COTTLE TAYLOR: EXPANDING THE ORAL CARE GROUP IN INDIA

Presented to

Prof.Roshan Lal Raina Communication Group, Indian Institute of Management, Lucknow

Prepared by

GR !P " #$%RI PR%&%'$ G (abm)*)+,-,.ogesh /ukare (pgp+01"1-, M $%2 M(pgp+01"3-, 2ithya Ramachandran (pgp+01"4-, 'andeep 5iruko6ela (pgp+01"0-,Parthi &umar ' (pgp+0+)7-, 2eehaarika 8ela6arthy(pgp+0++)-, I2I.%2 M / R(pgp+0++1-9 ':C5I 2 / PGP+0 ;%5C$ Indian Institute of Management, Lucknow

ctober 10, +)1+

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MEMORANDUM TO: FROM: DATE: SUBJECT: Prof.Roshan Lal Raina, Communication Group, Indian Institute of Management, Lucknow GR !P ",PGP+0 ;%5C$ Indian Institute of Management, Lucknow ctober 10, +)1+ Cottle<5aylor= :>panding the ral Care Group in India

&indly find the report about e>panding the ral Care Group in India for the company Cottle<5aylor, along with recommendations on how to implement strategies in India to offset the !' market downturn. 5he report included both secondary research using professional reports from :uromonitor Consumer Lifestyle Report, +)1). ;ased on the findings in this report, I ha6e concluded that 3? increase in the ad dollars will lead to higher re6enues and profitability. !nit sales growth of 3)? can be achie6ed by increasing the ad6ertising budget abo6e 1+? of sales as suggested by Lang.5he Company should also target different geographies for different products apart from allocating ad6ertising funds effieciently. 5he members of the group contributed towards the findings of the report. 5heir opinions and candor contributed greatly to my success in completing this report. Please come to me if you need additional information or if you ha6e @uestions. I would be happy to assist you in any way when implementing some of the recommendations presented in this report.

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TABLE OF CONTENTS 5R%2'MI55%L M:M ................................................................................................ iii :A:C!5I8: '!MM%R. .............................................................................................. 6 I25R /!C5I 2 .............................................................................................................7 PR ;L:M /:BI2I5I 2..................................................................................................7 %2%L.'I'.........................................................................................................................0 %L5:R2%5I8:'...............................................................................................................* '!GG:'5I 2'...............................................................................................................1) C 2CL!'I 2 ................................................................................................................11 R:B:R:2C:' ................................................................................................................11

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EXECUTIVE SUMMARY Purpose of the Report 5he purposes of this report are to (1- e>plain how to achie6e 3)? unit sales growth of tooth brush under the oral care category of the Cottle < 5aylor (+- identify how increase in ad dollars would contribute to higher re6enues and (3- discuss strategies of product mi> of other countries where it has been successful

Moti6ation in 5odayCs Dorkforce Bindings from report re6ealed that 3? increase in the ad dollars will lead to higher re6enues and profitability. !nit sales growth of 3)? can be achie6ed by increasing the ad6ertising budget abo6e 1+? of sales as suggested by Lang.5he Company should also target different geographies for different products apart from allocating ad6ertising funds effieciently Recommendations for Moti6ating :mployees Recommendations for increasing the unit sales growth of toothbrush include (1!tiliEing 6ast untapped market in rural India, (+- ffering low<end manual product before attempting to con6ert consumers to midFhigh<range, (3- achie6ing market strategies by designing geography specific strategies and (4- :fficient allocation of ad6ertising funds.

