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Cottle-Taylor: Expanding the

Oral Care Group In India

Submitted by: Group B32


Janani Ramanathan
Nidhi Agarwal
Prakriti Sharma
Amanjot Singh

Contents
Q1. What factors determine the demand for toothbrushes? How can demand be increased?.............2
Q2. How is Cottle-Taylor doing in Indonesia? Has Cottle leveraged its first mover advantage? How? 3
Q3. How should Cottle accelerate the development of toothbrush market in India?.......................4
Q4. Develop two 2010 income statement projections for toothbrushes- (i) based on Patel's estimate
that there will be a 20% increase in sales (vs 2009) (ii) based on Lang's estimate that there will be a
25-30% unit increase in toothbrush sales (vs. 2009)..............................................................4
5. Is it possible to attain 25-30% increase in toothbrush sales as suggested by Lang? If yes, how would
you plan to achieve it?.................................................................................................. 6

Q1. What factors determine the demand for toothbrushes? How can demand be
increased?
Oral care market in India had not yet penetrated fully which is illustrated from the fact that
50% of the Indians did not consider oral care to be major concern. It is important to note that,
traditional methods of oral care like neem twigs, black salt, ash was popular and only a small
subset of people were willing to migrate to high-margin products like battery operated brush
vis a vis majority were willing to try the inexpensive methods of oral care.
Given that, in 2009, India with a population of more than a billion, represented an enormous
revenue opportunity for Cottle. Also, it is clearly visible from exhibit 3, that oral care
anchored its success in emerging markets. Hence, the need of the hour was to make people
aware of the health hazards of the improper oral care, thus, increasing the penetration.
It is observed that, toothbrushes predominantly used by people in the urban and semi-urban
settings who had higher disposable income and the market was easily accessible to them in
terms of availability. However, in the rural areas, there was low awareness quotient and
access to the basic healthcare services was a major challenge. Along with this, many other
factors determined the demand consideration of the toothbrushes in India, namely:
Affordability of the customers towards the toothbrushes
Distribution and accessibility to the toothbrushes in rural areas
Less awareness about the oral care
Use of traditional methods like neem twigs, ash etc
A very few people visited dentists and followed IDA recommendations
Number of dentists was low across the country
People were not concerned about the dental problems
Improper use of the toothbrushes (people didnt change the brush in 3 months and
used it until the body broke or the bristles flattened)
It can be seen that the company had significant market share in the toothbrush business in
India (46%). The focus should be to cash on the advantages of the product. It is also seen that
most of the revenues came from the urban and semi-urban areas where the distribution
network were extensive and proper awareness was thereBut the majority of the untapped
market lied in the rural sector which had not yet been penetrated. Thus it would be advisable
to look into the sector by focusing mainly on the product mx of the company. It can be done
so by using low-end products to maximum along with the high-end products. The focus
should be on producing and promoting low-end products to tap into the rural market while
maintaining the high-end market in the urban areas. Along with this a proper use of negative
reinforcement would be beneficial in this case where campaigns can be set up for the sector
to make people aware of the health hazards of improper oral care.
Q2. How is Cottle-Taylor doing in Indonesia? Has Cottle leveraged its first mover
advantage? How?
The toothbrush market in Thailand was growing at a rate of 17% in 2006.
Thailand was experiencing a steady rise in income levels and was increasingly getting
exposed to western influences.
Lang believed that the reason for inertia in the mid-range and battery-operated
toothbrushes was the lack of awareness and understanding of products.
3

By increasing advertising expenditure by 3% of sales and by targeting mid-range and


high-end audiences, the 2007 sales increased by 25%.
In 2009 70% of Cottle sales in Thialand came from low-end manual, 25% from midrange manual and 5% from battery-operated manual
In Thialand they were able to grab a significantly higher level of growth in mid-range
and high-range. This spurt can be attributed to first mover advantage. However the
product mix allocation continues to stay same from 2007 to 2009.

Since Cottle had a strong foundation in India, it was well-placed to take advantage of the
economic liberalization in 1991. It did so, registering 12% annual growth from 2004-2009.
Since toothbrush production required expertise and special equipment, Cottle, with its strong
base, could not be troubled by competitors. So, it did enjoy a first mover advantage.
Q3. How should Cottle accelerate the development of toothbrush market in India?
Partnership
Cottle should continue their partnership and hold local campaign with
IDA to help introduce and educate people about the benefits of oral care
by using toothbrush frequently. Recommended activities include: school
visits, giving free samples, establishing dental clinic with dental hygienic
nurses and conducting free oral checkups, etc.
Product
Develop a wider portfolio of products and maybe develop complementary
products which will better satisfy the local needs and wants such as
herbal toothpaste, dentist floss, mouth wash, etc which could help
accelerate the sales of toothbrush.
Advertising
Display the sample, banners of toothbrush benefits and the way to use it
campaign
effectively and correctly in stores and public places. Push up advertising
including social media, prints, TV ads should also be promoted with
localization (inserting native voiceovers and local product shots).
Distribution
Cottle should cultivate the relationship with supermarkets, higher income
shoppers frequently visit supermarkets, and therefore, targeting at these
customer groups can help move from low-end products to mid-range or
even higher end category of toothbrush. Dentists can become effective
potential future distributors for Cottle. Also, this can help to improve the
brand image of Cottles toothbrush as high-quality compared with those
of Chinese competitors (low quality, low price, no consumer brand
recognition)
Important Q4. Develop two 2010 income statement projections for toothbrushes- (i) based on
Patel's estimate that there will be a 20% increase in sales (vs 2009) (ii) based on Lang's
estimate that there will be a 25-30% unit increase in toothbrush sales (vs. 2009)
Given:
Sales in 2009 Units
Share of Cottle (units)

