary competitors had started to widen favourably in the
toothpaste category (see Exhibit 1). The company wanted to extend this growth path, which had led to the
current discussion about the 2013 marketing budget.
During the discussion, it was suggested that Colgate Canada could increase its marketing budget for the
new financial year by $3 million. Werner highlighted three points:
1. The marketing mix in the current budget had delivered strong profits, and he was hesitant to make
2. The incremental expenditure on marketing would need to be focused in order for it to be
effective. A diluted effort of spreading any incremental funding across many marketing activities
would be fruitless. He wondered if it was best to focus on either increased advertising, increased
trade promotions or increased consumer promotions.
3. Any increase in funding for marketing would need to have a solid strategy and reasoning that
would result in an overall increase in operating profit for 2013.
COLGATE-PALMOLIVE: COMPANY BACKGROUND
Colgate-Palmolive (Colgate) was a global consumer products enterprise, marketing its products in over
200 countries. Founded in 1806 by William Colgate in New York City as a starch, soap and candle
The names of all persons mentioned in the case study are disguised.
business, it introduced Colgate toothpaste in 1896 and Palmolive soap in 1898 and established its first
international subsidiary in Canada in 1914. The company was listed on the New York Stock Exchange in
By December 2012, Colgate had about 37,700 employees with worldwide sales of US$17.085 billion for
the year ending December 2012 and net income of US$2.631 billion (see Exhibit 2). It was driven by the
vision of ?delivering strong, consistent business results and superior shareholder returns by providing
consumers globally with products that make their lives healthier and more enjoyable.? 2
Colgate had four broad business units: oral care, personal care, home care and pet care. Oral care
generated 44 per cent of the company?s revenue, and Colgate was the leader in the oral care market
worldwide. The company?s oral care product offerings included toothpastes, manual toothbrushes and
CANADIAN TOOTHPASTE MARKET
The Canadian oral hygiene market included toothpastes, toothbrushes, mouth wash and smaller categories
such as dental floss and denture products. This was a stable, mature, hyper-competitive category valued at
$810.4 3 million in 2012. With a high degree of household penetration, the oral hygiene market grew
slowly, yet steadily, with a compound annual growth rate (CAGR) from 2008 to 2012 of 4.2 per cent. 4
The overwhelming majority of toothpaste products were purchased by consumers in grocery stores, drug
stores, mass merchandisers and club stores.
In 2012, the toothpaste category was the largest part of the oral care market with sales of $390.6 million
at retail price 5 and an estimated market size of $254 million at factory price (see Exhibit 3).
Consumers were increasingly aware of the correlation between oral health and overall health. 6 They
expected much more than their traditional desire to prevent cavities. Their expectations included
improved tooth and gum health, whiter teeth, fresh breath, reduced sensitivity to heat and cold, reduced
plaque buildup and a product that tasted good ? at a competitive price.
Consumers indicated price, brand familiarity and recommendation by dentists as the top three purchase
influences (80 per cent, 71 per cent and 71 per cent of respondents respectively). 7 The most prevalent oral
health concerns for consumers were plaque and tartar build-up (83 per cent and 81 per cent respectively). 8
Colgate, 2007 Annual Report, p. 21.
All values are in Canadian dollars, except where otherwise noted.
?Oral Hygiene Canada: A Snapshot 2013,? Mintel Global Market Navigator, http://gmn.mintel.com.proxy1.lib.uwo.ca/
snapshots/CAN/292/performance/single, accessed October 31, 2013.
?Oral Care ? US ? May 2013 ? Interest in Product Attributes,? Mintel, last modified May 2013,
http://academic.mintel.com/display/665403/, accessed October 31, 2013. U.S. market trends were considered to be similar
and applicable to the Canadian market where less data was available.
?Oral Care ? US ? May 2013 ? Purchase Factors,? Mintel, last modified May 2013,
http://academic.mintel.com/display/665402/, accessed October 31, 2014.
?Oral Care ? US ? May 2013 ? Oral Health Concerns,? Mintel, last modified May 2013,
http://academic.mintel.com/display/665400/, accessed October 31, 2013.
