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Case Analysis on Colgate Max Fresh: Global Brand Roll Out

BY Group 8
(Mr. Anil Kumar MP13009 & Mr. Vishav Sharma MP13070)
Situation Analysis
Company Background
10.6$ billion revenue (2005)
Operating in 200 countries
70% of sales outside USA
Two core product segments: Oral personal & home care; pet nutrition
segments
Organization structure
Regional presidents with P&L responsibility
Global business development groups organized by category

Year 2004
Reported +6.5% unit volume growth
+7% sales dollar growth
+0.1% point growth in gross profit margin to 55.1%
Colgate launched worlds first commercial toothpaste in 1873.
In 1955, P&G launched first fluoride toothpaste Crest
By 1990, virtually all toothpaste in U.S. offered fluoride protection and
consumers evolved to additional oral care concerns.
In 1997, CP launched Colgate Total promising 12 hours protection
against full range of oral health problems.
Colgate max fresh product development
Global research and development works with CICs to develop new
products
CMF utilized patented technology of dissolvable mini breath strips as a
point of differentiation
Product consisted of small pieces of Tape, packaged in a convenient
carrying case which dissolves on the tongue releasing a flavor
designed for fresh breath
Initiatives & cannibalization
Four factors involving franchise growth:
1. Consumer substitution
2. Market Spending
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3. Distribution Penetration
4. Transaction Size
UNITED STATES
Market segments
Cavity/fluoride protection was the key benefit sought, followed by
reduction in plaque build-up , breath freshening and tartar control.
In 2004, U.S. toothpaste market was evenly split between toothpastes
that emphasized therapeutic (cavity/fluoride protection/ sensitivity
relief) benefits and those that stressed cosmetic
benefits(freshening/whitening).
Colgate max fresh
Positioning
1. As a premium brand along with CWE
2. Promises freshness with a whitening reassurance
3. Uses mini breath strips
Advertising
1. Media advertising to generate awareness accounted for 73% of
the year 1
marketing budget.
2. Targeted at adults 18-34 age group, with female skew.
Marketing Support
1. Launch was supported by a website which incorporated creative
promotions
and leveraged package visuals and program sponsorships on MTV,
AOL music, AOL
first look and yahoo launch.
2. For offline customers, plans included in-store sampling,
merchandising, and display
offering money back rebates and various special packs such as
buy one get one free
and two pack trial pack.
CHINA
Colgate Max Fresh: Qualifying the Product for Market
Communication Challenge
Colgate Max Fresh did not test as well as others name in China which
led to the name being changed to Icy Fresh.
Cooling Crystals was identified as the most relevant and meaningful
phrase to describe breath strips to Chinese consumers.
Celebrity advertising was developed using Jay Chou, leading rock star
in china, who embodied extreme living.
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MEXICO
Colgate dominated in Mexico with an 82% value share of the $348
million retail toothpaste market in 2004.
Market heavily skewed towards the therapeutic segment (87% of value
share) but growth was slow.
Majority of consumers focused on basic oral care(cavity prevention)
Price sensitivity and sales promotion activity were both high In Mexico.
Colgate Max Fresh launch
Concept and product results
1. Net acceptance was slightly below par in terms of benchmarks for
comparable new personal care products tested in Mexico.
2. Consumer Viability Index(CVI) of 62% suggested that the initiative
had an average
chance of in-market success, defined as
maintaining stable distribution for at least two years afte launch .
Sources of Volume
1. CMF volume sourced from Colgate would be slightly below fair
share whereas
Crest would lose more than fair share.
2. CMF volume was expected to come from CP brands notably
Colgate Big Red and
21% from Crest.
3. Shelf Is Not Elastic. Understanding which Colgate SKUs might
be at risk of
delisting was important.
Pricing
1. Pricing objective was to achieve parity with Crests cool
explosions.
2. Price/Value perception was above average for CMF.
3. Tested at a retail price of 15.99 Pesos
4. Estimated that CMF could increase volume by +25% if the price
was
decreased from 15.99 to 14.99 Pesos.
Advertising
1. Proposed advertising idea , a joy for your mouth". Depicted in an
advertisement entitled Snow surfer.
2. Incremental Production and talent costs combined were $500,000.

