28-11-2012, 12:48 PM
Marketing Strategy of Colgate-Palmolive Company
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Colgate-Palmolive Company (NYSE: CL) is an American diversified multinational corporation focused on the production, distribution and provision of household, health care and personal products, such as soaps, detergents, and oral hygiene products (including toothpaste and toothbrushes). Under its "Hill's" brand, it is also a manufacturer of veterinary products. The company's corporate offices are on Park Avenue in Midtown Manhattan, New York City.[3]
Company History:
Colgate-Palmolive Company's growth from a small candle and soap manufacturer to one of the most powerful consumer products giants in the world is the result of aggressive acquisition of other companies, persistent attempts to overtake its major U.S. competition, and an early emphasis on building a global presence overseas where little competition existed. The company is organized around four core segments--oral care, personal care, home care, and pet nutrition--that market such well-known brands as Colgate toothpaste, Irish Spring soap, Softsoap liquid soap, Mennen deodorant, Palmolive and Ajax dishwashing liquid, Ajax cleanser, Murphy's oil soap, Fab laundry detergent, Soupline and Suavitel fabric softeners, and Hill's Science Diet and Hill's Prescription Diet pet foods. Colgate-Palmolive has operations in more than 200 countries and generates about 70 percent of its revenue outside the United States.
Beginnings
In 1806, when the company was founded by 23-year-old William Colgate, it concentrated exclusively on selling starch, soap, and candles from its New York City-based factory and shop. Upon entering his second year of business, Colgate became partners with Francis Smith, and the company became Smith and Colgate, a name it kept until 1812 when Colgate purchased Smith's share of the company and offered a partnership to his brother, Bowles Colgate. Now called William Colgate and Company, the firm expanded its manufacturing operations to a Jersey City, New Jersey, factory in 1820; this factory produced Colgate's two major products, Windsor toilet soaps and Pearl starch.
Upon its founder's death in 1857, the firm changed its name to Colgate & Company and was run by President Samuel Colgate until his death 40 years later. During his tenure several new products were developed, including perfumes, essences, and perfumed soap. The manufacture of starch was discontinued in 1866 after a fire destroyed the factory.
In 1873 Colgate began selling toothpaste in a jar, followed 23 years later by the introduction of Colgate Ribbon Dental Cream, in the now familiar collapsible tube. By 1906 the company was also producing several varieties of laundry soap, toilet paper, and perfumes. Colgate & Company shifted its headquarters to Jersey City in 1910.
While the Colgate family managed its manufacturing operations on the East Coast, soap factories were also opened in 1864 by B.J. Johnson in Milwaukee, Wisconsin (under the name B.J. Johnson Soap Company), and in 1872 by the three Peet brothers in Kansas City, Kansas. In 1898 Johnson's company introduced Palmolive soap, which soon became the best-selling soap in the world and led the firm to change its name to the Palmolive Company in 1916. The Peets, who sold laundry soap mainly in the Midwest and western states, merged their company (Peet Brothers) with Palmolive in 1926, forming Palmolive-Peet Company. Two years later that firm joined with Colgate & Company to form Colgate-Palmolive-Peet Company, with headquarters in Jersey City. Palmolive-Peet's management initially assumed control of the combined organization.
On October 25, 1929, management signed an agreement to merge the company with Kraft Phenix Cheese Corporation (forerunner of Kraft Foods) and Hershey Chocolate Company. The three companies would continue to operate independently, but they would become subsidiaries of a holding company slated to be called International Quality Products Corporation. Just four days after the deal was signed, however, the stock market crashed, forcing the huge amalgamation to be scuttled. In the wake of the crash, the Colgate family regained control of Colgate-Palmolive-Peet and installed Bayard Colgate as president in 1933.
International Expansion
Colgate & Company had been a pioneer in establishing international operations, creating a Canadian subsidiary in 1913 and one in France in 1920. In the early 1920s the firm expanded into Australia, the United Kingdom, Germany, and Mexico. Colgate or its successor firm next created subsidiaries in the Philippines, Brazil, Argentina, and South Africa in the late 1920s. In 1937 the company moved into India and by the end of the 1940s had operations in most of South America. By 1939 Colgate-Palmolive-Peet's sales hit $100 million.
In the 1940s and 1950s the company also built upon its strategy of growth by acquisition, buying up a number of smaller consumer product companies. Organic growth remained on the agenda as well, and in 1947 the company introduced two of its best-known products, Fab detergent and Ajax cleanser. These acquisitions and new products, however, did little to close the gap between Colgate and its arch-rival, the Procter & Gamble Company, a firm that had been formed in the 1830s and had by now assumed a commanding lead over Colgate in selling detergent products in the United States. Meanwhile, the firm adopted its present name in 1953 and moved its offices for domestic and international operations to New York City in 1956.
In 1960 George H. Lesch was appointed Colgate's president in the hopes that his international experience would produce similar success in the domestic market. Under his leadership, the company embarked upon an extensive new product development program that created such brands as Cold Power laundry detergent, Palmolive dishwashing liquid, and Ultra Brite toothpaste. In an attempt to expand beyond these traditional, highly competitive businesses into new growth areas, Colgate also successfully introduced a new food wrap called Baggies in 1963. As a result of these product launches, the company's sales grew between 8 and 9 percent every year throughout the 1960s. Sales topped the $1 billion mark in 1967.
Setbacks Beginning in the Late 1970s
Foster's diversification strategy initially improved earnings, but Colgate's domestic sales, market share, and profit margins were beginning to soften. This was due, in large part, to an economic recession and an advertising cutback the company had made in an attempt to boost earnings. Colgate was consistently losing the marketing battle in personal care products to Procter & Gamble. It had no leading brands and few successful new product introductions because of reduced spending for research and development. In an effort to remedy this problem and broaden its product mix, Colgate moved into food marketing in 1976 with the acquisition of Riviana Foods, a major producer of Texas long-grain rice with its own subsidiaries in pet food (Hill's Pet Products), kosher hot dogs (Hebrew National Kosher Foods), and candy. The Riviana acquisition, however, did not live up to the company's expectations. Along with purchasing a successful rice-milling business, Colgate found that it had also saddled itself with two unprofitable restaurant chains and a low-quality candy company. In 1977 declines in the price of rice seriously eroded Riviana's cash flow.
Helena Rubinstein created additional headaches. Whereas other cosmetic manufacturers had moved their products from department store distribution to higher-volume drugstores, Colgate's management elected to keep Rubinstein products in department stores even though stores' demands for marketing support eroded the company's margins so severely that it lost money on every cosmetic item sold. Colgate finally sold the business in 1980 to Albi Enterprises.
Foster had become chairman in 1975. In 1979, embattled by a series of marketing failures and the pressures of an acquisition strategy that yielded more losers than winners, Foster suddenly resigned, citing ill health. The company's president and chief operating officer, Keith Crane, was appointed as Foster's successor. A 42-year Colgate employee, Crane quickly instituted a new management structure consisting of several group vice-presidents, reunited all domestic operations under one group, and realigned division managers in an attempt to promote a more cohesive organization. Consumer advertising and product research were given renewed emphasis to support the company's basic detergent and toothpaste lines.