747.1
46%
4

Share of Cottle (units)


Revenues in millions $
Population to be targeted

343.666
70.1
500

Toothbrush sales ( in
millions $)
Low end Manual
High end Manual
Battery operated
Total

2010
2009 E
45.4
64.9
14.7
22
10
13.2
70.1
100.1

2009

Toothb
rush
Low
end
manua
l
(30%
increa
se)

Unit
sales
Compl
ete
Sensit
ooth
Fresh
gum
Surrou
nd
Kidsie
Total

Mid
range
manua
l
(20%
increa
se)

Batter
y
operat
ed
(15%
increa
se)

Zagge
r

%
increas
e

20

230.6

2010E Patel
Price/
unit
(after
20%
Unit
increas
sales
e)

15
9
15
299.
5

20
7
8

16

7.8
0.216

18

0.228

9.63
16.2
356.4
3

0.144

3.9
2.2
2.3
65.97
612

0.348

43

8.6

10.75

Total

43

53.75

1.695

1.7

1.895

48.1
0.216

7.5
0.216
0.228
0.144

3.8
2.4
2.5
64.28
534

0.348

26.3
0.63

18.92

11.9
38.25
624

94.6

7.68

1.875
25

0.1
13.15
16
5

10.44
17.4
347.4
2

25

0.67

Total

17.4

Revenu
e ( in
million
$)

0.18

75.68

13.0

34.68
4

120

7.68

0.2

16

6.8
21.73
65

13

0.2

16

267.4
96

120

0.63

Refills

16

15.0

25

1.5

16

0.216

25

34.4

%
increas
e

49.8

35.88

Directi
on flex

Swirlb
rush

0.18

276.7
2

20

29.9

Revenu
e ( in
million
$)

2010E Lang
Price/
unit
(after
20%
Unit
incre
sales
ase)

14.4
0.67

0.25
2.125

0.2
14.56
75

Total
sales

344.
2

Income statement
Gross Revenue
Less: Trade Discounts
NetRevenues
Less:
Variable Manufacturing,
selling costs
Gross Margin
Less:

412.0
8

%
100
10
90

46
44

Advertising

Consumer promotions

Selling,admin costs

14

Profit from Operations

18

100.8
6

444.1
5

Patel
LANG 2010
2009 2010 (E)
(E)
70.1
100.9508
117.59
7.01
10.09508
11.759
63.09 90.85572
105.831
32.24
6
30.84
4

6.309
0.630
9
5.678
1
18.22
6

46.43736
8
44.41835
2

54.0914
51.7396

Ad(12%)14.1
9.085572 108
0.908557
2
1.05831
8.177014
8
9.52479
26.24720
8
27.0457

5. Is it possible to attain 25-30% increase in toothbrush sales as suggested by Lang? If


yes, how would you plan to achieve it?
Yes it is possible because of the following reasons:
Increasing western influences is driving modern oral care demand in India
First mover advantage in India would help to give advantage of price and securing
early market share
Wide distribution network of Cottle India from small bodegas to closet sized urban
sidewalk vendors to supermarkets and specialty retailers
Indias vast population and optimism about growth prospects of the economy, and
decline in people living in slums
How this can be achieved:

Educate consumers about the importance of dental hygiene and use of toothbrushes
through tie-ups with NGOs and IDA. Many Indian still cleaned their teeth with
traditional products like Neem twigs, tobacco, charcoal, and ash.
Increasing frequency of use of toothbrushes to 2 times/ day. Only 62% of the people
brushed their teeth at least once a day with 38% brushing less than 3 times in a week
Target states like Maharashtra, Uttar Pradesh and Andhra Pradesh which constitute
more than 30% of Indias total GDP. Promoting optimal product mix in different cities
and locations depending on average income of people. Focus on battery operated and
mid range varieties in areas of higher income and education.
6

117.1
1

Currently low end range constitutes 87% of total toothbrush sales in Cottle India.
Promoting premium varieties will help to increase the topline.
Since gross margin on toothbrush products are 44% of gross revenues, hence
increasing promotional expenditure to 17% (increase in 5% from 2009) will help to
increase usage of toothbrushes among people. Developing ads locally, tying up with
brand personalities who could act as opinion leaders, would help in diffusion of the
message of dental hygiene more profusely.