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Problem Definition
Did China and Mexico each do a good job of adapting the
launch to meet local consumer needs? What is the likely profit
impact of each plan? Which of the proposed adaptations were
must haves versus nice to haves?

Freshness though accounted for 28% of consumer reason for a


toothpaste purchase was a relatively new concept
The consumer responses were above the norms for new
toothpaste products in terms of Purchase intent, believability,
value for money, uniqueness and importance of main message
The 1st year had sales of 3882 tons, COGS as 50 % of sales and
marketing expenses of 78%
The second year had sales of 4370 tons, COGS as 41 % of sales
and marketing expenses of 42%
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Given this trend, doing some basic back-of-the-envelope


calculations, the contribution margin is expected to go up to
nearly 70% and assuming marketing expenses drop to 35% we
have an operating profit of 985,000$ in year 3
Given these, this adaptation is a must have as it clearly
demarcates a consumer need that can be satisficed profitably
MEXICO
Cavity protection was the major consumer reason for a
toothpaste purchase though freshness was an appealing
concept
The consumer responses were below the norms for new
toothpaste products in terms of Purchase intent, believability,
and product expectation
The 1st year had sales of 1600 tons, COGS as 47 % of sales and
marketing expenses of 15%
The second year had sales of 1850 tons, COGS as 40 % of sales
and marketing expenses of 10%
Given this trend, doing some basic back-of-the-envelope
calculations, the contribution margin is expected to go up to
nearly 70% and assuming marketing expenses drop to 8% we
have an operating profit of 700,000$ in year 3
Given these, this adaptation is a nice to have as it has
slightly below par acceptance yet preventing crest to gain
market acceptance
Q-2. From a global CMF perspective, what is the short- and
long-term impact of the complexity born out of these local
adaptations? Is this added complexity good or bad for the
global CMF business?
Implications China
Globally, the short-term affects of the complexity born out of
these adaptations is rather expensive.
It was expensive to adapt the Chinese advertisements, but in
the long-term it will be very profitable because freshness is
something that the Chinese are responsive to and sales are
increasing.
Implications (Mexico)

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In Mexico, the adaptation only cost about a third of that in


China, but they did not reach the market as well as they would
have liked.
It may have just held off Crest in the short-term for value
share, but they need to look at meeting the consumers
concerns better the next time they adapt a marketing plan to
Mexico.
Global Implications
The added complexity is crucial to Colgate Max Freshs global
business because it shows that they really put a lot of effort
into meeting the consumers needs and they will respond
positively to this.
If they would not have spent the time and money on this,
consumers might not take the product as serious and sales
would drop.
Burton and Colgate-Palmolive need to make sure that they
adapt every aspect of their product to meet the consumers
needs in all of the local and global markets because, although
it may be more expensive in the short-run, it will pay off in the
long-run.
Q-3. What guidelines could Burton propose going forward to
optimize new product introductions for CP worldwide, for the
regions, and for the country subsidiaries?
Guidelines
Global marketing strategy involves:
Understanding and addressing differences across markets
Balancing the global brand and appeal to distinct regions
Successful global marketing campaigns, leveraging similarities
to preserve a consistent message and limit costs while also
customizing advertising to align with regional cultural
preferences.
Four forces to drive the globalization of marketing and demands:
Market Drivers:
Global customers
Common customer needs
Cooling crystals
Cost Drivers:
Economies of scale potential of campaigns
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Different icon at different places, regions or countries


Trade-off between icons and opportunistic locations are
important
Competitive drivers:
Consideration of global competitors at earlier phase
Advantage from first mover advantage
Keep in mind the counter threats from competitors
innovation
Government drivers:
Keep an eye on regulation and censorship
A different strategy for promotion when there is inability
to mention competitors by name
When deciding which countries to enter first, we should
consider the potential for organizational learning
In order to purposefully grow global brand equity, must be
able to:
Identify the antecedents of brand value
Set objectives for brand development
Allocate resources across products

Possible Alternatives

Evolutions of Alternative
Recommendation

Implications

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