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Case Analysis Note 1

Cottle- Taylor: Expanding the Oral Care Group


in India

Submitted by:

PGP 17 | Section B | Group B15


Tamaraiselvi | Satyanarayan | Ankita | Nikhil

1. What factors determine the demand for toothbrushes? How can demand be increased?
The factors determining demand for toothbrushes are as follows:
(a) Disposable income of consumers Due to the economic liberalization in 1991, there has
been continuous increase in the GDP of India, In 2009 Indias GDP is 146 times greater than
the GDP in 1991. The disposable income with the Indian population has also been increasing.
The types of oral care products purchased by customers vary as per the disposable income of
consumers. Rural and semi-urban consumers are extremely price sensitive and cannot afford
expensive and sophisticated dental products while urban consumers prefer high quality
products that deliver better value.
(b) Consumer education and Oral hygiene awareness Awareness of dental health benefits
determines the brushing and consumption habits of the consumers. Rising awareness makes
consumers knowledgeable of different categories of products and motivates them to use
better products. Consumer education partnered with IDA showed exposed rural residents
were twice as likely to adopt tooth brushing. Many Indians associate dental problems with
bad eating habits and genetics. Consumer education and Oral hygiene awareness campaigns
advocate for oral care and result in increase in demand for toothbrushes.
(c) Frequency of use and replacement The greater the number of time a consumer brushes
his teeth, greater is the demand for new toothbrushes. Consumers who have knowledge about
when to replace toothbrush contribute to greater demand.
(d) Accessibility A product that is well distributed and readily available has a greater demand
since it is a regular use product.
(e) Influence of Western habits Because of globalization there has been tremendous cross
cultural exchanges between Indian and the Western world which has resulted in the change in
the oral habits of Indians to some extent.
The demand for toothbrushes can be increased in the following manner:
(a) Reaching out to rural India 64% of the Indian expenditures is made by this group alone
and hence it must be targeted.
(b) Advertising Increase in advertising budget to tap into the huge market of non-users and
prevent loyal consumers from straying away to competitors.
(c) Increase dental health awareness Dental health benefits must be promoted and Cottles
tooth brushes must be positioned as the best to prevent dental problems.
(d) Distributor Education Distributor must be aware of Cottles USP for pitching to retailers
in rural areas to promote the product.
(e) Free sampling Free sampling is necessary to create brand awareness and let non-users
experience the benefits of the product.

2. How is Cottle-Taylor doing in India? Has Cottle leveraged its first mover advantage? How?
Cottle-Taylor has been in India for over 50 years with its product lines in toothpaste, toothpowder
and tooth brushes. With its strategy of using oral care product categories in emerging markets the
company has struck the right chords to make a symphony out of economically improving population

of India. Cottle has a growth strategy of geographical expansion and product development. The
performance of the company can be justified by the following:
1. Sales:
Cottle tooth brushes account for 46% overall toothbrush market in India
Tooth paste and tooth powder contribution being 48.7% and 33.8% to its overall
revenues
Ease of availability in mainstream retailers, semi urban and rural retailers
2. Product acceptance
Cottles strategy of introducing its new products in all the markets has been
appreciated by its local managers and consumers
It has also helped Cottle to be associated with IDA and in spreading awareness about
oral hygiene with respect to battery operated products
3. Organization
As mentioned in the case, the organization is not centralized hence giving the local
managers more freedom in making decisions
The central office giving sales and marketing support with the local offices providing
the strategic advice and research
Products and advertisements were of international design with end modifications in
the ambit of local managers
4. Growth
The growth in Indian market has been in double digits from the previous year
The past 5 year performance has been in 8% CAGR and earnings per share being
14%
From the above factors we can see that performance of Cottle in India has been more than
satisfactory. Moving on to the first mover advantage, we have to notice the data in the case which
throws light on the demographics. 37% of population live under $1.5/day and 50% of the rural
population do not use toothbrushes. Further, they are unaware about oral hygiene and consequences
of the same. Cottle has been successful in associating itself with dentists and IDA with newly
designed products. With very a penetrative three layer distribution system they have given the ease
of product availability to customer of all segments. The product are targeted to all classes of
consumer from entry level to high spending customer buying at multi retail chains.
Leveraging of first mover advantage:
With Cottle creating awareness about oral hygiene and study saying that people are more likely to
pick up brushing their teeth on awareness, Cottle can leverage their association with awareness
programs to add more segments to their fold. With upcoming multi chain retails, Cottle can get into
the minds of high spending individuals to sell of their premium and high products. With an
upcoming strategy of high spending in advertising should increase their visibility and achieving a
superficial target for the next year may not be that difficult.