Cottle-Taylor: Expanding the Oral Care Group in India

INTRODUCTION Philadelphia<based Cottle was founded in 101, as a hand<soap manufacturer. ;y +))*, the company produced more than +)) products to ser6e three consumer< product categories= oral care, personal care (soaps, lotions, deodorants, etc.-, and home care (laundry and dishwashing products led this group-.Its +))* re6enues were G11., billion. CottleCs products were sold in more than +)) countries worldwide. Cottle 6iewed geographic e>pansion and new<product de6elopment as key dri6ers of growth in foreign markets and di6ided its global operations into four geographic di6isions= 2orth %merica, :urope, Latin %merica, and Greater %sia and %frica. ('ee Exhibit 1 for a breakdown of CottleCs +))* re6enue by region.- ;y +))* roughly ,)? of the companyCs re6enues, or G,." billion, came from emerging markets. 5o ser6e this customer base, Cottle maintained manufacturing and business operations in ", countries. 5he company belie6ed in pro6iding @uality products around the globeH unlike some competitors, Cottle employed a predominantly international workforce and in6ested hea6ily in foreign communities. ;etween +))4 and +))*, CottleCs sales grew by 0? annually, net income by 1+?, and earnings per share by 14?. Dhile personal and home care generated strong sales in the !nited 'tates and :urope, oral care anchored the companyCs success in emerging markets. ('ee Exhibit for CottleCs +))* Global ral Care re6enues, and Exhibit ! for details on CottleCs +))* Greater %siaF%frica ral Care re6enues.Indian business operations were conducted through a subsidiary <Cottle India< and focused e>clusi6ely on oral careH Cottle India manufactured toothpaste, toothpowder (a powder<based cleanser typically used without a toothbrush-, and toothbrushes. %s the market for modern oral care products de6eloped, Cottle planned to introduce ancillary products, including mouthwash and dental floss. Dithin India, CottleCs distribution network was wideH its products were sold in more than 4,),))) retail outlets throughout the country, from small bodegas in one< shop towns to closet<siEed urban sidewalk 6endors to supermarkets and specialty retailers. PROBLEM DEFINITION CottleCs senior management, faced with declining !.'. re6enues, had looked to emerging markets to offset domestic losses, and Lang, as 8P of Marketing for Greater %sia and %frica, was under pressure to deli6er results. $e needed a higher unit sales and re6enue contribution from India to boost his regionCs bottom line. Dith a +))* population of more than one billion, India represented an enormous
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re6enue opportunity f o r C o t t l e . Lang b e l i e 6 e d that by increasing t o o t h b r u s h <related a d 6 e r t i s i n g a n d promotional spending beyond 1+? of sales Ithe +))* le6elICottle could accelerate market de6elopment in India, as it had in 5hailand in +))". Lang strongly belie6ed a toothbrush unit growth rate of +,?J3)? in India was achie6able in +)1). /espite its recent economic growth, more than three<@uarters of Indians li6ed on less than two dollars a day. Dith this gi6en scenario it is necessary to determine whether Mr.LangCs proKected unit growth rate of 3)? in India was achie6able or not.
Exhibit 1 Cottle-Taylor 2009 Global Revenues by Region ($ millions)
Global North America $uro%e )atin America Greater Asia+A,rica $ 11,500 $ 2 !"0 2 &'0 " 9*0 $ 2 "00 100 % 22# 2(# "(# 20#

Exhibit

2009 Cottle-Taylor Global -ral Care Revenues by Category ($ millions)

$ ! !02 9"0 200 &0 2*0 & 000 &9# *"# (# *# "#

Tooth%aste (inclu.es tooth%o/.er) Toothbrushes 1outh/ash 2enture Care 2ental 3loss Total

Exhibit ! 2009 Cottle 4hare o, Global+Regional -ral Care 5 Toothbrush 1ar6ets

00" Oral Care # Toothbru$h: %e&enue$ and 'ar(et )hare Global 1ar6et ($ billions) Cottle # o, Global 1ar6et Cottle Revenue ($ billions) # Cottle Revenue ,rom Greater Asia+A,rica Cottle Revenue ,rom Greater Asia+A,rica ($ billions) # Cottle Revenue ,rom 8n.ia Cottle Revenue ,rom 8n.ia ($ billions) Oral Care 2'790 2'7*# $ &70 2!# $ *7&' '# $ 07( $ Toothbru$h '70! *!7!# $ 079( 2! $ # 072" &# $ 070& $