The demand for whiter teeth was the fastest growing slice in the toothpaste industry, 9 with 52 per cent of
the population looking for toothpaste that delivered ?shinier teeth.? Sixty-two per cent of women aged 18
to 34 were interested in teeth whitening features. 10 Approximately 12 per cent of consumers suffered from
tooth hypersensitivity and 20 to 45 per cent of consumers had mild sensitivity; however, of this
population, only 8 to 10 per cent used sensitivity toothpaste. 11
Forty-seven per cent of consumers indicated that they always purchased the same brand of toothpaste. 12
Although families tended to be loyal to specific children?s brands, it was thought that the loyalty was
likely to the cartoon character (e.g., Dora the Explorer) featured on the product, rather than to the product
itself. As much as 64 per cent of some consumer segments did not have an oral care product in mind
before shopping. 13
Consumers who were not brand loyal often made their final selection of the toothpaste brand in the store
aisle: 60 per cent of consumer toothpaste brand decisions were made in-store while 40 per cent had made
their toothpaste brand decisions beforehand. The latter were brand loyalists. 14 Their consideration set was
determined by their need preference, for example, simply clean teeth or reducing tooth sensitivity. The
final product selection was influenced by brand preference, perceived efficacy, retail environment
influences and price.
The market was segmented on the basis of demographics (such as age and gender), needs and
psychographic profile (see Exhibits 4 and 5).
The top four competitors in the overall oral care market in Canada collectively held over 80 per cent
market share (see Exhibit 6). The top three competitors in the Canadian toothpaste category held over 75
per cent market share. Smaller competitors, specialty competitors and house brands split the remainder of
Beyond traditional basic toothpaste, the category was composed of five major toothpaste subcategories:
oral health, sensitivity, whitening, children?s and fresh breath. Furthermore, there were premium and
super premium levels in the subcategories. All the major competitors had products in most or all of the
subcategories (see Exhibit 7).
Competition was largely between products within a subcategory as consumers selected from brands that
suited their need (e.g., tooth sensitivity). Each competitor invested significantly in brand positioning
through consumer advertising, retail merchandising and consumer promotions.
?Oral Care ? US ? May 2013 ? Brand Share ?Toothpaste,? Mintel, last modified May 2013,
http://academic.mintel.com/display/665390/, accessed October 31, 2013.
http://academic.mintel.com/display/637652/?highlight=true, accessed November 27, 2013.
Herizo Evo, ?1 in 8 Have Sensitive Teeth,? Articles of Health Care, September 6, 2013, www.articlesofhealthcare.com/,
accessed November 2013; NovaMin Research Report, ?General Population Tooth Sensitivity Prevalence and Attitudes
www.oralscience.ca/en/documentation/articles/tooth_paste/GeneralPopulation-Tooth-Sensitivity-Prevalence-and-AttitudesTowards-Sensitivity-Toothpaste.pdf, accessed November 27, 2013.
?Oral Care ? US ? May 2013 ? Purchase Factors,? op.cit.
?Oral Care – US – May 2013,? op.cit.
AC Neilson, www.nielsen.com/ca/en/nielsen-solutions.html, accessed December 24, 2013.
Toothpaste was largely a category with few observable features that distinguished one competitive
product from another. The room for differentiation either in terms of product composition or technology
was limited. Typically, new product introductions were the result of technology advancements in one of
the subcategories, for example, improved gum health or faster whitening effect. The new product was
usually introduced as a superior product at the super premium level, which gave the competitor an
advantage in that subcategory until another competitor introduced a similar product. Technology
advances were not secret for very long or unduly difficult to copy. Superior brand perception was a very
important competitive tool.
Toothpaste was a staple category for most food and health related retailers. Toothpaste typically
generated a 35 per cent 15 margin for retailers. The concentration of the toothpaste category allowed the
top manufacturers with strong branded products to develop strong market positions. Brand equity was one
of the major levers in the arsenal of manufacturers when negotiating with retailers. Notwithstanding the
consumer demand resulting from strong brand advertising, a considerable investment in trade and
consumer promotions was required to ensure prominent retail shelf placement and secure inclusion in
regular retailer promotions.
The retail market was fairly concentrated in Canada. A few retailers held a major part of market share in
several retail segments. For example, the top four retailers of groceries accounted for 70 per cent of sales
(see Exhibit 8). The bargaining power that Canadian retailers had over manufacturers was evident in
several ways: increased retailer advertising had created consumer loyalty to retailers, which had
previously been the sole domain of brand products; an increased number of store brands were building
retailer exclusivity; and retailers were using creative pricing strategies and sophisticated in-store
merchandising (see Exhibit 9).
Colgate Canada had a complete portfolio with toothpaste products in every subcategory (see Exhibit 10).
The company invested $14.7 million in advertising across all toothpaste brands in 2012 and delivered
$18.4 million in operating profits (see Exhibits 11 and 12).
Exhibit 13 summarizes the average retail unit prices of both the category and the individual brands at
different levels in the industry and the share of business for each.
Colgate products had secured very high channel penetration with mass merchandisers, grocery stores,
health and beauty retailers and drug stores. The company?s products were also available in certain
convenience stores, house goods retailers and general merchandise stores. The company?s six largest
customers in Canada, in alphabetical order, were Costco, Loblaws, Shoppers Drug Mart, Sobeys, Target
Case writer?s estimate.