3. How should Cottle accelerate the development of toothbrush market in India?


Cottle can accelerate the development of toothbrush market in India using the following action plan:

(a) Restructuring the advertising mix The current distribution of ad budget for Cottle is 50%
television, 30% newspaper ads, 15% outdoor advertising and 5% on radio. Since 87% of their
revenue comes from low-end manual toothbrushes sold in rural and middle income areas
having low television penetration, they should increase their advertisement budget on radio
and local dailies because they are more accessible in rural India. Communication can also be
done via billboards, magazines and cinema to deliver the message.
(b) Distributor Education and Incentivization As distributors handle multiple manufacturers
and product lines, they do not understand the key selling points of Cottless toothbrushes. It is
essential to educate them about the product and make them learn the local language for
increasing rapport with retailers and ensuring that the products are at the forefront of cluttered
rural grocery stores. The best performing distributors can be incentivized positively.
(c) Differential communication campaign strategy As the needs and issues at each income
level is different, a differential strategy should be adopted highlighting the key message to be
delivered. People who dont use a brush should be persuaded to brush for the first time.
People who are already brushing should be motivated to increase the frequency of brushing.
High end consumers should be encouraged to upgrade their toothbrush to premium electric
brushes that provide 20% better results.
(d) Collaborating with dentists to endorse product Dentists are the key influencers of oral
care products. Cottle must collaborate with reputed dentists to recommend Cottle brushes and
toothpaste. Doctors have credibility within society and urban consumers religiously follow
their doctors advice. This method was effective in Thailand.
(e) Consumer Education about oral care Cottle must continue to partner with IDA for
awareness campaigns and free dental check-ups. Sampling at such events helps to increase
visibility and induce first trial among non-users. These campaigns are twice as likely to
convince rural consumers to start tooth brushing.
(f) Reaching out to rural India Aanganwadi workers can be included in the oral hygiene
programme to convince rural consumers to start brushing. They can visit schools and colleges
with dentists in mobile vans to assist in free health check-ups and provide free samples. Fairs,
haats, street plays can be used to educate the users and promote the brand in rural areas.
4. Develop two 2010 income statement projections for toothbrushes- (i) based on Patel's
estimate that there will be a 20% increase in sales (vs 2009) and (ii) based on Lang's estimate
that there will be a 25-30% unit increase in toothbrush sales (vs. 2009)

Patel (E)

Lang (E)

2009

Toothbrush gross revenues

100179124.7

107313079.4

70139267.6

Less: Trade Discounts

10017912.47

10731307.94

7013926.76

Net Revenues

90161212.21

96581771.49

63125340.84

Less: Variable manufacturing, selling and 46082397.35

49364016.54

32264063.1

distribution costs
Gross Margin

44078814.86

47217754.95

30861277.74

Advertising

9016121.221

12877569.53

6312534.084

Consumer Promotion and Merchandising

3005373.74

3219392.383

2104178.028

Selling, General and Administrative costs

14025077.45

15023831.12

9819497.464

Profit from operations

18032242.44

16096961.91

12625068.17

Less:

Note: For Langs projections, advertising expenses have been increased by 3% i.e. 12% of gross
revenues.

5. Is it possible to attain 25-30% increase in toothbrush sales as suggested by Lang? If yes, how
would you plan to achieve it?
Our analysis suggests a 27.5% increase in toothbrush sales is possible in India.
Products
Low-end Manual
Mid-Range Manual
Battery Operated
Total

Unit Sales 2009


299460960
43026000
1721040
344208000

Langs Projection
381812724
54858150
2194326
438865200

% increase
27.5%
27.5%
27.5%
27.5%

The three key messages that are to be addressed are


1) Persuading consumers to brush for the first time
2) Increasing the frequency of brushing
3) Persuading consumers to upgrade to mid-range and premium products
Recommendations:
The solution will be to first understand the dynamics of economic and social conditions of the
population of India. Thus the strategy to increase revenues in this competitive market should be to:

Different messages should be focused for different segments


o Urban, semi urban Message 1 10%; Message 2 40%; Message 3 50%
o Rural - Message 1 60%; Message 2 35%; Message 3 5%
The population should be divided into segments and for each segment a different line of
product should be advertised which can cater to their needs and should be affordable. For E.g.

Low end toothbrush line to be marketed for the economically weak people and mid-range or
premium products for people with income above 5000$/year (80 Million households).
Cottle should partner with IDA more and more to create awareness among the people in rural
areas about Oral Hygiene and also use this opportunity to advertise their products. Also, at
the same time partner with the dentists to get help in the advertisement of mid-range or
premium products for the urban
As the markets for Toothpaste, toothpowder and toothbrushes already have several
competitors, the focus should be on ancillary products like mouthwash and Dental floss
where market is fresh and the growth rate is highest (62% growth in period 2004-09).
More budgets should be allocated for advertisement in rural areas which could be in the form
of radio broadcasts and billboards.
Relationship with seed distributors should be established and local population should be used
to more and more to counter the language problem. Also, the distributor should be trained
for key selling points of the Cottles products which will help the distributor to push the
product to the customer. Also, a reward program should be initiated for the distributors who
achieve the sales target decided by the company