Colgate Precision Deck

Colgate-Palmolive: Precision Toothbrush

Assessment

By: Jordan Michael Smith

• Increasing interest towards the category by consumers, and a significant increase in purchase frequency of toothbrushes (9.7-9-8.7 months)

Since 1990 there has been an average 12.75% annual volume growth, and an average 17.71% retail value growth

YEAR 1990 1991 1992

Market Size Units(Volume)

242,000,000 261,000,000 307,000,000

YEAR 1990 1991 1992

Market Size Sales( Value)

395,000,000 453,000,000 547,000,000

Toothbrush Market

The Toothbrush market is growing and becoming more competitive

• Market size of toothbrushes sold in 1992 were 307 million, an 17.6% increase from 1991

• There was an increase of 49% in media support towards the category

• Coupon circulation has increased by 48%

• Since 1990 there has been an increase in new products being introduced to the market (over 47) and increase of new suppliers entering the market

• Introduction of the Super Premium Segment

IMPACTS ON

TOOTHBRUSH MARKET

The Super Premium segment has impacted the Toothbrush market since 1991

Since the year of introduction the segment has been able to capture on average 29.8% volume share of the Toothbrush market

• Consumers were becoming more concerned about oral health, and were willing to pay a premium for new products addressing this issue

• Increasing amount of consumers were beginning to differentiate product, and search out functionally effective products

• Major toothbrush suppliers began to introduce products into the segment to satisfy the needs and wants of this growing consumer base (Oral-B, Johnson & Johnson, P&G)

Super Premium Segment

24.7% Volume Share of Toothbrush Market

35% Volume Share of Toothbrush Market

1991 1992

64,467,000 Units 107,250,000 Units

Super Premium Toothbrush Suppliers

• Oral-B (Indicator, Regular)• Johnson & Johnson (Reach

Advanced Design)• Aqua Fresh



Advanced Design)• Aqua Fresh• P&G (Crest)

The Super Premium segment is currently being lead by three major Toothbrush suppliers

ORAL-BORAL-B Indicator(Launched 1991)

ORAL-B Regular(Launched 1991)

Johnson & JohnsonReach Advanced Design

(Launched 1991 )

Procter & GambleAqua Fresh

(Launched 1991)

Market Size Units 261,000,000 307,000,000

Oral-B 1.3% 4.3%

Oral-B Indicator 1.0% 3.7%

Oral-B Regular 0.3% 0.6%

Johnson & Johnson 0.7% 4.0%

Reach Advanced Design

0.7% 4.0%

Aqua Fresh 0.9% 4.6%

Year 1991 1992

Super Premium Products In Toothbrush Market

The Super Premium segment is expected to grow in 1993 and 1994

With continuous growth and introduction of new suppliers into the segment, the segment is expected to attain 39.6% volume share in 1993 and 45.6% in 1994

• Since 1991 there has been a 10.3% annual volume growth in the segment

• Consumer purchase frequency has continued to increase (from 9 month- 9 months-8.7 months

• Growing appeal towards oral health benefits, has lead consumers to upgrade their toothbrush (Athetically to Functionality)

• Entrance of Procter & Gamble's (P&G) Crest Complete in 1993 into the segment, is expected to capture 2.0% volume share

Super Premium Segment



1993 1994

131,027,600 Units 156,083,034 Units







Colgate is currently absent in the Super Premium segment; If continued, Colgate will lose market share to competitors

Market Size UnitsMarket Share UnitsColgateClassicPlus

Oral-BOral-B IndicatorOral-B RegularJohnson & JohnsonReachReach Advanced DesignReach BetweenPreventLeverAimPepsodent ProfessionalPepsodent RegularProcter& Gamble- CrestAqua FreshButlerPfizer-PlaxPrivate Label

OtherTotal

261,000,000 307,000,000 330,877,778 342,287,356

23.3% 22.2% 20.0% 17.5%6.4% 4.9% 3.0% 1.0%

16.9% 17.3% 17.0% 16.5%0.0% 0.0% 0.0% 0.0%

23.1% 19.8% 20.1% 22.1%1.0% 3.7% 4.0% 6.0%

19.2% 19.9% 17.0% 13.5%17.8% 15.2% 10.0% 5.0%0.7% 4.0% 4.5% 5.5%0.0% 0.5% 2.5% 3.0%0.7% 0.2% 0.0% 0.0%7.2% 5.0% 3.5% 1.5%

