COLGATE PALMOLIVE

Introduction:
Colgate-Palmolive Pakistan (PSX: COLG) was incorporated in 1977. The name of the company
back then was National Detergents Limited. In 1990, the name was changed to Colgate-
Palmolive Pakistan when Colgate-Palmolive USA acquired 30 percent shareholding in the
company. Currently the company is one of the top manufacturers of personal care and consumer
products in Pakistan.

The history of the company starts with launching of 'Brite' in 1981 and 'Express Powder' in
1983. After the licensing agreement with Colgate-Palmolive USA in 1985 products such as 'Max
Dishwash', 'Palmolive' Soap were launched. Toothpaste manufacturing was launched in 1988 and
subsequently 'Colgate' toothpaste was produced for the Pakistani market.

The company launched 'Bonus' detergent powder in 1992 targeted towards the middle-class.
This detergent has gone on to become one of the best-selling detergents in Pakistan.

Value Chain of Colgate-Palmolive Pakistan:

Value chain analysis consist of two activities. Primary & Secondary activities.The primary value
chain activities of Colgate Palmolive are directly involved in producing and selling the product
to targeted customers.

Primary Activities
Inbound Logistics:

It is important to develop strong relationships with suppliers as their support is necessary to

receive, store and distribute the product. Analysis of in-bound logistics requires Colgate-
Palmolive company to focus on every aspect of transformation from raw material to
finished product. Some examples of inbound logistics are retrieving raw material, storing the
inputs and internally distributing the raw material and components to start production.
Operations:

The importance of analysing operational activities raises when raw material arrives, and
Colgate Palmolive is ready to process the raw material into the end product and launch it
in the market. Some examples of operational activities are machining, packing, assembling and
testing. Equipment repair and maintenance also falls into this category.

It includes both- manufacturing and service operations. Analysis of operational activities is

important for improving productivity, maximising the efficiency and ensuring the competitive
success of Colgate Palmolive.

Outbound Logistics:

Outbound logistics include the activities that deliver the product to the customer by passing
through different intermediaries. Some examples of outbound logistics activities are material
handling, warehousing, scheduling, order processing, transporting and delivering to the
destination.

when outbound activities are timely managed with optimal costs and product delivery
processes put a minimum negative effect on the quality, it maximises the customer
satisfaction and increases growth opportunities for the firm. Colgate Palmolive should pay
specific importance to its outbound value chain activities when its offered products are
perishable and require quick delivery to the end customer.

Marketing & Sales:

At this stage, Colgate Palmolive will highlight the benefits and differentiation points of offered
products to persuade the customers that its offering is better than competitors. Only producing a
high quality product at affordable costs and distinctive features cannot create value until
Colgate Palmolive invests on the marketing and sales activities.

The company can use the marketing funnel approach to structure its marketing and sales
activities. The marketing strategies can either be push or pull in nature, depending on the Colgate
Palmolive’s business objectives, brand image, competitive dynamics and current standing in the
market.

Services:

The pre-sale and post-sale services offered by the Colgate Palmolive will play an important
role in developing customer loyalty. The modern customers consider post-sale services as
important as marketing and promotional activities.
Secondary Activities:
The support activities play an important role in coordinating and facilitating the primary value
chain activities. Colgate Palmolive can also benefit from analysis of its support activities as
explained below.

Firm infrastructure:

Effective infrastructure management can allow Colgate Palmolive to optimise the value of
the whole value chain. Colgate Palmolive can control the infrastructure activities (or commonly
called overhead costs) to strengthen the competitive positioning in the market.

Human resource management:

Colgate Palmolive can analyse human resource management by evaluating different HR

aspects, including- recruiting, selecting, training, rewarding, performance management
and other personnel management activities. The effective HR management can allow Colgate
Palmolive to reduce competitive pressure based on motivation, commitment and skills of its
workforce.

Technology develomement:

Colgate Palmolive to realise the importance of technology development. It can be divided into
product and process technological development activities. Some examples are- automation
software, technology-supported customer service, product design research and data analytics.

Procurement:

The procurement in value chain denotes the processes involved in purchasing the inputs that may
range from equipment, machinery, raw material, supplies, raw material and other items necessary
for producing the finished product. Due to its linkage with multiple value chain activities,
Colgate Palmolive should carefully consider its procurement activities to optimise the inbound,
operational and outbound value chain.
Porter's Five Forces Analysis:
Porter Five Forces focuses on - how Colgate-Palmolive Company can build a sustainable
competitive advantage in Personal Products industry. Managers at Colgate-Palmolive Company
can not only use Porter Five Forces to develop a strategic position with in Personal Products
industry but also can explore profitable opportunities in whole Consumer Goods sector.

Colgate-Palmolive Company Porter Five (5) Forces Analysis for Consumer Goods Industry

Threat of New Entrants:

New entrants in Personal Products brings innovation, new ways of doing things and put
pressure on Colgate-Palmolive Company through lower pricing strategy, reducing costs, and
providing new value propositions to the customers. Threat of new entrants is high in this
sector.

Bargaining Power of Suppliers:

All most all the companies in the Personal Products industry buy their raw material from
numerous suppliers. Suppliers in dominant position can decrease the margins Colgate-
Palmolive Company can earn in the market. . The overall impact of higher supplier bargaining
power is that it lowers the overall profitability of Personal Products.

