Colgate consolidates its position as competitive pressures subside

Mumbai: Colgate is consolidating its position in the oral care business as competitive pressures are subsiding.

Even when the entire oral care business shrunk in size due to price reductions, freebies and promotions, Colgate has been able to increase its market share in the last couple of years.

Also it is likely to benefit from subsiding competition from other players. A major competitor, Anchor, is starting to lose its market share, while the oral business of Hindustan Lever (HLL) is undergoing a global recast.

Leading research firm ASK Raymond James says: "For Colgate, competitive pressures are likely to subside with fringe players such as Anchor starting to lose its market share, while HLL grapples with an uncertain global oral care portfolio. We expect a substantive changeover to happen in the operational environment for the oral care business."

Colgate has now clearly defined its 'ability zone' in terms of oral care while trying to grow in personal care, the report says. There is continuous market share growth that acts as a key trigger for the business. Volume growth could touch up to the 6-7-per cent levels, the report added. Also, the company could gain from the likely selling off/restructuring of Unilever's oral care business.

The stock market is expected to take note of the free cash generation capability and the oral care leadership of Colgate. The stock prices are likely to firm up in the coming months.

Colgate had recently declared its first interim dividend of 22.5 per cent (Rs 2.25 per equity share of Rs 10) for the financial year ending 31 March 2004. The interim dividend will be paid on the paid-up equity share capital of Rs 1,359.90 million involving a total payout of Rs 345 million.

Also, there were rumours that Colgate may buy back its shares from the market. But the company denied any such move.