THE 2013 MARKETING BUDGET
Market share topped the list of metrics that Colgate Canada used to assess its performance. The sales
growth in 2012 was encouraging. No product launches were planned for 2013, but there were always
internal and external pressures to grow market share. Although the revenue growth targets for 2013 for
Colgate Canada had not been finalized, Werner?s team expected that revenue targets set by the company?s
management for the toothpaste category in Canada were likely to increase by about 4.5 per cent.
The market positioning of the current product portfolio was competitively strong, and the current
marketing mix was delivering favourable results. Consequently, the team was hesitant to make major
changes. After reviewing the market data and financial results, they reviewed the 2012 marketing budget
and wondered if any fine-tuning adjustments should be made in the 2013 budget. Colgate Canada?s
marketing mix was typical in the category. The norm in the toothpaste business was to invest heavily in
advertising, often representing three-quarters of the budget, with the remainder invested in trade and
consumer promotions. The industry?s gross contribution margin was approximately 57 per cent.
As the management team discussed the 2013 business plan and marketing budget for the toothpaste
category, it was suggested that the time was right to leverage their current market strength to drive some
growth. The team wondered if an additional $3 million could be approved for the marketing budget. If
approved, the team agreed it could have a major impact. The team also agreed that spreading the
incremental funds across the existing activities would have little impact. Any incremental marketing
funds would only have a significant impact if they were focused in one or two areas.
Simons: The support of our retailers is essential to drive growth. We need to increase the number of
placements in retailer flyers and the number of shelf facings in retail stores as much as possible.
We should add as many alternate point-of-purchase displays as we can. Therefore, in my view,
the additional funding should be focused on trade promotions. Last year we spent $3.9 million on
trade promotions. Investing a sizable portion of any budget increase in trade promotions will get
the retailers to heavily push our products over the competition.
Marcos: I agree with you; however, we need to keep in mind where the growth will come from. We have
built a significant brand loyalty over many years, but new growth will not come from existing
customers. It will only come from consumers who are loyal to competitor brands and from those
who are loyal to no particular brand. Therefore, in my view, we need to spend the additional
funding on consumer promotions. An incremental $1 million will double our 2012 spending and
allow us to create promotions that will spark trial by new consumers and get them to switch to our
Christopher: We have won our market share through constant reminders provided by our advertisements.
We normally invest 75 per cent of our marketing budget in advertising, which has driven our
current success. Our current campaign is very effective. We just need to have more consumers
see our ads more frequently. We could boost our gross rating point (GRP) 17 level significantly
with the new funding. A boost in sales comes from a boost in advertising. That is the best
Values in this section are case writer?s estimates. They do not represent the actual amounts. This disclaimer is provided in
order to protect company confidentiality.
One GRP per week represents exposure of 1 per cent of the target market to an advertisement during a seven-day period.
Werner trusted the advice of his team, and he weighed the alternatives carefully. He agreed that an
increased marketing budget would only have a significant impact if the incremental investment was
focused. He considered five alternatives:
1. Deploy the same budget mix as 2012 and not request an increase.
2. Increase the advertising budget by $3 million, which would allow an increased online presence or an
increased television ad frequency.
3. Increase the trade promotion budget by $3 million to focus on building volume with all the major
retailers. It would include initiatives such as more secondary locations within stores and increased
frequency of distribution of weekly flyers.
4. Increase the consumer promotion budget by $3 million to focus on consumer promotions such as
sampling and coupons to encourage product trial.
5. Make a major market push with an even larger increase in the marketing budget to fund multiple
Whatever he decided, Werner knew that he would have to present his explanation to Colgate Canada?s
executive management to justify his budget recommendation.
EXHIBIT 1: CANADIAN TOOTHPASTE MARKET ? VALUE SHARES 2006 TO 2012
Source: Company files.
EXHIBIT 2: COLGATE-PALMOLIVE COMPANY ? CONSOLIDATED INCOME STATEMENT
Year ending December (in US$) (in millions)
Cost of Sales
Less: Selling and Distribution Costs
Less: Other Expense (Income)
Less: Interest Costs
Less: Provision for Income Taxes
Number of Employees
Sources: Colgate 10-K Report 2012, pp. 44, 89; Colgate 10-K Report 2009, p. 44. The data for 2008 and 2009 is taken from
the 2009 10-K Report, and the data for 2010, 2011 and 2012 is taken from the 2012 10-K Report as per page numbers
EXHIBIT 3: CANADIAN TOOTHPASTE MARKET ? COMPARATIVE SIZE 2009 TO 2012
(in million $)
At retail price
At ex-factory price
Note: Some information is augmented with case writer?s estimates.
http://gmn.mintel.com.proxy1.lib.uwo.ca/snapshots/CAN/292/performance/single, accessed October 31, 2013.
