Don’t lose hope and more importantly don’t relax. Colgate Vs Crest –Nice read

Hi

I came across this articel and thought of sharing it with you.  Read on

Success is never permanent and there is always competition fighting to take your spot. So how does one battle a position that was lost? Looking at the toothpaste wars in the US can give us some lessons.The toothpaste brand “Crest”, owned by Procter & Gamble, was the favourite toothpaste for 40 years in the US since launching in 1955. However, in 1998, Colgate-Palmolive’s “Colgate Total” kicked out Crest from its champion spot.

 
 

Game changer delivers leadership position

How did a brand that was #1 for 40 years lose its spot in its market? Colgate-Palmolive had market leadership in more than 170 countries as the toothpaste champion but in the US, it was forced to contend with second place. The story changed in 1998 with the launch of Colgate Total and Crest tumbled from its leading spot. It took Crest almost a decade of fierce competition to regain the #1 position in the US in 2007 and the toothpaste battles continue. The way Crest won back its #1 position holds valuable lessons for us in the fund management and the financial distribution businesses.When Crest was first launched in 1955, Colgate was the market leader in the toothpaste category. In 1960, Crest became the first brand of toothpaste to receive an endorsement from the American Dental Association (ADA) that Crest was shown to be effective in fighting cavities. P&G took the market by storm with the endorsement and was able to dominate the US toothpaste marketover the next several decades with a product that was marketed as having both cosmetic and therapeutic benefits. Till the 1990s, Crest retained its leadership spot in the US market with around a 35% market share, while Colgate had about 20 percent.

CREST VS COLGATE 1

Resting on past laurels

Over the years, P&G did not vary the sales pitch or the look of the brand. However, competition did not stay still. Rival toothpaste makers started to concentrate on other aspects of oral care beyond cavities to appeal to consumers – yellowing teeth, sensitive gums and bad breath. Crest meanwhile continued as the cavities fighter toothpaste but its fall was a slow decline. Between 1987 and 1997, Crest’s market share slipped from 39% to 25%.

In 1997, Colgate-Palmolive launched Colgate Total which promised to fight everything – cavities, tartar, plaque, bad breath, and, most importantly, gingivitis. An estimated 100 million Americans suffer from gum disease. Gingivitis is an inflammation of the gums which is usually caused by bacterial infection and can result in symptoms such as bleeding gums. If left untreated, it can lead to more a serious infection known as periodontitis. Gingivitis and periodontitis are major causes of tooth loss in adults. According to dentists, gingivitis can be prevented by consistent and proper oral hygiene.

CREST VS COLGATE 2

Colgate Total capitalized on this consumer concern and Colgate Total was marketed as the only toothpaste approved by the Food and Drug Administration to prevent gingivitis, as well as by the American Dental Association to fight plaque and gingivitis. By the end of 1998, Colgate had grabbed 30% of the toothpaste market knocking P&G off its leadership spot in the US.

How did P&G get left behind? Even though P&G had all the technology that competition had exploited for years, the company continued its old approach and focus on what it used to do. The company was not quick to recognize the change in consumer trends and respond accordingly. P&G had a gingivitis fighting toothpaste in testing for at least 6 years but its slow and meticulous culture meant Colgate, with a much smaller research budget, was able to reach the market first.

Flip the game back – and win

Until P&G came up with its cavity fighter, toothpastes were largely marketed around their cosmetic value. For the next 40 years, Crest and Colgate slugged it out on therapeutic values – cavity fighting, gingivitis fighting, bad breath control, toothpastes for sensitive teeth and so on. This was a game that Colgate was playing better than Crest.

What P&G did next was not to find yet another therapeutic utility – but to flip the game back to where it originally started – cosmetic value. And, it thought beyond toothpastes to fight and win in the oral care market.

In 2000, the company introduced a 14-day tooth-whitening system, Crest Whitestrips. Compared to products used in dentists’ offices, the whitestrips allowed consumers to whiten teeth faster in the comfort of their own home at less cost. P&G was able to capitalize on the Crest brand name to ease any customer uneasiness about using the product at home without a dentist’s supervision. While the initial price of $40 was high for a P&G product, people were willing to buy the product as they trusted the Crest brand name.

CREST VS COLGATE 3

Since approval from dentists formed the core of the Crest brand, P&G also had to win over dentists with Whitestrips. The company used its research to demonstrate the products safety and efficacy as well as developing a more powerful whitening product for dental-office use.

Whitestrips in its first year generated $200 million in revenue. It then introduced a complementary product – Night Effects and line extensions like Crest Whitening Liquid Gel and finally Crest MultiCare Whitening Toothpaste. If you wanted whiter teeth (as most consumers aspire for), Crest rolled out an impressive array of solutions in different formats, at different price points – to ensure that you went only to Crest and nowhere else. Over the years, P&G have expanded the Crest brand to include other products that combine oral care and aesthetics such as power toothbrushes, dental floss and mouthwash. By 2007, Crest was able to win back the #1 position in the US toothpaste market from Colgate.

Lessons for us

1. One cannot be complacent when your portfolio is performing well.

2.  Understand the stocks, that may be under threat and face competition.

The example currently is of FMCG brands, Vs  Patanjali Brand.  The impact of this not known yet. Be watchful

3. Good management will overcome turbulent times. Hence one of the criteria in stock selection would be the capability of management. With ability and governance

4. You can equate with the FDA issues the pharma companies . Well managed companies will improve their process quality and controls and adhere to compliance and scale up their business.

This post is  to remind us all that there is nothing permanent but never lose hope and more importanltly never relax

varadharajan VS

ckar.vsv@gmail.com

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s