Caso Colgate
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Concluding concepts 13
Colgate: one squeeze too many?
Colgate is the world’s number one toothpaste company but they have their eye on another market – over the counter
(OTC) drugs. What would you think of Colgate aspirin or Colgate antacid? Would you buy Colgate laxatives or
Colgate dandruff shampoo? That is exactly what ColgatePalmolive would like to know. Colgate wants to investigate the possibility of entering the over-the-counter (OTC) drugs market. Can it use its Colgate brand name, developed in the oral-care products market, in the OTC healthcare market?
Why does the OTC market interest Colgate? The first reason is market size. The worldwide OTC market annually accounts for over a50 billion in sales. It is the largest nonfood consumer products industry, and it is growing at over
6 per cent annually.
Several trends are fuelling this rapid growth.
Consumers are more sophisticated than they were and they increasingly seek self-medication rather than seeing a doctor. Companies are also switching many previously prescription-only drugs to OTC drugs. The companies can do this when they can show, based on extensive clinical tests, that the drug is safe for consumers to use without monitoring by a doctor. Moreover, OTC drugs tend to have very long product life-cycles. Medical researchers are also discovering new drugs or new uses or benefits of existing drugs. For example, researchers have found that the psyllium fibre used in some OTC natural laxatives is effective in controlling cholesterol.
Beyond the size and growth of the market, Colgate also knows that the OTC market can be extremely profitable.
Analysts estimate that the average cost of goods sold for an OTC drug is only 29 per cent, leaving a gross margin of 71 per cent. Advertising and sales promotions are the largest expenditure categories for these products, accounting for an average of 42 per cent of sales. OTC drugs produce on average 11 per cent after-tax profit.
Concluding concepts 13
Colgate: one squeeze too many?
Colgate is the world’s number one toothpaste company but they have their eye on another market – over the counter
(OTC) drugs. What would you think of Colgate aspirin or Colgate antacid? Would you buy Colgate laxatives or
Colgate dandruff shampoo? That is exactly what ColgatePalmolive would like to know. Colgate wants to investigate the possibility of entering the over-the-counter (OTC) drugs market. Can it use its Colgate brand name, developed in the oral-care products market, in the OTC healthcare market?
Why does the OTC market interest Colgate? The first reason is market size. The worldwide OTC market annually accounts for over a50 billion in sales. It is the largest nonfood consumer products industry, and it is growing at over
6 per cent annually.
Several trends are fuelling this rapid growth.
Consumers are more sophisticated than they were and they increasingly seek self-medication rather than seeing a doctor. Companies are also switching many previously prescription-only drugs to OTC drugs. The companies can do this when they can show, based on extensive clinical tests, that the drug is safe for consumers to use without monitoring by a doctor. Moreover, OTC drugs tend to have very long product life-cycles. Medical researchers are also discovering new drugs or new uses or benefits of existing drugs. For example, researchers have found that the psyllium fibre used in some OTC natural laxatives is effective in controlling cholesterol.
Beyond the size and growth of the market, Colgate also knows that the OTC market can be extremely profitable.
Analysts estimate that the average cost of goods sold for an OTC drug is only 29 per cent, leaving a gross margin of 71 per cent. Advertising and sales promotions are the largest expenditure categories for these products, accounting for an average of 42 per cent of sales. OTC drugs produce on average 11 per cent after-tax profit.