Analyst Corner: Colgate-Palmolive expects sales to be augmented

We interacted with the Colgate management for a business update. Following are our key takeaways, Volumes, Colgate’s toothpaste volumes have improved from 1Q (-4% y-o-y) levels and are witnessing growth (our estimate: early mid-single digits in 2Q). Toothbrush volumes have also recovered meaningfully (our view: flat in 2Q vs c.-35% in 1Q). Trade channel, Colgate expects sales to be further augmented by some trade-channel filling that had reduced in 1Q; however, channel inventory is still below pre-pandemic levels

Pricing, While the company has yet to put into effect its annual price hike (usually in April), promotions were withdrawn in April-May, yielding an indirect price hike (our estimate: c.2-3%), supporting value growth.

Naturals, Naturals toothpaste category growth has moderated vs earlier and so has the intense competitive intensity. Recent launches, While overall premiumization is unlikely to be a priority in the current tough environment; Colgate’s recent launch ‘’Colgate Charcoal Clean Black Gel’’ toothpaste has performed very well, even during the pandemic.

Palmolive, Personal care products (i.e., body washes, hand washes, sanitizers) are doing well in the current environment of elevated hygiene consciousness. Market share, Overall market share (Nielsen data) continues to be stable (c.52%); however Colgate seems to be growing faster than industry growth. The company’s share in the naturals’ category is also stable.