GST Impacts Colgate Global Quarter Sales Down 5%

Oral Care giant Colgate-Palmolive in Quarter 2 global net sales were down by 5% in Asia Pacific, and organic sales saw a down of 3.5%, which is softer than expected primarily due to the reduction in shipments in India in advance of the new goods and services tax, or GST, increased competitive activity in China, Australia and consumption declines in Thailand.

India, Australia, China and Thailand were together responsible for the overall decline in the volumes, which was down by 2%. Overall, the second quarter was challenging for the company globally, with Net sales 0.5% in the quarter along with 1% pricing growth offset by 1% volume decline and slightly negative foreign exchange. Organic sales growth was flat year-over-year in the second quarter, below the company’s expectations.

“The volume performance in India worsened sequentially in Q2, in advance of the implementation of GST. Due to uncertainty about the new law, the trade in India was cautious, and shipments basically ground to a halt for the last 2 weeks of June,” said Ian Cook, global CEO, President, Colgate-Palmolive whilst talking to investors during an earnings conference call on last Friday (21 July).

Cook on Patanjali
US multinational Colgate Palmolive’s global CEO Ian Cook has acknowledged that Patanjali is a “tough competitor” in the Indian business space. Cook was talking to investors during an earnings conference call on last Friday (21 July).

Commenting on the growing traction of local brands with consumers where Colgate was a market leader, Cook said, “-- I don't think it's consumer tilt towards local brands is driven by e-commerce, it's driven by ideas that tend to be premium, which are ideas we're happy to compete with rather than, perhaps, in the early years, ideas that were more pricing driven.”

Cook pointed that Patanjali in India takes a very naturalist view of its business which worked in the local market that tends to be premium-priced oriented. And it means that one has to respond with a very specifically constructed offering that attacks the benefit the consumers are looking for. “Hence, the Naturals reaction. So I think it's more a function of entrepreneurs' concepts, affinity with the local market. And in the end, the winner over time in these clashes are going to be the companies that best understand the consumer and serve them offerings that they want over time. And of course, that's what we are resourced and focused on doing,” said Cook.

Cook said there is a need to respond to “changing consumer preferences.” “Patanjali in India takes a very nationalist view of its business. They tend to be premium price oriented and it means that you have to respond with a very specifically constructed offering to the consumer,” the Colgate Palmolive’s global CEO said.

It could be noted that Colgate India has recorded a fall in its market share last year. The share of Colgate India in Indian toothpaste segment fell by 1.8 per cent and the company’s sales volume declined by 4 per cent in the last fiscal. The shift of consumers to ayurvedic and herbal brands is the reason for the fall.