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Q1-2016: Colgate-Palmolive marketing spends up 11%

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BENGALURU: Colgate-Palmolive (India) Limited (Colgate-Palmolive) spent 11 per cent more towards advertisement and sales promotion (ASP) in Q1-2016 (quarter ended 30 June, 2015) at Rs 200.50 crore (19.8 per cent of Total Income or TI) as compared to the Rs 180.55 (18.7 per cent of TI) in Q1-2016 and 29.8 per cent more than the Rs 154.49 crore (15 per cent of TI) in the immediate trailing quarter. 

The company?s marketing or ASP spends are made up of two components ? Advertisement spends; and Sales Promotion spends. The company does not share the breakup of these two spends in its quarterly financials. The breakup is mentioned on an annual basis in the company?s annual report (Fig A1 below).

Note: 100,00,000 = 100 Lakhs = 10 million = 1 crore

Colgate-Palmolive?s major brands include Colgate for oral care, Palmolive, Charmis and Halo for personal care, and Axion for household care. Some of the other other brands/prodcuts are Active Salt Neem, Max Fresh, Total Charcoal, Sensitive Pro-Relief Enamel Repair, Zig Zag Black, Colgate Dental Cream.

Please refer to Fig A below. Over a thirteen quarter period starting from Q1-2013 until the current quarter (Q1-2016), Colgate-Palmolive?s ASP shows a linear increasing trend both in terms of percentage of TI as well as in absolute rupees. 

In Q2-2015, Colgate-Palmolive spent the highest amount towards ASP in terms of absolute rupees as well as percentage of TI in a quarter at Rs 201 crore and 20.1 per cent of TI during the period under consideration. The company?s ASP in the current quarter was just a little less than the ad spends in Q2-2015. The lowest ASP by the company during the thirteen quarters was in Q4-2013 at Rs 82.1 crore and 9.7 per cent of TI.

Colgate-Palmolive?s TI in Q1-2016 at Rs 1010.15 crore was 4.8 per cent more than the Rs 963.35 crore in Q1-2015, but was 1.8 per cent lower than the Rs 1028.51 in Q4-2015. The company?s TI shows a linear increasing trend during the thirteen quarter period under consideration in this report.

Further, across eight financial years starting FY-2008 until FY-2015, the company?s TI, ASP and ASP as percentage of TI show an upward linear trend, with the company?s marketing spends being the highest both in terms of absolute rupees and percentage of TI in FY-2015 at Rs 714.25 crore (17.9 per cent of TI). Fig A1 below indicates the breakup of Colgate-Palmolive?s advertising and sales promotion across three financial years for which data is available.

Figure A1 below shows the split of ASP into advertising and sales promotion spends for four financial years starting FY-2012 until FY-2015.

Please refer to Fig B below. PAT in Q4-2015 at Rs 114.28 crore (11.4 per cent of TI) declined 15.3 per cent as compared to the Rs 134.91 crore (14.1 per cent of TI) in Q1-2015 and declined 30.2 per cent as compared to the Rs 163.63 crore (16 per cent of TI) in Q4-2015. During the thirteen quarter period under consideration, PAT shows a linear increasing trend in absolute rupees.  

The slope of the broken blue trend line indicates that the company?s PAT in terms of percentage of TI shows a decline. This is likely to change over the next few quarters, if the company?s PAT continues to buck the trend as it has in Q4-2015. 

Colgate-Palmolive?s PAT has been the highest at Rs 185.22 crore (21.5 per cent of TI) in Q1-2014 during the twelve quarter period under consideration, while the lowest PAT in absolute rupees and in terms of percentage of TI was in Q2-2013 at Rs 109.52 crore and 12.2 per cent of TI.

Colgate-Palmolive says that it has continued to enhance its leadership position in the Toothpaste category by registering a volume market share of 57.9 per cent during the January-June 2015 period, an increase of 90 basis points over the same period of the prior year. It says that its flagship brands Colgate Dental Cream, Active Salt and Max Fresh have majorly contributed to this growth. Further, the company says that it has maintained its leadership in the Toothbrush category by registering a volume market share of 42.7 per cent in the period January-June 2015.

Colgate-Palmolive?s board of directors at its meeting held on 30 July, 2015 has considered and recommended a bonus issue of one equity share for every equity share held, as on the record date to be determined by the board.

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