Colgate Investment In E-Commerce Staff, Online Brands Pays Off: Sales Up 50%

Strategies including enhanced capabilities, more external talent and online-only launches boosted e-commerce business with 50% sales growth in the fourth quarter. Net sales are anticipated to grow 4% to 7% in 2021.

Colgate-Palmolive Co.’s e-commerce investment, including offering some brands only online, delivered in the fourth quarter with more than 50% digital sales growth.

The firm’s online business reached a double-digit run rate as a percentage of total sales during the October-December period, said president and CEO Noel Wallace during a 29 January earnings briefing.

“We made real progress on e-commerce where we brought in more external talent while upskilling existing talent across the enterprise; launched more online-specific innovation like the Optic White Pen, the Miracle Repair serum; and invested broadly behind enhanced digital capabilities,” Wallace said.

E-commerce sales were particularly strong in North America, more than doubling from prior-year period, and helping drive total regional sales up 10% to $940m, excluding pet nutrition. In China, digital sales contributed to 7% growth in Asia Pacific to $721m.

Colgate Miracle Repair C+ Gum Repair toothpaste launched exclusively online in china.

Net sales for the company, excluding pet nutrition, were $3.53bn, up 7.5%;  net income was flat at $647m. Total sales for 2020 climbed 5% (7% organically) to $16.48bn and net income grew 13% to $2.7bn.

“If you take the China piece specifically, where we’ve been very focused on driving our online and digital capabilities, we’ve seen our market share in e-commerce grow nicely in 2020 based on the strategies that we’ve been deploying,” said Wallace.

The initiatives include the launch of Colgate Miracle Repair C+ Gum Repair toothpaste exclusively online in China in late 2019. (Also see "Colgate Offers 'Anti-Aging' Toothpaste In China, Ready For 'Prolonged' Coronavirus" - HBW Insight, 25 Feb, 2020.)

The CEO said the e-commerce strategy parallels Colgate’s growth in the indirect trade channel – through wholesale third parties – over the past 20 years. “It’s that same level of focus that we’re bringing to the online world now, both from a digital standpoint and from an e-commerce standpoint,” he said.

Colgate has emphasized e-commerce growth in the past few years as result of small brand competition, launching aggressive e-commerce strategies that helped it grow its digital business 70% in 2017,  doubling the prior year’s rate. Also in 2017, the firm purchased the EltaMD professional skin care brand, which came with e-commerce business and influencer model Colgate said would emulate across other brands. (Also see "Colgate’s Prestige Skin-Care Acquisitions Inspire Interest In Similar Deals" - HBW Insight, 28 Apr, 2019.)

Bigger Brands Benefiting In E-Commerce Growth

While the COVID-19 pandemic has benefited online sales across the board as consumers opt to stay away from conventional stores, Wallace suggests larger companies like Colgate have managed the digital universe particularly well.

“There’s been a return to big brands over the course of COVID. And obviously the importance of health and hygiene and trust played into that resurgence,” he said.

Big brands’ market share gains have come at the expense of smaller brands, which likely will rebound when more consumers return to stores.

Colgate launched Optic White Overnight Teeth Whitening Pen in August.

“As consumers move back into stores and you get the benefit of displays, you will see perhaps some of the local brands reorient themselves and get some benefit of that. But if you look at the online world, obviously, the big players have really figured out how to target more effectively, how to spend in the right mediums, which was historically a space that the local brands and some of the insurgent brands were taking,” Wallace said.

Procter & Gamble Co. similarly stated consumers during the pandemic have turned to its familiar personal health and hygiene brands over private label competitors. During an earnings briefing in October, the firm reported the trend helped drive its US organic sales up 16% during the July-September period. (Also see "P&G Health, Hygiene Brands Ride Consumer ‘Trust’ To Sales Growth Amid Pandemic Uncertainty" - HBW Insight, 20 Oct, 2020.)

For 2021, Colgate expects net sales to be up 4% to 7%, including a low-single digit benefit from foreign exchange. Organic sales are anticipated to be in the long-term targeted range of 3%-5%.

“In the categories where consumption has risen during the pandemic, primarily liquid hand soap, dish soap and cleansers, we are expecting lower rates of growth or even declines year-over-year in 2021 depending on the market,” said chief investor relations officer John Faucher. “However, we expect overall consumption in these categories to remain elevated versus 2019 levels.”

Skin Care Business Rebounds In North America

In North America, organic sales grew 8.5% in the quarter, fueled by line extensions and increased consumption in categories impacted by the pandemic, Colgate reported.

The firm also benefited in the region from a “rebound” by its skin health business, with sales of home-use skin peels strong as consumers opt to avoid the dermatologist office. Sales in the region grew on increased marketing support behind the hum By Colgate electric toothbrush, Optic White Overnight Teeth Whitening Pen and the Irish Spring soap brand.

Colgate launched Optic White Overnight Teeth Whitening Pen in August, promoting it as an advanced whitening technology with hydrogen peroxide that can remove “15 years of stains.” The pen retails for $24.99 online and in most major retailers.

Sales in Latin America slipped 2.5% to $886m, though organic sales grew 10.5%, led by Brazil, Mexico, Argentina and Colombia. European sales grew 14% to $743m, with 4.5% organic sales growth led by Poland, the UK, Germany and France.

Organic sales in Asia-Pacific climbed 5%, led by India, the greater China region and the South Pacific region, Colgate reported. In Africa/Eurasia, total sales slipped 1.5% but grew 8% organically to $245m.