0.0% 2.0% 5.0% 7.0%0.9% 4.6% 5.0% 6.0%2.0% 2.0% 2.0% 2.0%1.8% 3.6% 3.6% 3.6%

11.2% 11.5% 12.0% 14.0%

11.3% 9.4% 11.8% 12.8%100.0% 100.0% 100.0% 100.0%

1991 1992 1993 1994• With absence in the Super Premium segment, Colgate has the potential to lose an average of 2.35% volume share annually over the next two years to emerging and current competitors.

• The three leading competitors (Oral-B, Johnson & Johnson, Procter & Gamble) have invested heavily in advertising towards the super premium segment, establishing product awareness.

• Absence in the Super Premium segment can have a substantial impact on Colgate's future shelf space, as Colgate's current products may not solve the changing consumers problem

Colgate should enter the Super Premium segment through the introduction of Precision

Market Size UnitsMarket Share UnitsColgateClassicPlusPrecisionOral-BOral-B IndicatorOral-B RegularJohnson & JohnsonReachReach Advanced DesignReach BetweenPreventLeverAimPepsodent ProfessionalPepsodent RegularProcter& Gamble- CrestAqua FreshButlerPfizer-PlaxPrivate Label

OtherTotal

261,000,000 307,000,000 330,877,778 342,287,356

23.3% 22.2% 27.2% 31.7%6.4% 4.9% 1.5% 1.0%

16.9% 17.3% 13.0% 13.5%0.0% 0.0% 13.0% 17.0%

23.1% 19.8% 19.1% 18.40%1.0% 3.7% 4.0% 3.0%

19.2% 19.9% 15.5% 11.0%17.8% 15.2% 10.0% 3.0%0.7% 4.0% 3.0% 5.0%0.0% 0.5% 2.5% 3.0%0.7% 0.2% 0.0% 0.0%7.2% 5.0% 3.5% 1.5%

0.0% 2.0% 6.0% 11.0%0.9% 4.6% 4.0 % 4.0 %2.0% 2.0% 2.0% 1.0%1.8% 3.6% 3.0% 3.0%

11.2% 11.5% 12.0% 14.0%

11.3% 9.4% 8.2% 4.4%100.0% 100.0% 100.0% 100.0%

1991 1992 1993 1994

With the introduction of Precision, Colgate can maintain an leadership position within the market.

• With presence in the Super Premium segment through Precision, Colgate has the potential to gain an average of 4.75% volume share annually over the next two years.

• The Precision aligns with the changing consumer preference and concerns when looking for a toothbrush. Already having a strong presence in shelf space the Precision will solidify that Colgate's shelf space of 25%-40% remains secured

• Although the Precision will be taking a portion of share from Colgate's current products, the remaining will be taken from Oral-B (.7%), Aqua Fresh (.6%), Butler (.5%), Pfizer (.6%), Lever (1.5%), and Johnson & Johnson (1.4%)

Forecast shows a positive NPV of $35,063,744 with the launch of the Precision

Projected Metrics For Precision

1993 1994

• Demand 42,021,477• Net Manufacturer Price $1.76• UVC $0.64• Gross Margin $47,064,055• Suggested Advertising Budget $32,800,000• Net Income $16,779,593

• Demand 58,873,425• Net Manufacturer Price $1.76• UVC $0.64• Gross Margin $65,938,236• Suggested Advertising Budget $290,000,000• Net Income $41,498,016

Investment Investment Cost

Annual Capacity

Tuffers $500,000 3 MM units

HandleMolds

$300,000 7 MM units

Packaging $150,000 40 MM units

Investment Amount Needed

Cost Of Investment

Tuffers 20 $10,000,000

HandleMolds

9 $2,700,000

Packaging 2 $300,000

12% Discount Rate NPV= $35,063,744

TOTAL $13,000,000

Precision is an effective innovative toothbrush that aligns with the changing consumer

• Contains Longer outer bristles that clean around the gun

• Contains Longer inner bristles that clean between the teeth

• Contains Shorter bristles that clean the surface of the teeth

• Removes an average 35% more plaque than any other leading tooth-brush

• Effective at the gum line and between the teeth achieving double the plaque removal scores of competitors

• Assist in reducing the probability of gum disease

Precision retail price should be priced at $2.80 as if it is the most effectively advanced toothbrush on the market.