EXHIBIT 4: MARKET SEGMENTATION
Needs Based Segmentation
fresh breath and
Source: Created by case authors.
Improved Overall Health
toothpaste based on
flavour and package
buying toothpaste for
the basic need of
A Whiter Smile
Clean Teeth and Cavity
EXHIBIT 5: PSYCHOGRAPHIC SEGMENTATION
Full Adult Range
the health benefits
benefits, as well as
fresh breath and
Marketing to this
on flavour and the
presentation of the
This segment is
of children and
? Fun product
Generalists do not
and their additional
toothpaste on a
?needs? basis and
that are the
cheapest or on
? Fight plaque
? Help thinning
? Reduce tooth
? Whiter teeth
? Fresh breath
? Low price
Sources: ?Product ? Markets and Market Segments ? The Toothpaste Market,? Marketing Management, last modified
January 23, 2001, http://courses.unt.edu/kt3650_2/sld008.htm#1, accessed October 31, 2013; and ?Oral Care ? US ? May
2013 ? Cluster Analysis,? Mintel, last modified May 2013, http://academic.mintel.com/display/665406/, accessed October
EXHIBIT 6: CANADIAN ORAL HYGIENE MARKET SHARES BY VALUE (%), 2012
October 31, 2013.
EXHIBIT 7: SAMPLE LIST OF COMPETITOR BRANDS
Brand and Product
Brand and Product
Proctor and Gamble
Crest 3D White Advanced Vivid
Colgate Total Plus Whitening
Crest Cavity Protection Toothpaste
Colgate Total Clean Mint
Crest Extra White Plus Scope Outlast
Colgate Total Advanced Health Professional Clean
Kid?s Crest Spider-Man Liquid Gel
Colgate Total Advanced Health Gum Defence
Crest Tartar Protection Toothpaste
Colgate Cavity Prevention
Crest Pro-Health Sensitive Shield Original
Colgate Total Advanced Health Whitening
Crest Sensitivity Whitening Plus Scope
Colgate Total Advanced Health Enamel Strength
Crest Pro-Health Enamel Shield
Colgate Total Advanced Health Intense Fresh
Crest Pro-Health Whitening Gel
Colgate Total Advanced Health Sensitive
Crest 3D White Vivid Toothpaste
Colgate Optic White
Crest Complete Whitening + Scope
Colgate 2in1 Whitening
Kid?s Crest Cavity Protection Gel Toothpaste-Sparkle Fun
Crest Pro-Health Clinical Gum Protection
Colgate Bubble Fruit
Sensodyne Repair & Protect
Sensodyne Rapid Relief
Colgate Senstive Whitening
Colgate Senstive Enamel Protect
Colgate Sensitive Pro-Releif
Sensodyne 24/7 Sensitivity Protection
Colgate Sensitive Pro-Releif Whitening
ProNamel Gently Whitening
ProNamel for Children
Colgate Sensitive Pro-Releif Enamel Repair
Church and Dwight
Colgate Sensitive Pro-Releif Multi-Protection
AquaFresh Ultimate White
AquaFresh White & Shine
AquaFresh Extreme Clean
Arm & Hammer Enamel Care
AquaFresh Extreme Clean Power White
Arm & Hammer Extra Whitening
AquaFresh Cavity Protection
Arm & Hammer Sensitive
Arm & Hammer Complete Care
Arm & Hammer Advanced Clean
AquaFresh Kid's Mint
Arm & Hammer Supreme Fresh
Pearl Drops Triple Power Whitening
Pearl Drops Whitening
Aim Cavity Protection
Note: All brand names are company trademarks.
www.crest.com/en-CA/crest-products/crest-toothpastes.aspx, accessed December 18, 2013; www.gsk.ca/ english/html/ourproducts/index.html, accessed December 18, 2013; and www.churchdwight.ca/, accessed December 18, 2013.
EXHIBIT 8: CANADIAN RETAIL ? GROCERY SALES 2011
Loblaw Cos Ltd
Costco Canada Inc
Wal-Mart Canada Corp
Jim Pattison Foods
Source: CIBC World Markets, accessed October 31, 2013.
EXHIBIT 9: SOME COMMON RETAILER STRATEGIES
Retailer as a Brand: Retailers, particularly large retailers of staple goods, heavily advertised their store
banners to build brand loyalty. When shopping for routine items, consumers often chose the retailer first
and made their purchase selection from the brands on offer. As a result, retailer brand preference
sometimes trumped product brand preference, which gave the retailer negotiating leverage over the