Colgate International Expansion Plan Presented By CEO Cook

Colgate-Palmolive is finalizing plans for a natural product under the Tom's of Maine brand likely to launch globally next year, the firm stated during a July 25 earnings call.

"We are assessing where we would expand internationally," President and CEO Ian Cook said, noting that the firm will roll out a new product on a "market by market basis."

"We see very good signs for a natural offering, and we think Tom's, as we have said before, is transferable - but I'd rather not talk the specifics."

After acquiring a majority stake in Tom's of Maine last year, Colgate has expressed interest in expanding the U.S. brand's distribution overseas (¹ (Also see "Colgate Snaps Up Tom’s Of Maine In $100 Mil. Deal" - HBW Insight, 27 Mar, 2006.), p. 3).

Cook's comments emerged from the exec's first analyst presentation as head of the company. Formerly president and COO, Cook assumed the CEO title in early July upon the retirement of Reuben Mark, who now serves as chairman (² (Also see "Colgate President Cook Slated For CEO Post After Mark’s Retirement" - HBW Insight, 27 Feb, 2006.), p. 10).

When asked by analysts whether he planned to oversee expansion into new personal-care categories, Cook responded that he sees more opportunities to "geographically transfer categories that we already have today."

For example, underarm care represents one possibility for expansion because it is a high-gross-profit category, is highly fragmented and has low barriers to entry, so it would be easy to build share in the segment, he said. The firm has underarm care under the Speed Stick and Tom's of Maine brands.

The exec did note that Colgate is in the process of test-marketing leave-on skin-care lotions and creams in Mexico, which suggests that the firm is targeting a new category.

"If the test market is successful, I think you could expect to see us selectively and carefully expand the business," Cook said.

The company may also explore taking the Softsoap and Palmolive value soap brands into the premium mass-market body-cleansing arena, Cook added.

The CEO was also asked to comment on rumors that Colgate is in acquisition/merger talks with Unilever.

The exec responded that the firm does not comment on rumors, but that "there are absolutely no conversations now with Unilever on any M&A activity," adding that the firm's existing "acquisition strategy and parameters" remain the same.

For the second quarter, Colgate's profit soared 47 percent on a reported basis, fueled by improvements from the firm's restructuring effort and a significant investment in advertising, the company reported.

Net income reached $415.8 million during the quarter; excluding restructuring costs, net income was $457.5 million, the firm says. Net sales (excluding pet care) in the second quarter grew 13.2 percent to $2.95 billion.

"Our restructuring and business-building program is on track," VP-Investor Relations Bina Thompson said. "The savings generated from that program, combined with our ongoing Funding-the-Growth program, are allowing us to support our business with meaningful advertising increases in every region of the world."

Colgate continues to focus its advertising efforts in the U.S. on promoting Colgate Total Advanced Clean, which launched in Q1, and on reaching the Hispanic market.

An Advanced Clean ad featuring actress Brooke Shields helped drive Colgate Total shares up 1.1 points during the quarter to 15 percent and total toothpaste sales in North America up 8 percent.

The firm plans to continue heavy ad spending through the remainder of the year, Cook said.

Advanced Clean and Max Fresh Burst toothpaste helped increase net sales (excluding pet care) in North America 3.5 percent to $671.5 million. Operating profit for the segment grew 13.1 percent to $161.6 million in Q2, according to Colgate.

- Eileen Francis ([email protected])