• Priced respectively within the super-premium segment

• Offset loss from the cannibalization of Colgate's Classic and Plus toothbrushes

• Effectiveness and benefits of the brush will be strongly shown to the consumer and retailer with the implementation of a mainstream strategy and aggressive advertising.

Colgate Classic

Colgate Plus Colgate Precision

Oral-B Regular

Oral-B Indicator

Crest Reach advanced Design

Net Price $0.69 $1.35 $1.76 $1.78 $1.92 $1.67 $1.66

Retail Price $1.22 2 $2.80 $2.51 $2.65 $2.40 $2.38

Retail Margin

77% 48% 59% 41% 38% 44% 43%

For Precision to be successfully launched, Colgate will have to increase its current advertising budget by 58.78%

1993 1994Precision $32,800,000 $29,000,000

Plus $8,200,000 $7,250,000

Classic $0.00 $0.00

• Increasing the advertising budget will allow Precision to reach its full sales potential amongst launch as a mainstream product in its first year (42,021,478 units)

• 75% (32.8MM) of the budget will be allocated to Precision while the remaining 25% (8.2MM) will be allocated to Plus.

• Examining consumer trends and behavior in the market, there has been a substantial decrease in the Value segment (Consumers are becoming more conscious of oral disease and searching for products that can assist in prevention), as a result to this there will be no planned support in the segment.

Appendix 1- Base

1989 1990 1991 1992 1993 1994Market Size Units 243000000 242000000 261000000 307000000 330877778 342287356Market Share UnitsColgate 20.50% 21.80% 23.30% 22.20% 20.00% 17.50%Classic 8.50% 8.10% 6.40% 4.90% 3.00% 1%Plus 12% 13.70% 16.90% 17.30% 17% 16.50%Precission 0.00% 0.00% 0.00% 0.00% 0% 0%Oral-B 24% 24.50% 23.10% 19.80% 20.10% 22.10%Oral-B Indicator 0.00% 0.00% 1.00% 3.70% 4.00% 6.00%Oral-B RegularJohnson & Johnson 20.60% 19.80% 19.20% 19.90% 17.00% 13.50%Reach 18.10% 18.20% 17.80% 15.20% 10% 5.00%Reach Advanced Design 0% 0% 0.70% 4% 4.50% 5%Reach Between 0% 0% 0% 0.50% 2.50% 3%Prevent 3% 1.60% 0.70% 0.20% 0% 0%Lever 10.50% 9.80% 7.20% 5.00% 3.50% 1.50%AimPepsodent ProfessionalPepsodent RegularProcter & Gamble (Crest) 0% 0% 0% 2.00% 5% 7%Aqua Fresh 0% 0% 0.90% 4.60% 5% 6%Butler 0% 2% 2% 2% 2%Pfizer (Plax) 0.00% 0.00% 1.80% 3.60% 3.60% 3.60%Private Labels 0% 0% 11.20% 11.50% 12.00% 14%

Other (Plug) 24.400% 24% 11.300% 9.4000000000000100% 11.8000000000000000% 12.800%Total 100% 100% 100% 100% 100% 100%

Super Premium 24.00% 24.50% 24.70% 35% 39.600% 45.100%Professional 30.100% 31.90% 38.50% 38.60% 35.100% 30.10%Value 21.50% 19.50% 10.10% 10.10% 18.50% 16.500%

Appendix 2- Base(2)

