trending Market Intelligence /marketintelligence/en/news-insights/trending/_t9vyfw_bvlr6r9tgjnzng2 content esgSubNav
Log in to other products

Login to Market Intelligence Platform

 /


Looking for more?

Contact Us
In This List

Colgate-Palmolive Q2 emerging market sales shrink

Blog

Message in a (Word)Cloud

Six trends shaping the industries and sectors we cover in 2021

Six trends shaping the industries and sectors we cover in 2021

Blog

CUSIP Request Volume Surges in December, Pushing Full-Year 2020 Volumes Past 2019 Totals


Colgate-Palmolive Q2 emerging market sales shrink

For the first time in recent memory, Colgate-Palmolive Co.'s organic sales in the emerging world are shrinking, leading analysts to question how the company will meet its long-term growth target.

Organic sales in emerging markets declined 0.5% for the second quarter ended June 30, the maker of consumer goods said July 27. Wells Fargo analyst Bonnie Herzog said in a note that it marked the first time that the metric has reached negative territory.

Emerging markets, including Latin America, Africa, Eurasia, Central Europe and Asia excluding Japan, account for about half of the company's net sales, which totaled $3.89 billion for the second quarter. The slowdown has posed a challenge for the company, along with higher raw material costs and volatile foreign exchange rates, Chairman and CEO Ian Cook told analysts during a July 27 call to discuss the company's second-quarter results.

"We have sometimes questioned if we're responding with an appropriate sense of urgency," Cook said.

For years, growing populations and increasingly sophisticated tastes in emerging markets have powered sales growth at the consumer goods makers, particularly as similar figures stalled in North America and Europe. Now, as sales in developing markets cool, the companies are debating how to stoke expansion and bring results within their long-term objectives.

At Colgate-Palmolive, that goal is to provide investors with companywide organic growth of between 3% and 5%, Cook said.

Meeting that objective has become more difficult in recent quarters, though. The second-quarter decline in emerging markets sales is the latest slowdown for the maker of Tom's of Maine toothpaste. Developing market organic sales grew at 8% as recently as the third quarter of 2016, according to data compiled by S&P Global Market Intelligence.

Sales in the industrialized world have only recently returned to their historical growth rate of about 2% after several consecutive quarters of contraction, according to the data.

SNL Image

The New York-based company's executives said they are raising prices in many emerging markets to combat the decline, though Cook said during the July 27 call that it was too early to gauge their effects.

The company is also expanding programs aimed at getting emerging market consumers to try higher-quality — and often more profitable — versions of its products. In Brazil, the company added its Elmex toothpaste, which is designed for sensitive teeth, to shelves at more pharmacies during the second quarter, Cook said. The company's second-quarter sales in Latin America tumbled 7% to $933 million, mainly on foreign exchange. They fell 1.5% in organic terms.

Colgate-Palmolive has also shortened the time it takes to put new premium products on store shelves in China, the CEO said, adding that the company researched, developed and distributed one new brand in five months.

Questioned by one analyst about how seriously the company is trying to accelerate sales growth, Cook said the company is "being dramatic and re-evaluating ... all aspects of our business as we move forward here."

Contracting organic sales in the developing world have weighed on results at several major consumer goods manufacturers in recent quarters, including Procter & Gamble Co. and Unilever PLC. While demand in some markets, such as Brazil, has ebbed due to political and macroeconomic factors, local competitors have grabbed market share from the multinational producers.