ANALYSIS I"#i$ i" %%&

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Demographics and Economic growth India was the worldCs largest democracy. Its 1.+ million s@uare miles of 6aried topography hosted a +))* population of 1.17 billion, with a median age of +, and an annual growth rate of 1.4?. Population control campaigns had succeeded in slowing growth rates to 1"? for the first decade of the +1st century. 5he country was di6ided into +0 states and * territoriesH $indi was the primary language and :nglish the second, although the number of officially recogniEed languages (e>cluding :nglish- was ++. Changes in economic policy introduced in 1**1 helped to shift the country away from the highly regulated and protectionist economic en6ironment that was established when India gained independence from ;ritain in 1*4". /uring the 1**)s, foreign in6estors and businesses, optimistic about growth prospects, poured money into India. 5he G/P rapidly e>panded as a resultH in +))* G/P was 147 times greater than in 1**). .et the distribution of newfound economic prosperity was inconsistent across India. In +))*, Kust three of the 3" states and territoriesIMaharashtra, !ttar Pradesh, and %ndhra Pradesh (where Patel had grown up-Iaccounted for 3)? of IndiaCs total G/P. /espite economic growth, India struggled to free 6ast swaths of its population from po6erty. Roughly 3"? (or 4+* million indi6iduals- li6ed below the po6erty line, defined by the Dorld ;ank as G1.+, !.'. per day. 'ome estimates suggested that as much as 0)? li6ed on less than G+ per day. In +))*, roughly "0? of Indians (*), million- li6ed in rural towns and 6illages and ++? (+,, million- in urban settings. $owe6er, farmers seeking higher wages as manual laborers were rapidly migrating to cities. Dhile new wealth fueled impro6ements in urban areas, abKect po6erty remained there as well. Propelled by the continual influ> of rural residents to cities, the number of Indians li6ing in slums (defined as dwellings with no solid roof and no on<site access to a toilet or clean drinking water- was proKected to reach 0? of the population (*3 million- by +)11. I"#i$" O'$( C$') Attitudes and Habits /ental hygiene had e>isted in India for centuries. % widespread practice was (and is- for Indians to chew twigs from the 2eem tree, often referred to as L2atureCs /rugstore.M In +))4, countrywide campaigns promoted by the Indian /ental %ssociation (I/%were designed to Linform, educate and empowerM citiEens on oral health issues. 5he I/% and its partnersI including CottleIpro6ided free dental checkups, free product samples, and basic instructions for proper oral care. Rising awareness of dental health benefits, combined with the increasing incomes and influence of Destern habits, propelled industry wide oral care growth within IndiaH the oral care sectorCs growth rate from +))0 to +))* was 1)?. In +))*, though, many Indians still cleaned their teeth with traditional products like 2eem twigs, black salt, tobacco, charcoal, and ash. :specially in rural areas, many Indians did not associate dental problems (such as ca6ities or bleeding gums- with improper oral care, but instead attributed them to bad eating habits or genetics. % +))" study re6ealed that ,)? of Indians were not concerned with pre6enting or curing dental problemsH the same sur6ey also found that Indians who li6ed in rural areas were fi6e times more likely to refrain from using modern oral care products than their urban counterparts.
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Dental Professionals 6erall penetration of dentists in India was low. In +)),, the maKority of Indians had ne6er 6isited a dentist, and Kust +? 6isited one regularly. Bactors contributing to the shortage of dentists in India included the migration of Indian dentists to foreign countries for higher compensation, a relati6ely small pool of @ualified dental educators, and in rural areas a lack of skilled labor a6ailable to support dentists and technicians. %ccording to the Dorld $ealth rganiEation, there was Kust one Ldentistry personnelM (a term that includes dentists as well as dental assistants and techniciansfor e6ery 1),))) people. 5 h e 6 a s t maKority of dental professionals were clustered in urban areas, ser6ing patients with higher incomes. /ental fees were typically paid out< of<pocket by patients and ranged from G1) for routine ser6ices to G,)) for sophisticated procedures. In +))*, efforts to institute dental insurance plans were underway by the I/%. Brushing Frequency and Brush Replacement More than ,)? of rural India did not use a toothbrush to clean teeth. %mong brushers, few followed the I/%Cs recommendations for brushing fre@uency (twice daily- and brush replacement (once e6ery three months-. ALTERNATIVES Consumer Education 5o help establish and reinforce brand awareness, Cottle should partner fre@uently with the I/% to conduct research studies and dental health outreach campaigns. Product anufacturing

'ince 5oothpaste and toothpowder were ine>pensi6e and locally a6ailable, the company should concentrate on toothbrush production, which re@uired financial and manufacturing resources such as specialiEed e@uipment for molding plastic handles and trimming bristles. $a6ing operated in India for more than ,) years, Cottle had in6ested in growing its toothbrush manufacturing capacity and impro6ing producti6ity o6er time. ;y +))* the company could adKust its product mi> to meet demand without relying on the e>pensi6e and sometimes risky import process. In +))*, Cottle IndiaCs toothbrush sales accounted for 1".,? of total Cottle India oral care sales, with toothpaste and toothpowder contributing 40."? and 33.0? respecti6ely. Distribution and !ales Placement of CottleCs toothbrushes in retail outlets countrywide re@uired multiple distribution strategies and reliance on a wide network of partner distributors. 5he company s h ou ld stri6e to continually fine<tune its retail distribution operation,
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and by +))* the @uality and reliability of its distribution network should ha6e a competiti6e ad6antage. Dentists and Distribution Dith the growing awareness of the importance of good dental hygiene, Cottle plotted how to le6erage the dentist distribution channel. In early +))*, !.'. management had conducted a study to @uantify the benefits of its battery<operated toothbrush. 5he study demonstrated that battery brushes were more effecti6e than manual brushes in remo6ing pla@ue and nearly +)? better at reducing gum bleedingIa pre6alent problem in Indian dental patients. Communications Cottle IndiaCs oral care di6ision spent *? of gross toothbrush sales in+))* on toothbrush<related ad6ertising and 3? on promotions and merchandisingH 1)? was for off<in6oice allowances for trade deals. Media ad6ertising primarily targeted men and women aged +)J3, in both rural and urban locations. %ppro>imately ,)? of the ad budget was spent on tele6ision, 3)? on print ads in newspapers, 1,? on billboards and outdoor displays, and ,? on radio. Campaigns were weighted to mid< range products to encourage consumers to trade up. SUGGESTIONS AND CONTROL 1. 5he %d6ertising budget should be increased should be increased abo6e 1+? of sales as suggested by Lang. +. 5he company should offer schemes like discounts and product<bundling 3. ;etter allocation of ad6ertising funds should be made through different forms. 4. 5arget different geographies for different products ,. 5he company should !tiliEe 6ast untapped market in rural India.

CONCLUSION Bindings from report re6ealed that 3? increase in the ad dollars will lead to higher re6enues and profitability. !nit sales growth of 3)? can be achie6ed by increasing the ad6ertising budget abo6e 1+? of sales as suggested by Lang.5he Company should also target different geographies for different products apart from allocating ad6ertising funds effieciently.

REFERENCES

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N!:LC$, O. %. (+)1+-. Cottle<5aylor= :>panding the oral care group in India. Har"ard Business Publishing, 13.

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