The Toothpaste Wars
Friday, June 11, 2021 by Finshots
In this week’s Finshots Markets we talk about Toothpaste wars and how Colgate is trying to hold its fort in an increasingly competitive landscape.
Ever heard of trademark genericide?
It’s what happens when a product becomes synonymous with an entire category. Like Xerox (a US company) became synonymous with photocopying. Like Maggi became synonymous with noodles. And “Thermos” became synonymous with vacuum-sealed flasks. When you have a product so successful that it replaces an entire category, you can sometimes lose the right to enforce your trademark. It’s like becoming a victim of your own success and it’s called genericization.
And sure, it sucks not to have exclusive rights to a name that you cultivated, but that’s what success does to you sometimes. And at one point in time, our main protagonist for the day, Colgate, dominated the oral hygiene market in such a way that they became synonymous with toothpaste. They were single-handedly responsible for getting people to abandon neem twigs for toothbrushes. And the rich legacy they built since 1937 paved the way for Colgate to build a brand like no other.
Imagine reaching out to a crore school-going children (read prospective customers) every year. Imagine stocking your flagship product in more than 60 lakh stores all across the country. Imagine engaging with over 30,000 doctors who recommend your products. That’s what Colgate does every year. They have excellent brand recall and an unparalleled distribution network. And all of this has culminated in a market share of close to 60%.
But this was back in 2015.
Things have changed since then and the toothpaste industry is no longer what it once was. Starting from 2010, Patanjali tried to do something very few people have tried to do before. They plotted to get a large part of the Indian population to switch toothpaste brands in a very short span of time.
And sure, switching toothpaste doesn’t cost a lot. You could do it overnight. But once you get used to the taste, it’s not that easy. You need a major push to make the leap. And when Patanjali started marketing its “indigenous” Ayurvedic products, a cultural shift in perception began to take hold. They focused on tier 2, tier 3 cities at first. But soon enough, they were making major headway in metros as well. Within just a decade, they went from having no presence to commanding a sizeable share in the herbal toothpaste segment which accounts for about 30% of the entire industry.
Colgate's share meanwhile went down to about 51% during the same period. And it wasn’t just them that was feeling the heat. Other MNCs including Hindustan Unilever, who market brands such as Pepsodent and Closeup, saw their market share dip — from 21% to 16%. Meanwhile, highly specialized toothpaste manufacturers like Sensodyne also started chipping away at the total pie. It was all-out warfare. But then after 2018, perceptions started shifting once again.
Patanjali was dabbling in too many things and its value proposition was no longer unique. Companies had taken a leaf out of Patanjali’s playbook and started launching their own Ayurvedic variants. Colgate launched Cibaca Vedshakti, ActiveSalt, Charcoal, and Neem toothpaste. They even marketed it heavily, spending about 14% of their revenues on advertisement in 2020 as opposed to spending 10% back in 2015. And just when it was beginning to seem like Colgate was ready to snap back at its competitors, Dabur took the stage by storm.
See, by now, Patanjali had done all the heavy lifting. They had clearly communicated to people the value of adopting Ayurvedic variants. But when they started losing their way, it was Dabur that was best positioned to pounce on the opportunity, and pounce they did. From around 12% in 2015, Dabur’s share has increased to 17%.
And Colgate — Well their share has further dipped to about 48–49%.
Does this mean Colgate will no longer mean the dominant force that it once was?
Well, it’s hard to say. This is a company that’s been in the market for 80 odd years now. They practically built the segment. And their financials are pretty robust. During the first three months of 2021, their net profit increased by 54% compared to the same period last year. They are also innovating as we speak, with new variants like Colgate Diabetes, a premium offering for diabetic patients who are extra conscious about oral hygiene. Bottom line — Even though they may no longer have the market share they once commanded, Colgate is still a force to be reckoned with.
So we wouldn’t write them off just yet.
Why fuel isn’t included under GST?
A few days ago, the union minister for petroleum and natural gas said that he would like to see petrol and diesel included under the ambit of the GST. But what’s really stopping us from actually implementing this? It’s a question that we’ve been asked many times before. So earlier this week, we discussed this story at length in our daily Finshots article.