Analysis of Colgate-Palmolive

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The Company’s Brief History

Colgate-Palmolive Company was started in 1809 by William Colgate as a soap, candle and starch company in New York. In 1923, the company became incorporated and changed its name from Colgate to Colgate-Palmolive. It further grew and acquired entities and became Colgate-Palmolive with its headquarters based in New York City. However, the company is listed as a public company. Today, Colgate-Palmolive makes sales exceeding $15 billion with 70% of its sales being sold overseas.

In 2005, the company got rid of its poor performing brands such as Arctic Powder, Cold Power, Dynamo, and the Fresh Start. Recently, the company has been engaged in the acquisition of Tom’s of Marine Inc. which was the leading company in natural toothpaste manufacture. Further, the company has introduced new brands such as whitening strips.

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The company is dedicated to being the best and most efficient company in the provision of oral, pet and personal care products. In the recent years, it has continued eliminating some of the products including Colgate tooth powder, Swerl, Halo shampoo and much more. In the United States, it has sold its detergent brands to Phoenix Brands. The company has opened up more plants in the United States as well as overseas such as the one in Tennessee. Colgate-Palmolive Company functions in over 200 countries and contributes greatly to employment. Colgate has also closed down some plants such as Dallas toothbrush, Kansas, and Morristown plant and also laid down many workers.

Sales History

The net sales for Colgate-Palmolive have increased fairly in the past ten years although in some it decreased. In 2006, the sales amounted to $12.2 billion, with over a million of each brand sold out. The net sales rose for the next eight years to $17.3 billion, with sales in units increasing by millions. In 2016, there was a decrease in net sales to $16 billion as well as unit sales decreasing. However, in 2016, the net sales went up again by 7%. The increase in net sales can be attributed to good marketing strategies as well as concern for consumer satisfaction. Table 1.1 shows an analysis of net sales, operating profit and net income for the past ten years.

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Financial History

The revenues and profits of Colgate-Palmolive have been increasing drastically since 2007, according to information obtained from Form 10-k. In the United States, for instance, the revenues rose from $2,450 million to $2,577 million in 2011. In 2008, the revenues rose again to $2,591 million. In 2012, there was a slight decrease compared to 2011, since the revenues stood at $2,567 million, and worldwide, the revenues amounted to $16,734 (Form 10-Q). The trend then took an upward trend again with the revenues averaging to $2,669 million in the United States in 2013, while worldwide, they were at $17,085 million. In 2014, the revenues went to $2,771 million in the United States and $17,420 worldwide.

Furthermore, the profits increased to $2,835 million in United States and $17,277 across the world. In 2016, the revenue further increased to $2,896 million in the United States. However, worldwide, there was a slight decline to $16,034 million (Form 10-Q). The operating profits of the company have also been growing for the past ten years. For instance, the profits in 2007 were $2,161 million and increased to $2,653 million in 2008. By 2012, the profits had risen to $4,024 million and to $4,215 million by 2014. However, in 2015, these profits increased to $4,225 million but decreased in 2016 to $3,988 million (Form 10-K). The decrease could be attributed to charges incurred in the change of accounting for Venezuela operations.

The total debt has also risen over the past ten years. For instance, in 2006, the debt amounted to $3,446 million; it increased to $3,671 million in 2007. However, in the following year, it dropped to $3,516 million (Form 10-Q). In 2008, it rose to $3,784 million throughout the subsequent years to 2011 it dropped to $3,424 million. However, in the next five years, it took an upward trend, in 2016, the debt amounted to $6,571 million (Form 10-Q). Table 1.2 shows a breakdown of current liabilities, total liabilities, shareholder’s equity, and total debt.

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Industry Analysis

Current Structure of the Industry

Colgate-Palmolive competes in the personal goods industry. In the industry, it faces stiff competition mainly from Procter & Gamble. Other competitors include Unilever, Church & Dwight, and Clorox. The businesses have been increasing in number since the early 1980’s and, therefore, there are many of them. The industry is, however, characterized by few but large companies as the key players.

Classification of the Industry and Degree of Competition

Although there are a few key enterprises in the industry, I would still classify the firm’s industry as perfect competition. This is as a result of rivalry between the businesses; both buyers and sellers have adequate information about the market; there is free entrance of new firms, and also the products sold by these firms have close substitutes and are less differentiated. Further, the personal care industry does not have any restriction on entry and exit of new companies to the market (Porter, 2008). The level of competition is very high, and prices of all the firms are very close to each other and to the marginal costs. In addition, the enterprises engage in the non-price competition such as brand image, promotional activities, advertising, research and innovation and introduction of new products. The most effective non-price competition for the company has been brand image and introduction of new products.

Government Regulation

Further, the industry has some degree of government intervention through formulation of regulations and policies. Government regulations manifest through areas such as taxes and employee relations. The government has enforced strict guidelines on raw materials and products that they can trade to protect the safety of consumers. Government taxes have reduced profits for the industry. The government has further issued firms in the industry including Colgate-Palmolive with strict regulations on how to hire and treat employees.

Government economic policies affect the industry in various ways. For instance, the trade policy affects the flow of services and goods between countries including export taxes, tariffs, and quotas. For instance, The General Agreement on Tariffs and Trade affects the firm in that it is able to export more due to open economies and lower tariffs. As a result of the increased trade, the revenues of the company increase significantly. The domestic policies such as tax policy and quantity restriction policies influence the industry in that it affects the prices, welfare, profits, and production levels. Strict domestic policies will lead to a decline in profits and production levels. Conversely, lenient domestic policies will result in increased profits, production and better prices for goods in the industry.

