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Colgate's disposal of its laundry

detergents businesses in key LatinAmerican markets indicates a major

shift in its growth strategy. It first sold

its Colombia laundry detergents

business to Unilever in 2011, and then in 2012 it divested its Dominican

Republic laundry detergents business to Henkel. Colombia and

Dominican Republic accounted for 15% of its global laundry detergents

business prior to the sell-offs. The rising competitive challenges in its

core operation - oral care - is making it necessary to amass more

resources to invest in product development and marketing, contributing

to the laundry detergents divestments. Whether or not Colgate

continues to divest its laundry detergents in its entirety is something to

watch out for, but the move would prove beneficial for the company in

the long run.

Limited option in laundry detergents

It makes strategic sense to shift resources from laundry detergents to

oral care. Colgate is a smaller player in laundry detergents, ranking

seventh with a global total of approximately US$1bn . It controlled 2%

of the laundry detergents market in 2011, compared to 28% for Procter

& Gamble and 17% for Unilever. Colgate would require significant

nvestment to be competitive in laundry detergents against such market

behemoths. Instead, Colgate stands to benefit more by investing in oral

care, its sales equalling over US$10 bn in 2011 - ten times that of

aundry detergents. It is the global leader in oral care and its

eponymous brand enjoys worldwide recognition. Divesting the remaining

part of its laundry detergents would generate more resources for oral

care category expansion. Moreover, Pakistan, Venezuela and Australia

account for 80% of its remaining laundry detergents business, thus

making it highly disparate, limiting scope for economies of scales -

further diminishing the incentive for retaining the laundry detergents

business. In Pakistan, Colgate is the market leader in laundry

detergents, with a 45% market share in 2011. This would help fetch agood price for the laundry detergents business in Pakistan.

Mounting challenges in oral care

Procter & Gamble is investing in product development in oral care, thus

raising the competitive bar for Colgate. Although both companies have

managed to drive share growth in oral care in 2011, the competitive

ntensity can be expected to increase going forward. A key disadvantage

for Colgate is that its presence in oral care is less diverse than that of

Procter & Gamble. Colgate historically lacked presence in electric

toothbrushes, while Procter & Gamble has been the leading player in

Colgate-Palmolive to Exit Laundry Detergents to Boost

Oral Care

Opinion|30 Nov 2012

Oru Mohiuddin

Senior Analyst - Homeand Personal Care

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the category. In the last quarter of 2012, Colgate launched rechargeable

electric toothbrushes - corroborating its interest in category expansion.

Colgate's leading position in oral care has emerged from dominating the

eading oral care category - toothpastes - which is, however, reaching

saturation point. In CAGR terms, growth between 2012 and 2017 is

projected to be led by battery and electric toothbrushes and

mouthwashes. Procter & Gamble has a stronger presence than Colgate

n power toothbrushes, while commanding approximately equal sales in

mouthwashes. Colgate needs resources to invest in category expansion,

which laundry detergents divestment could be expected to generate.C o lg a t e v s P &G O r a l Ca r e M a r k e t P r e s e n c e 2 0 1 1 & % CAGR 2 0 1 1 - 2 0 1 6

Source: Euromonitor International

Looking forward

Judging from the growth prospects, it makes strategic sense for Colgate

to divest its laundry detergents business to strengthen its position in

oral care where future growth would be driven by categories in which its

presence is weaker than its key competitor - Procter & Gamble.

Divesting laundry detergents in Colombia and Dominican Republic is a

move in the right direction, which it should follow up by disposing the

remaining part of the business.

Euromonitor International 2013

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