Colgate boosts budget to further 5-year plan

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Colgate-Palmolive Co. will focus on growth this year through new products, higher marketing expenditures and an emphasis on its top brands.

Addressing the company's annual shareholders meeting last week, Chairman-CEO Reuben Mark said the company is placing particular emphasis on its global brands -- especially its oral care business. Eighty percent of the company's business comes from megabrands such as Ajax, Colgate, Mennen and Palmolive, he noted.

"We're smiling. We started 2000 well," Mr. Mark said. Colgate posted healthy first-quarter results, with sales up 3% to $2.2 billion and net income increasing 15% to $239.9 million.

GOOD NEWS

Colgate's growth strategy for the next five years includes plans to reduce costs and use the funds for additional advertising and sampling -- good news for its agency, Y&R Advertising, New York. The company's measured U.S. ad spending levels have grown 22.7% to $133.7 million in 1999 from $109 million in 1996, according to Competitive Media Reporting.

Colgate's percentage of worldwide sales from new products increased to 35% in 1999 from 26% in 1994. In the U.S., the new-product share of the business has increased even more sharply, to 58% from 27%. That bodes well for the rest of the year, Mr. Mark said, since most new products originate in the U.S. market before they roll out globally.

Colgate has plans to launch 19 new products in 2000. Among the latest are a revamped Softsoap liquid soap line, whitening toothpaste and battery-operated toothbrushes.

The new-product strategy is an appropriate growth plan, even if most of the products in the pipeline are extensions and revamps of existing products, said William Steele, analyst with Banc of America Securities. Most consumer product companies realize introductions motivate retailers and consumers, which deliver the sales growth Wall Street likes to see, he said.

"What these guys all recognize is topline growth is important, and the way to do it is with new products. . . . The trade dictates you need to have new products," Mr. Steele said. But in the long term, all consumer product companies will need to spend more on research and development to create truly new offerings, he added.

Colgate wants to raise the bar in the liquid soap category this summer with relaunch of its Softsoap line, backed by a $100 million effort from Y&R. Colgate will repackage all Softsoap hand soaps and body washes; add a fruit-scented extension called Softsoap Fruit Essentials; and two new products, Softsoap 2 in 1 moisturizing hand soap and Softsoap Active for Men, a body wash.

ORAL-CARE ADDITIONS

Additionally, Colgate will break ads in June for two oral-care launches, the battery-operated Actibrush toothbrush and Sparkling White whitening toothpaste. At the annual meeting, Mr. Mark previewed Y&R's Actibrush TV spots, which carry the tagline "Simply a better clean." Sparkling White will be backed by separate ads.

The company also plans to leverage the Internet to boost sales with targeted marketing opportunities, Mr. Mark said. Efforts include online sampling programs and online consumer sales via the sites of retailers such as Wal-Mart Stores, as well as direct sales to professionals such as dentists for Colgate Pharmaceutical products and veterinarians for its Hill's Pet Nutrition division.

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