S G Shrinivas

Section A

Brighter Smiles for the masses Colgate & P&G: Strategy Sheet
Arena:
Geographical location: USA with expansion to the lucrative Europe
Patent protection, Brand equity and presence across the world
Making the strips more convenient, fast and cheaper if possible
Vehicle:
Ensuring greater availability of product at various outlets
Launching the product in Europe which is the biggest market for
Oral Health Care Products
Differentiator:
Better quality of product: Long lasting whiteness unlike Colgates
product which gets washed away within 30 seconds
Proven track record of White-strips unlike Simply White which is very
new in the market
Staging:
Take legal recourse at NAD. If not effective, take it up under the
Lanham Act
If successful, follow it up with the Mumbles Ad Campaign
emphasising on the legal victory and reduce prices simultaneously
to wipe Colgate off the market
Geographical expansion to Europe and then to Asia
Economic Logic:
To re-establish P&G as the market leader in the tooth-whitening oral
care segment by using the proprietary & patented product to charge
premium prices
Recover the cost of R&D and advertising

Decision:
Take legal recourse at NAD. If not effective, take it up under the
Lanham Act
If successful, follow it up with the Mumbles Ad Campaign
emphasising on the legal victory and reduce prices to $30
simultaneously to wipe Colgate off the market
Geographical expansion to Europe and then to Asia
Being a direct attack on the core profit making area for P&G, our
motivation level for getting back at Colgate will be high. Considering the
fact that our awareness level has been quite high, it will be easier to
retaliate to this move by Colgate. Capability of the company is also
extremely high as it is the market leader in consumer products across the
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world and as shown in the following calculation, it has already recovered

its investments from the product. If we win the legal battle, we should
follow it up with a high awareness campaign. The price cuts should be
only after winning the legal battle as P&G risks giving wrong signals to
the customer otherwise should also be highly advertised and try to wipe
Colgate out of the market.
White Strips Profitability (End of 2000 figures)
Total Profits
Number of Units Sold
Profit per unit sold
Price per Unit
Net Margin in %
At 9% Margin of Oral Care Category,
Price of White Strips will be
At 25% Margin of Oral Care Category,
Price of White Strips will be

$
200
mn
12 mn
$
16.67
$ 40
41.67
%
$
25.43
$ 30

Profits generated by White Strip

Market Size in 2000
Assuming 55% Market Share
Market Size in 2001
Assuming 70% Market Share
Market Size in 2002
Assuming 50% Market Share
Total
Net Margin @ 16.67%
Total Launch Expenses (including
R&D)

$200 mn
$ 110 mn
$310 mn
$217 mn
$460 mn
$230 mn
110 + 217 + 230 = $ 557 mn
$ 232.10 mn
$205 mn

This means that P&G has recovered its initial investment on R&D and
advertising. Considering that further advertising may have been incurred in the
following years as well, it can recover that through a lower margin level of
about 25% i.e at a price of $30

Tradeoffs:
Fall in current profitability levels due to reducing prices
Fighting a prolonged legal battle might mean lack of focus on the
actual product
Losing out to Simply White in the courts might mean that Colgate
will take advantage of the same with a strong advertising campaign,
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leading to greater brand equity for them and moving our product
further down, in the Decline Phase, it is in right now.
Support and Resistance Factors:
Support from:
The research that indicates that our product is 5 times more
effective, giving us a strong ground in the legal battle.
Proven Track record in the segment
Quality of the product
Mumbles ad campaign which is ready for launch immediately
Resistance from:
Considering that we won a similar legal battle during the
launch of white-strips, there is a chance that the court/NAD
ruling may go against us.
Impact:
Fall in profit margins of the product but a greater market share in
the segment.
Profitability will come from geographical expansion to Europe and
later Asia where the market is highly lucrative.

P&G- Total business & Oral Care Financials

FY 2002

Glob
al

Oral Care

Revenue

4023
8

12%

4829

Net
Profit

4352

10%

435

Margin

10.8
%

9.0%

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