Colgate to focus resources on ‘big hits’

NEW YORK —Product innovation and understanding what influences the shopper will sustain future growth at Colgate-Palmolive, said president and chief executive officer Ian Cook.

“The momentum that we have established over the last three years is indeed continuing,” Cook told attendees of the Consumer Analyst Group of New York Conference in late February. “We had established in 2005 some goals for the company through 2010, and they were to grow consistently the top line of the company between 5 percent and 8 percent in volume terms, [and] we were well within that range in 2006 and 2007, [and] that we would increase our gross margin year-on-year by between 75 and 125 basis points, which, again, we accomplished in 2006 and 2007. That puts us on our way to our goal of 60 percent gross margin for the year 2010.”

Helping the company achieve such goals has been, in part, such product innovation as the recent U.S. launch of its hybrid powered version of the Colgate 360-Degree Manual Toothbrush.

Going forward, innovation will remain at the forefront, as it is a vital part of continuing the volume growth of the company, Cook said. In fact, Colgate plans to sustain growth by focusing on “big hits”—products that in the first year of global sales can garner more than $100 million in sales.

To do this, the company has long-established category innovation centers, which are groups of marketers and consumer insight professionals that focus on unique consumer insights and market trends. These centers, which are not research and development centers, are located around the world, from China to Mexico, and report to each operating division. These centers focus on several categories, including oral care, and those new product concepts and technologies that can be launched within the next three years, Cook explained.

In addition, Colgate established in 2006 what it refers to as “long-term innovation groups.” These groups are located more centrally—which means in New York for the oral care and personal care businesses—and they report to the worldwide global marketing organization.

“While the category innovation centers are focused on readying products for commercialization in a three-year time frame, these long-term innovation groups are focused on new product concepts and technologies that can be launched in three to five years from now, taking a longer-term view,” Cook said.

That is just part of the behind-the-scenes at Colgate. Aside from innovation, understanding shopper marketing also is critical, as between 50 percent and 80 percent of final purchasing decisions, depending on the category, are made in the store, Cook said. In addition, retailers increasingly are seeking shopper knowledge and expertise from suppliers.

“The benefits we get from shopper marketing is to build stronger brands and category growth, to better capitalize on the new product opportunities that we have, strengthening partnerships with our customers and, again, helping to maximize the return on our commercial investments,” Cook said.

For example, in Mexico, shopper insight on oral care revealed that the shelf shopping experience is not as friendly or interactive as within the cosmetics category. Toothpaste is a regular planned purchase, but it does not lead to increased purchases of other oral care categories, such as toothbrushes. To drive sales, Colgate created an oral care boutique to enhance the shopper experience. It lowered the shelf to eye level, used lighting and interactive techniques to change the look and feel of the shelf, and used TV screens and posters to deliver therapeutic messages. It also created a separate, interactive children’s section.

Other areas of focus will be continuing to build a connection with professionals, such as dentists who can recommended Colgate products, and in getting its brand message out to consumers via such vehicles as the Internet.

“We will continue winning on the ground with our financial strategy, a stronger focus on innovation, improved go-to-market initiatives that will bring that innovation to consumers, and continuing our long history of efficiency and the values of the company,” Cook said.