1989 1990 1991 1992 1993 1994

Classic

Quantity 20655000 19602000 16704000 15043000 9926333.34 3422873.56

Price 0.69 0.69 0.69

UVC 0.3381 0.3381 0.3381

Revenue 10379670 6849170.005 2361782.756

TotalVariable Cost 5086038.3 3356093.302 1157273.551

GrossMargin 5293631.7 3493076.702 1204509.206

Fixed Cost

TotalFixed Cost

Media 1623000

2677950 933225

ConsumerPromotions 1176675

Trade Promotions 1257825

Prof it

1989 1990 1991 1992 1993 1994

Plus

Quantity 291600000 33154000 44109000 53111000 56249222.26 56477413.74

Price 1.35 1.35 1.35

UVC 0.6615 0.6615 0.6615

Revenue 71699850 75936450.05 76244508.55


GrossMargin 36566923.5 38727589.53 38884699.36

Fixed Cost

Total Fixed Cost

Media 8000000

21200000 21200000

Consumer Promotions 5800000


Profit

1989 1990 1991 1992 1993 1994

Precision

Quantity 0 0 0 0 0

Price 0 0 0 0 0

UVC 0 0 0 0 0

Revenue 0 0 0 0 0

Total Variable Cost 0 0 0 0

Gross Margin 0 0 0 0 0

Fixed Cost 0 0 0 0 0

Total Fixed Cost 0 0 0 0 0

Media 0 0 0 0

Consumer Promotions 0 0 0 0 0

Trade Promotions 0 0 0 0 0

Profit 0 0 0 0 0

Appendix 3- Base(3)

1989 1990 1991 1992 1993 1994

PlugQuantityPriceUVCRevenueTotal Variable CostGross MarginFixed Cost 11423000 15810391 21675992Total Fixed CostMediaConsumer PromotionsTrade PromotionsProfit

1989 1990 1991 1992 1993 1994

TotalQuanitityPriceUVCRevenue 82079520 82785620.06 78606291.31Total Variable 40218964.8 40564953.83 38517082.74Gross Margin 41860555.2 42220666.23 40089208.57Fixed Cost 35480500 39688341 43809217

Profit 6380055.2 2532325.228 -3720008.434

Appendix 4- Innovation

1989 1990 1991 1992 1993 1994Market Size Units 243000000 242000000 261000000 307000000 330877778 342287356Market Share UnitsColgate 20.50% 21.80% 23.30% 22.20% 27.20% 31.70%Classic 8.50% 8.10% 6.40% 4.90% 1.50% 1%Plus 12% 13.70% 16.90% 17.30% 13% 13.50%Precission 0.00% 0.00% 0.00% 0.00% 13% 17%Oral-B 24% 24.50% 23.10% 19.80% 19.10% 18.40%Oral-B Indicator 0.00% 0.00% 1.00% 3.70% 3.00% 3.00%Oral-B RegularJohnson & Johnson 20.60% 19.80% 19.20% 19.90% 15.50% 11.00%Reach 18.10% 18.20% 17.80% 15.20% 10% 3.00%Reach Advanced Design 0% 0% 0.70% 4% 3.00% 5%Reach Between 0% 0% 0% 0.50% 2.50% 3%Prevent 3% 1.60% 0.70% 0.20% 0% 0%Lever 10.50% 9.80% 7.20% 5.00% 3.50% 1.50%AimPepsodent ProfessionalPepsodent RegularProcter & Gamble (Crest) 0% 0% 0% 2.00% 6% 11%Aqua Fresh 0% 0% 0.90% 4.60% 4% 4%Butler 0% 2% 2% 2% 1%Pfizer (Plax) 0.00% 0.00% 1.80% 3.60% 3.00% 3.00%Private Labels 0% 0% 11.20% 11.50% 12.00% 14%

Other (Plug) 24.400% 24% 11.300% 9.4000000000000100% 8.1999999999999900% 4.400%Total 100% 100% 100% 100% 100% 100%

Super Premium 24.00% 24.50% 24.70% 35% 49.800% 60.600%Professional 30.100% 31.90% 38.50% 38.60% 30.000% 23.50%Value 21.50% 19.50% 10.10% 10.10% 17.00% 16.500%

Appendix 5- Innovation (2)