Bargaining Power of Buyers:

Buyers are often a demanding lot. They want to buy the best offerings available by paying
the minimum price as possible. This put pressure on Colgate-Palmolive Company profitability
in the long run. The smaller and more powerful the customer base is of Colgate-Palmolive
Company the higher the bargaining power of the customers and higher their ability to seek
increasing discounts and offers.

Threat of Substitute Products or Services:

When a new product or service meets a similar customer needs in different ways, industry
profitability suffers. For example services like Dropbox and Google Drive are substitute to
storage hardware drives. The threat of a substitute product or service is high if it offers a value
proposition that is uniquely different from present offerings of the industry.

Rivalry among the Existing Competitors:

If the rivalry among the existing players in an industry is intense then it will drive down
prices and decrease the overall profitability of the industry. Colgate-Palmolive Company
operates in a very competitive Personal Products industry. This competition does take toll on
the overall long term profitability of the organization.

Comperison of Colgate Palmolive Pakistan

limited with competitors & also financial
performance
Symbol COLG GLPL UPFL ZIL

Name Colgate Gillette Pakistan Unilever Pakistan ZIL Ltd.

Palmolive (Pak) Ltd. Foods Ltd.
Ltd.

Sector CHEMICAL FOOD & FOOD & FOOD &

PERSONAL PERSONAL PERSONAL
CARE CARE CARE
PRODUCTS PRODUCTS PRODUCTS

Last Trade Price 2,022.00 215.36 7,600.00 133.00

Number of Shares 57,545,900 19,200,000 6,369,900 6,122,600

Face Value 10.00 10.00 10.00 10.00

Beta 0.27 0.08 0.31 0.63

Market Captalization 116.36 Bn 4.13 Bn 48.41 Bn 0.81 Bn

Last Annual EPS 61.01 8.56 385.08 4.56

Latest EPS 39.97 10.64 385.08 10.74

Book Value 258.44 38.18 361.73 95.55

Price To Book Value 7.82 5.64 21.01 1.39

Return On Equity 23.61 % 25.61 % 106.46 % 4.92 %

Retention Ratio 40.17 100.00 -0.24 67.12

Equity To Assets Ratio 78.27 53.94 32.50 51.19

Return On Assets 18.48 13.81 34.60 2.52

Return On Capital 31.68 42.48 101.14 11.01

Employed

Dividend Rs. 36.50 Rs. N/A Rs. 386.00 Rs. 1.50

Net Profit Margin 9.50 8.38 18.46 1.47

Gross Profit Margin 28.33 33.22 40.86 28.33

EBIT Margin 13.04 14.15 19.85 3.90

Inventory Turnover 6.3 6.01 14.73 10.14

Asset Turnover 194.58 164.94 187.50 170.92

Current Ratio 3.56 3.03 0.74 0.93

Quick Ratio 3.90 1.61 0.54 0.46

Net Interest To Assets 55.12 54.79 76.60 48.42

Long Term Debt To Equity 3.79 % 1.66 % 13.22 % 26.88 %

Total Debt To Equity 32.06 % 51.69 % 207.65 % 115.14 %

Long Term Debt To Assets 2.87 % 1.10 % 4.30 % 12.50 %

Total Debt To Assets 24.28 % 34.08 % 67.50 % 53.52 %

 Unilever Pakistan Foods Limited
Operating Results
Rupees in million
Description 2019 2018 Increase
(Decrease)
Sales 13,291 11,898 12%

Gross Profit 5,430 5,349

2%
Profit fro Operations 2,943 2,543 16%
Profit before tax 2,808 2,496 13%

Profit after tax 2,453 1,734

41%
EPS-basic (Rs) 385.08 274.92 40%

COLGATE-PALMOLIVE (PAKISTAN) LIMITED

Operating Results
Rupees in million
Description 2019 %age 2018 %age
Gross Sales 41422 10.5% 48719 17.6%

Operating Profit 4697 (3.3%) 5003 6.5%

Net Profit After Tax 3257 0.0 3511 7.8%

Earnings per share 56.60 0.0 61.01 7.8%

ZIL Limited. Pakistan

Financial Position at Glance:

PKR in millions

Nine Month period fro January to September

 Description 2019 2018 Growth

Gross Sales 2,397 1,823 31%

Net Sales 1,775 1,339 33%

Gross Profit 509 365 39%

Gross Profit % 28.7% 27.3 % 140 bps

Profit/(Loss) after 51.4 9.0 5.7 times

taxation

8.4
EPS 0 1.47 5.7 times

ta Oveview of Colgate Palmolive:

Net turnover of the Company grew by 18.19% on the back

of volume and selling price increases across all categories. Currency depriciation and commodity
price increases had a significant effect on product costs. In order to reduce the impact, the
Company undertook aggressive selling price increases and measures to control costs. However
the Company was unable to pass on the full impact of cost increases to consumers. Hence gross
profit margin dropped by 499 bps.
Media and promotional spending was optimized resulting in decrease of 3.59% in selling and
distribution costs. Administrative expenses increased by 13.54% primarily due to employee
related cost and depreciation expense.

Current ratio & quick ratio are showing us company’s performancr in a good direction,
however decreasing current as well as quick ratio is not a good sign for company. Company debt
ratio also consistent 22% in Y19 & Y 18 20% which show a good gesture of company.
inventory turnover is also good which is 5.3 times in Y 19 & Y was 5.1 times. Standard time of
inventory turnover is 5 times.

lCommitted to Intelligent Investing