Colgate continues to witness steady toothpaste volume growth of 12-13%. The company has been witnessing market share improvement in both its flagship toothpaste brands,
Colgate Dental Cream (CDC) and Cibaca.
Management is effectively guiding for 15-16% adspend to sales ratio in H2F2010. Since Colgate’s adspend to sales ratio in H2F2009 was 13%, it is likely to witness an increase of around 180 to 380 bps rise in adspend to sales ratio in H2F2010.
Management notes that HUL has increased its adspend in the last couple of months and has taken some price correction by increasing the size of SKU at the same price points. Although, there are no market share gains by Dabur.
Although the company is open to increase its presence by introducing new product offerings from its parent’s basket, currently there is no new category that is being test marketed and the focus is solely on Oral Care.
Colgate is witnessing input cost inflation of 5-6% on yoy basis and this is on account of the increase in Sorbitol and packaging costs. The company has a forward cover on Sorbitol for the next two quarters, and hence there is unlikely to be any significant impact on gross margins.