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Competitive Environment Analysis

The Company’s Market Share

In this competitive industry, the market share is very unbalanced. The major companies such as Procter & Gamble, Clorox, and Church & Dwight together with Colgate-Palmolive take the highest shares. The market share of Colgate-Palmolive has been on the increase and comes second after Procter & Gamble. Currently, the market share of Colgate-Palmolive is about 36.2% in the United States and 44.4% in the world. Procter & Gamble is the company that has mostly impacted Colgate-Palmolive since it is more established and hence possesses high competition.


Further, due to economies of scale, the company is able to reduce its prices giving it a competitive edge. Procter & Gamble has further impacted the market share of Colgate-Palmolive in that it has been able to establish uniqueness through company brand image and customer satisfaction (Özer & Köse, 2013). It has also been able to attain new customers through the inclusion of fluoride as an ingredient in their toothpaste. This explains why Procter & Gamble is able to take more than double market share of Colgate-Palmolive.

However, Colgate-Palmolive has made tremendous steps in catching up with Procter & Gamble. It has, therefore, improved its brand image, set prices close to those of Procter & Gamble. The market share for oral products has been 46% while that of personal care has taken 21% of the market. In addition, the home care products have taken up 20% of the total market share. This is a huge percentage in comparison with other companies in the industry (Porter, 2008). The consumer goods industry has in recent years experienced a lot of changes. For instance, there has been new technologies and social trends.

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Changes in the Industry

Through improved technology, the participants in the industry have been able to connect with their customers through social media platforms (Özer & Köse, 2013). The firms have also introduced new brands in different fields. For example, Colgate-Palmolive has ventured into skin care and introduced Sanex Advanced, a skin care product. In addition, firms have explored new markets such as Latin America, Asia, Africa and Central Europe with the most being the entry of Colgate-Palmolive products into Norway.

Economic Environment Analysis

The economic environment includes the nature of the economy, economic resources, income distribution, interest rates, taxes inflation, unemployment rates, and economic conditions of a certain country among others. The economic environment affects the operations of any firm around the world. For Colgate-Palmolive, the economic environment has affected it and the industry in a variety of ways for the past two years. For instance, the change in exchange rates in 2016 greatly affected the profit margins.

Increase in interest rate between 2015 and 2016 also affected financing activities since the company had to cut down on finances from bank loans. In addition, the company is also affected by rising inflation and has to come up with strategies to make more sales. Some of the strategies it uses include the introduction of twin toothbrushes and toothpaste, packaging its products in cheap sachets, and usage of the bonus cheap detergents (Porter, 2011). The economy of the United States is stable and among the best in the world.

This has had a positive impact on Colgate-Palmolive since it provides the conducive environment the company requires to increase its production. Further, the income distribution of the country is fair as compared to most African countries. This is advantageous to Colgate-Palmolive, since it has been able to improve its market. In addition, the United States has enough economic resources required by any company to perform and achieve success. Colgate-Palmolive has taken advantage of this and hence increased its productions and profits for the past two years by a margin.

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Economic Importance


The Colgate-Palmolive Company and personal care industry are essential to the U.S. economy. Particularly, they contribute to the employment, balance of trade and economic growth. Cutting down on any firm in the industry by a given percentage would mean an increase in unemployment. For example, Colgate-Palmolive provides more than 30,000 jobs or Procter & Gamble provides about 37,000 jobs.

U.S. Economic Growth

Further shutting down of Colgate-Palmolive would lead to unemployment both to those laid off and potential future employees. Downsizing would lead to loss of employment to those retrenched in the process (Appelbaum, Simpson, & Shapiro, 2012). Generally, any efforts to downsize or shut down the company would result in the massive increase in unemployment. Further, the economic growth would slow down as the industry is a key contributor to economic growth (Stiglitz, 2000). This is because the company contributes to the GDP of the United States. Although the level of contribution to economic growth could seem insignificant compared to the large number of companies in the country, shutting it down would certainly result in a reduction in GDP.

U.S. Balance of Trade

The balance of trade would be affected equally by either closure of Colgate-Palmolive or downsizing it. This is because most products produced by Colgate-Palmolive and other firms in the industry are exported to countries all over the world and hence contributes to the balance of trade. Therefore, with a decrease in exports, the balance of trade would reduce. The strategic importance of the company would diminish upon its closure, similarly, it would reduce if the company was downsized by 50%. The services, products and management teams are important components contributing to the strategic importance of Colgate-Palmolive (Porter, 2008).

Strategic Importance

In case it is closed, the consumers of the products will lose since they have to shift to other products. In case of downsizing, the consumers will have to compete for the few products available in the market. In case the Colgate-Palmolive Company or its industry is closed or downsized by half, other industries that act as sources of raw materials industries would be affected. Specifically, these industries would lose revenue and reduce profit margins.

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Recommended Policies

The policies I would recommend to the government of United States are policies aimed at prioritizing public good and those in favor of the national interest. A good example of such a policy is a policy that prevents the company from using ingredients with harmful side effects in their products. This is because they would raise the living standards of families, workers, and community as a whole. To the industry, I would recommend policies that would strengthen democracy in the country as well as other trade partners (Porter, 2011). Such policies would include a well-balanced global trade policy that honors the rights of investors, mindful of the environment, develops trade and respects labor and human rights. For instance, a policy that removes trade barriers reduces import and export taxes and also provides for environmental protection during production processes and disposal of waste materials would be ideal for this industry.

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