But last quarter's results also show that neither package-goods powerhouse has yet matched the all-around top- and bottom-line performance of common foe Procter & Gamble Co., which Aug. 1 reported 10% sales growth for its fiscal fourth quarter and the full year ended June 30.
And it's yet to be seen whether Colgate-which took its ad spending to unprecedented levels-and Unilever can return to the profit growth they've seen in the past, particularly as P&G is poised to become even more powerful when its acquisition of Gillette Co. is complete, expected to be this fall.
Colgate, the smaller of the two, has made the more dramatic turnaround in the marketplace. It reported sales up 10.5% to $2.8 billion last quarter, its biggest increase in 10 years, (1.5 points of that came from acquisitions). Colgate also reached record global toothpaste market shares in the quarter, with its U.S. market share up 1.5 points to 35.6%.
Global ad spending also reached record levels, up 16% to $292.3 million, led by double-digit increases in media. Earnings per share were up only 2% excluding restructuring charges, however, and down 7% including them. But analysts expect those indicators to improve at Colgate later in the year due to weak results in the year-ago quarters.
In an Aug. 1 conference call, P&G Chairman-CEO A.G. Lafley appeared to chalk up Colgate's gains to "competitive price discounting and trade-promotion spending," which he termed "particularly intense in both North America and Western Europe." P&G itself is reallocating spending (see story, P. 8).
But in his own conference call five days earlier, Colgate Chairman-CEO Reuben Mark dismissed assertions Colgate's surge has been fueled mainly by promotion. He said Colgate's "gross-to-net" deduction from sales for trade and consumer promotion was less in the first half of 2005 than it had been in the last half of 2004.
"That's a very good trend we expect to continue throughout the year," said Mr. Mark. He added that Colgate now has a global department using SAP software taking test results from Mexico and applying them around the world in an effort to get more volume lift from the same level of trade-promotion spending.
Colgate also expects to step up media spending in the second half of 2005 behind the U.S. launch later this month of Colgate Luminous, an enamel-strengthening toothpaste with a patented silica whitening formula that lifts off surface stains.
The product, which also has a patented "stay-clean" cap with a valve closure that cuts off the flow of toothpaste after the tube is squeezed, appears to be the first substantial functional improvement in several years in a category where new-product appeal has been based primarily on flavor in recent years.
But while new flavors have clearly been sales winners, enamel-boosting toothpastes haven't grown beyond niche status up to now in the category. Enamelon, later bought by Church & Dwight Co., which applied its liquid calcium technology to its Arm & Hammer brand, hasn't topped a 1% market share.
WPP Group's Y&R Advertising, New York, handles creative and sibling Mediaedge:cia media planning and buying for Colgate. Publicis Groupe's Saatchi & Saatchi, New York, handles creative and sibling Starcom MediaVest Group planning and buying for P&G's Crest.
For its part, Unilever also reported positive returns from its stepped up marketing investments when it reported results Aug. 4. Its sales were up 6% to $12.8 billion, or 3.3% excluding impact of divestitures and currency. That compared to underlying sales increases of 1% in the fourth quarter of 2004 and 2% in the first quarter of 2005 after adjusting for the impact of five extra days in the first quarter. Earnings per share, however, hit by the Slim-Fast write-off, were weaker than Colgate's, down 25% to 54¢.
In Unilever's case, nearly all the growth came from a 10% increase in developing markets, with a decline in European markets racked by heavy price promotion and deflation, mixed results in North America and continued trouble Slim-Fast.
Unilever increased advertising and promotion spending as a percent of sales for the third straight quarter. Though not specifying how much spending was up, CEO Patrick Cescau said Unilever increased advertising more than promotion.
Unilever said it has halted the global market-share declines that began in late 2003 and continued throughout 2004. The U.S. home and personal-care business was among the bright spots, with sales up by "high single digits," said Chief Financial Officer Rudy Markham, citing strength for new-product launches or restages by Dove, Axe, Vaseline and Degree.
Mr. Cescau said Dove's 10-month-old Campaign for Real Beauty, which has generated considerable buzz in the U.S. in recent weeks, has been successful globally, generating double-digit growth for the brand in the second quarter.
In the U.S., figures from Information Resources Inc. show Dove sales were up 11.4% in the first quarter, compared to 3.3% growth in the categories where the brand competes. WPP Group's Ogilvy & Mather Worldwide, Chicago, handles creative, and sibling Mindshare, New York, handles media planning and buying.
"This beauty campaign has met with extraordinary support and improved sales," Mr. Cescau said. "It's doing very well and we're proud of it."