AGM held on AUGUST 29, 2001
SPEECH | QUESTION
& ANSWER SESSION | DISCUSSION
WITH MANAGING DIRECTOR
- FY 2001 was marked
by an overall economic slowdown, affecting consumer demand particularly
in the rural areas. Despite sluggish market conditions and intense competition,
Colgate has done well to record overall growth of 8% in Sales at Rs.
1,177 crores and 21% increase in Net Profit to Rs. 63 crores (including
profit of Rs. 5.5 crores on sale of real estate).
- Company generated
record cash flow of Rs. 118 crores in FY 2001, up 110% from FY 2000.
Given the healthy cash position and accumulated surplus from previous
years, Colgate recommended dividend of Rs. 8.25 per share, including
one-time special dividend of Rs. 4.75 per share.
vision is To Be The Innovative Leader of With Its Brands Everyday
In Every Home. To realise this vision, company focused
on following key strategies in FY 2001:
- Driving Growth
- Funding Growth
- Becoming the Best
Place To Work
- Some of the initiatives
taken by your company for driving growth included:
Marketing Communications Focused
marketing activities are playing a vital role in Driving Growth.
Company continues to develop compelling, creative and memorable ways
of communicating with consumers. This backed by aggressive media support
is maximising efficiencies and helping the company in reaching consumers
- The Mera
Colgate campaign contemporarised the Colgate brand
- Talk To
Me Colgate Fresh Energy Gel advertising campaign launched this
year with an innovative catch phrase Talk To Me using
the television, outdoor and online media to connect
with the youth.
of Colgate Actibrush company
has recently launched Colgate Actibrush, battery powered
toothbrush as a part of its effort to further strengthen leadership
image by bringing in worlds best innovative products.
Oral Health Programme - Initiated Smile
Through The Millennium National Oral Health Programme to stress
importance of preventive oral care amongst school children by providing
logistics support including teaching kids, education materials and special
dental health kits. The programmed aimed to cover 4 million school children
over 100 towns across India.
Distribution Expansion Programme Rural India
still presents huge opportunity for the company to grow the market.
Even today, over 70% of population resides in rural areas. Colgate,
therefore, continues to focus on expanding its rural distribution. Thrust
of this market expansion programme commenced in FY 2001 under Operation
Jagruti. This programme is in 2nd phase with massive
rural sampling and seeding exercise for Colgate Herbal, targeted at
non-users and infrequent users of dentifrices.
Costs essential component of Funding Growth is
reducing overall total delivered cost of products thru various supply
chain initiatives. Towards its goal of rigorously reviewing and driving
down costs, company has recently upgraded SAP. This with managements
strong focus on each element of working capital enabled Colgate to achieve
reduction of about Rs. 120 crore in net working capital during past
3 years period
of Fiscal Levies and Other Regulations - company
appealed the Govt. to help them on following 3 key issues, which will
help to improve oral hygiene in India.
exempt the excise duty on toothpaste, toothpowder and toothbrush-
though the Govt. exempted the toothpowder from excise duty, it raised
the excise duty payable on toothpaste from 8% to 16% and levied excise
duty on toothbrushes @ 4% to 16%. Company appeal to the Government to
reconsider its decision since neither toothpastes nor toothbrushes are
luxury items. They should, therefore, be exempted from excise duty to
reduce cascading effect on their prices.
Sales Tax - Local Tax rates for these items in states
like Kerala and Andhra Pradesh are as high as 20% to 23%. It is heartening
note that the State Governments have agreed, in principle, to introduce
State Value Added Tax (VAT) effective April 2002 to replace present
varying rates of local sales tax. Since these items are daily necessities
the State Govt. should exempt these products from VAT or levy a maximum
tax of 4%.
of items used for oral care -Toothpastes, toothpowders and toothbrushes
are items reserved exclusively for the small-scale sector, depriving
consumers of economies of scale. Paradoxically, these oral hygiene products
manufactured by large scale industries around the world are freely importable
in the country. Hence, need for reviewing government policy on reservation
of daily necessities and lifting all restrictions so that they can be
produced on a large scale allowing consumers to reap benefits of economies
Facility - Despite unfortunate bomb blast in Nepal, facility
recorded impressive growth. Colgate India received dividend of 36.5%
During FY 2001.
& ANSWER SESSION
- To maintain its
leadership position, company will
continue to spend heavily on advertising. The toothpaste market
is like the soft drinks market. Advertising as a percentage of sales
is high due to intense competition.
- In FY 2001 Colgate
launched Cibaca Top targeting rural segment. However, even at such a
low price, rural people are still not using this paste. About 67-70%
people in rural India still use neem and other substances for cleaning
their teeth. Companys research shows that neem sticks do not do
much for oral health as they only massage the gums, which even a toothbrush
can do. To upgrade these users towards using toothpaste (which also
generate demand for tooth brushes) and to penetrate deeper in rural
India, company launched Operation Jagruti. It is also actively
participate in local festivals.
- Royalty (Rs. 2.7
crore in FY 2001) was paid to parent company on sale of soaps. The increase
can be attributed to growth in sale of soaps. It is paid @ 5% on domestic
turnover and @ 8% on exports.
- Colgate (Nepal)
pays royalty to Colgate (USA) whereas dividend to Colgate (India).
- The company undertook
a key employee retention programme. The salaries were equal to other
benefits due to accommodation facilities provided to the employees and
a one-time expenditure of Rs. 5 crore undertaken by the company.
- Dividend paid
in FY 2001 includes special dividend, which is not paid every year.
Though the profits for FY2001 were Rs. 62.5 crores, company paid dividends
worth Rs. 112 crores by utilizing the profits of the previous years,
which resulted in lowering of Net worth as well as Capital Employed
in FY 2001.
continues to be the No. 1 brand for past eight years.
Company continued to be the market leader in toothpaste segment with
51% market share. In toothpowder and toothbrush, Colgates market
share was 48% and 31% respectively. It is spending on advertising according
to its market share & leadership position it enjoys and is conscious
about what it costs.
continue to maintain a tight control over the working capital.
Companys goal has been to drive down all costs along entire supply
/ delivery chain through improved productivity. Saving in working capital
is at record level right now. Company will be maintaining tight control
on working capital.
- Exports were mainly
to countries such as Bangladesh, Nepal and SriLanka.
- Colgate hopes
to continue with its good performance in FY 2002 as well through new
launches and aggressive advertising campaigns.
WITH MANAGING DIRECTOR
with Mr. Derrick Samuel, Managing Director
will achieve 8-9% growth in FY 2002 thru new product launches
(areas not specified for competitive purposes) and aggressive marketing.
When asked, what steps company is taking for deeper penetration did
not specify any thing.
people are very tight lipped, did not disclose any thing.