1989 1990 1991 1992 1993 1994

Classic

Quantity 20655000 19602000 16704000 15043000 4963166.67 3422873.56

Price 0.69 0.69 0.69

UVC 0.3381 0.3381 0.3381

Revenue 10379670 3424585.002 2361782.756


GrossMargin 5293631.7 1746538.351 1204509.206

Fixed Cost

TotalFixed Cost

Media 1623000

0 0

ConsumerPromotions 1176675


Prof it

1989 1990 1991 1992 1993 1994

Plus

Quantity 291600000 33154000 44109000 53111000 43014111.14 46208793.06

Price 1.35 1.35 1.35

UVC 0.6615 0.6615 0.6615

Revenue 71699850 58069050.04 62381870.63


GrossMargin 36566923.5 29615215.52 31814754.02

Fixed Cost

Total Fixed Cost

Media 8000000

10503500 10503500

Consumer Promotions 5800000


Profit

1989 1990 1991 1992 1993 1994

Precision

Quantity 0 0 0 0 42021477.81 58873425.23

Price 0 0 0 0 1.76 1.76

UVC 0 0 0 0 0.64 0.64

Revenue 0 0 0 0 73957800.94 103617228.4

Total Variable Cost 0 0 0 26893745.8 37678992.15

Gross Margin 0 0 0 0 47064055.14 65938236.26

Fixed Cost 0 0 0 0 0

Total Fixed Cost 0 0 0 0 0

Media 0 0 0 15000000 12000000

Consumer Promotions 0 0 0 0 13000000 10000000

Trade Promotions 0 0 0 0 48000000 7000000

Profit 0 0 0 0 14264055.1 36938236.26

1989 1990 1991 1992 1993 1994

PlugQuantityPriceUVCRevenueTotal Variable CostGross MarginFixed Cost 11423000 15810391 21675992Total Fixed CostMediaConsumer PromotionsTrade PromotionsProfit

1989 1990 1991 1992 1993 1994

TotalQuanitity 89998755.62 108505091.9PriceUVCRevenue 82079520 135451436 168360881.8Total Variable 40218964.8 57025626.97 69403382.31Gross Margin 41860555.2 78425809.01 98957499.49Fixed Cost 35480500 59113891 61179492Profit 6380055.2 19311918.01 37778007.49

Appendix 6- Innovation (3)

1989 1990 1991 1992 1993 1994Market Size Units 243000000 242000000 261000000 307000000 0.00 0.00Market Share UnitsColgate 20.50% 21.80% 23.30% 22.20% 7.20% 14.20%Classic 8.50% 8.10% 6.40% 4.90% -1.50% 0.00%Plus 12% 13.70% 16.90% 17.30% -4.00% -3.00%Precission 0.00% 0.00% 0.00% 0.00% 12.70% 17.20%Oral-B 24% 24.50% 23.10% 19.80% -1.00% -3.70%Oral-B Indicator 0.00% 0.00% 1.00% 3.70% -1.00% -3.00%Oral-B Regular 0.00% 0.00%Johnson & Johnson 20.60% 19.80% 19.20% 19.90% -1.50% -2.50%Reach 18.10% 18.20% 17.80% 15.20% 0.00% -2.00%Reach Advanced Design 0% 0% 0.70% 4% -1.50% 0.00%Reach Between 0% 0% 0% 0.50% 0.00% 0.00%Prevent 3% 1.60% 0.70% 0.20% 0.00% 0.00%Lever 10.50% 9.80% 7.20% 5.00% 0.00% 0.00%Aim 0.00% 0.00%Pepsodent Professional 0.00% 0.00%Pepsodent Regular 0.00% 0.00%Procter & Gamble (Crest) 0% 0% 0% 2.00% 1.00% 4.00%Aqua Fresh 0% 0% 0.90% 4.60% -1.00% -2.00%Butler 0% 2% 2% -0.50% -1.00%Pfizer (Plax) 0.00% 0.00% 1.80% 3.60% -0.60% -0.60%Private Labels 0% 0% 11.20% 11.50% 0.00% 0.00%

0.00% 0.00%Other (Plug) 24.400% 24% 11.300% 9.4000000000000100% -3.60% -8.40%Total 100% 100% 100% 100% 0.00% 0.00%

0.00% 0.00%Super Premium 24.00% 24.50% 24.70% 35% 10.20% 15.50%Professional 30.100% 31.90% 38.50% 38.60% -5.10% -6.60%Value 21.50% 19.50% 10.10% 10.10% -1.50% 0.00%

Appendix 7- Delta

Appendix 8- Delta (2)

1989 1990 1991 1992 1993 1994

Classic 0.00% 0.00%Quantity 20655000 19602000 16704000 15043000 -496316667.00% 0.00%Price 0.69 0.00% 0.00%UVC 0.3381 0.00% 0.00%Revenue 10379670 -342458500.23% 0.00%TotalVariableCost 5086038.3 -167804665.11% 0.00%GrossMargin 5293631.7 -174653835.12% 0.00%FixedCost 0.00% 0.00%TotalFixedCost 0.00% 0.00%Media 1623000 -267795000.00% -93322500.00%ConsumerPromotions 1176675 0.00% 0.00%TradePromotions 1257825 0.00% 0.00%Profit 0.00% 0.00%

1989 1990 1991 1992 1993 1994Plus 0.00% 0.00%Quantity 291600000 33154000 44109000 53111000 -1323511112.00% -1026862068.00%Price 1.35 0.00% 0.00%UVC 0.6615 0.00% 0.00%Revenue 71699850 -1786740001.20% -1386263791.80%TotalVariableCost 35132926.5 -875502600.59% -679269257.98%GrossMargin 36566923.5 -911237400.61% -706994533.82%FixedCost 0.00% 0.00%Total Fixed Cost 0.00% 0.00%Media 8000000 -1069650000.00% -1069650000.00%Consumer Promotions 5800000 0.00% 0.00%Trade Promotions 6200000 0.00% 0.00%Profit 0.00% 0.00%

1989 1990 1991 1992 1993 1994

Precision 0.00% 0.00%Quantity 0 0 0 0 4202147780.60% 5887342523.20%Price 0 0 0 0 176.00% 176.00%UVC 0 0 0 0 64.00% 64.00%Revenue 0 0 0 0 7395780093.86% 10361722840.83%Total Variable Cost 0 0 0 2689374579.58% 3767899214.85%Gross Margin 0 0 0 0 4706405514.27% 6593823625.98%Fixed Cost 0 0 0 0 0.00% 0.00%Total Fixed Cost 0 0 0 0 0.00% 0.00%Media 0 0 0 1500000000.00% 1200000000.00%Consumer Promotions 0 0 0 0 1300000000.00% 1000000000.00%Trade Promotions 0 0 0 0 4800000000.00% 700000000.00%Profit 0 0 0 0 1426405510.00% 3693823625.98%

Appendix 9- Delta (3)

1989 1990 1991 1992 1993 1994

Plug 0.00% 0.00%

Quantity 0.00% 0.00%Price 0.00% 0.00%UVC 0.00% 0.00%Revenue 0.00% 0.00%Total Variable Cost 0.00% 0.00%Gross Margin 0.00% 0.00%Fixed Cost 11423000 0.00% 0.00%Total Fixed Cost 0.00% 0.00%Media 0.00% 0.00%Consumer Promotions 0.00% 0.00%Trade Promotions 0.00% 0.00%

Profit 0.00% 0.00%

1989 1990 1991 1992 1993 1994

Total 0.00% 0.00%

Quanitity 8999875561.60% 10850509185.20%Price 0.00% 0.00%UVC 0.00% 0.00%Revenue 82079520 5266581592.43% 8975459049.03%Total Variable 40218964.8 1646067313.88% 3088629956.87%Gross Margin 41860555.2 3620514278.54% 5886829092.17%Fixed Cost 35480500 1942555000.00% 1737027500.00%Profit 6380055.2 1677959278.54% 4149801592.17%

Appendix 10- NPV/Investment Break Down

Investment Cost BrushesInvestment Break DownTufters $500,000 = 3 Million Units x20 $10,000,000 58,873,425.29Handle Molds $300,000= 7 Million Units x9 $2,700,000Packaging $150,000 = 40 Million Units x2 $300,000Total $13,000,000

Discounted Rate 12%Profit $48,063,743.52Cost of Invesments $13,000,000Net Present Value $35,063,743.52

Documents

Colgate Precision Deck