Agenda

•  Executive & Case Summaries

•  Colgate-Palmolive Company

•  Colgate Max Fresh/US Product Launch

•  Mexico and China Launch

•  Insights

•  Recommendations

•  Q&A

Executive Summary

•  Organizational Restructuring

•  Streamline Product Development

•  Optimize Marketing Operations

Case Summary

•  February 2005

•  Nigel Burton - President of Global Oral Care

•  China and Mexico

Colgate-Palmolive Global Financials 2004

•  7% Revenue growth (sales $) •  0.2% Growth in Gross profit •  -2% Operating Profit •  -7% Net Income

Colgate Max Fresh US Launch

•  August 2004

•  “Freshness + Whitening”

•  “Breath strips” --- uniqueness

•  Principal consumer benefit: cosmetic

•  Value share for cosmetic benefit toothpastes up by 19%

(2000-2004)

•  Main competitor: Crest Whitening Expressions (CWE)

•  Big success

CP Organizational Structure Geographic Division – Asia/Latin America •  EXECUTION •  Responsible for all products in the region •  Supervised regional CIC •  P&L responsibility •  Report to COO

Global Business Development Group – Oral Care (Category Lines) •  STRATEGY •  Evaluated on Global Market Share •  Resource Allocation •  Report to COO

Consumer Innovation Center (CIC) – Asia/Latin America

•  Work on strategy with GBD Groups •  Marketers and product developers •  Involved in new product development (Global R&D) •  Report to Regional Division Marketing VP

Country Subsidiary – China/Mexico •  Develop and execute

local marketing campaigns

•  Report to Geographic Division

Go to Market Team

•  Launch plan and execution

$

$

$

2004 Toothpaste Market at a Glance

868

348

492.16

285.36

0

100

200

300

400

500

600

700

800

900

1000

China Mexico

US

$ in

Mil

lion

s Total Toothpaste Market

Colgate's Market Share

56.7% 82%

Reasons For Buying Toothpaste

China Shares by consumer benefit 2004

Mexico Shares by consumer benefit 2004

89.3

82.9

10.7

17.1

2000

2004

Total Therapeutic

Total Cosmetic

84.7

87.3

15.3

12.7

2000

2004

Total Therapeutic

Total Cosmetic

China’s preference to cosmetic benefit of toothpaste increased 6.4%; a reflection of changing purchase drivers.

Mexico’s preference to therapeutic benefit increased by 2.6%; a reflection of stronger traditional purchase drivers.

Source: Exhibit 14. Source: Exhibit 7A.

*In the US, therapeutic benefit decreased and cosmetic benefit increased.

CMF China TV Advertisement

CMF Market in China

•  $868 million retail toothpaste market

•  1.1% decrease of value shares in 2004 of Colgate Equity from 2001

•  8.4% increase of value shares in 2004 Crest from 2001

•  “Fresh breath” top reason for buying toothpaste in China

Sources: Table C & Exhibit 7B.

CMF Adaptation Strategies in China

Adaptation Need Costs Time Frame

New Commercial/TV Ad ✓ $500,000 -

Renaming of “Breath Strips” ✓ - -

Celebrity Endorser ✗ Up to $1,000,000 -

New Flavors* ✗ $200,000 32 weeks

Filling Machines !!! $1,500,000 -

Packaging Research I !!! $7,000 12 weeks

Packaging Research II !!! - 24 weeks

Color Testing* ✗ $7,000 4 weeks

*Does not fall in either Therapeutic or Cosmetic Value Share.

New packaging is 20% variable cost premium/package. Packaging for existing tube in carton format is 40% of COGS

CMF Mexico TV Advertisement

CMF Market in Mexico

•  $348 million retail toothpaste market

•  82% market value share of Colgate

•  10% approximated market share of Crest

•  Relatively flat toothpaste demand

CMF Adaptation Strategies in Mexico

Adaptation Need Costs Time Frame

New Commercial/TV Ad ✓ $500,000 -

Renaming of “Breath Strips” ✓ - -

“New Freshness” Message* ✓ - -

Pricing Strategy ✓ - -

Sources of Volume ✓ - -

*An additional “Therapeutic Benefit” message would have possibly increased sales.

CMF Adaptation Matrix

Adaptation China Mexico

New TV ad Must have Must have

Celebrity endorser Nice to have Nice to have

New Flavors Nice to have Nice to have

New Packaging Nice to have Nice to have

Pricing Must have Must have

Sizes Must have Must have

Renaming “Breath Strips” Must have Must have

China adapted to their local market better than Mexico, according to concept and product tests. However, better test results do not necessarily mean that there will be better profits.

CMF Comparative Media Investments

China •  13.5 million dollars •  6 months duration •  6% expected share of voice (SOV)

–  Internet ads –  Dedicated website –  PR event –  in-store displays –  trade support –  consumer sampling advertising to

communicate

WHOLE NEW DIMENSION OF FRESHNESS

Mexico •  2 million dollars •  8 months duration •  14.7% expected share of voice

(SOV). –  In-store merchandising –  Sampling –  Advertising –  Public Relations will communicate

single-minded benefit of:

NEW DIMENSION OF FRESHNESS

CMF Launch Pro-Forma Profit-and-Loss 2005 & 2006

China Mexico

10336

4848

5488

1406

1500

2582

13487

5458

8029

1834

1400

4795

Net Sales (In millions)

Cost of Goods Sold

Contribution Margin

NonVariable Ovherhead

Marketing Expenses

Operating profit

Mexico Year 1

Mexico Year 2

20303

10054

10249

4710

15880

-10261

23773

9745

14028

5515

10000

-1487

Net Sales (In millions)

Cost of Goods Sold

Contribution Margin

NonVariable Ovherhead

Marketing Expenses

Operating profit

China Year 1

China Year 2

Source: Exhibit 13 Source: Exhibit 20

Projected CMF Growth & Marketing Campaign ROI

Market Sales (tons) Growth YOY 2005-2006

Net Sales Growth YOY 2005-2006

ROI 2005 ROI 2006

China 12.5% 17% -165% -85%

Mexico 15% 30% 72% 242%

More marketing dollars spent does not necessarily lead to more sales & profits.

Source: Computed from Exhibits 13 & 20

CMF Launch Pro-Forma Profit-and-Loss 2005 & 2006

China Mexico

10336

4848

5488

1406

1500

2582

13487

5458

8029

1834

1400

4795

Net Sales (In millions)

Cost of Goods Sold

Contribution Margin

NonVariable Ovherhead

Marketing Expenses

Operating profit

Mexico Year 1

Mexico Year 2

20303

10054

10249

4710

15880

-10261

23773

9745

14028

5515

10000

-1487

Net Sales (In millions)

Cost of Goods Sold

Contribution Margin

NonVariable Ovherhead

Marketing Expenses

Operating profit

China Year 1

China Year 2

Source: Exhibit 13 Source: Exhibit 20

Gross Revenue : Cost Ratio Year 1

$0.64 : $1

Gross Revenue : Cost Ratio Year 2

$1.40:$1

Gross Revenue : Cost Ratio Year 1

$3.65 : $1

Gross Revenue : Cost Ratio Year 2

$5.70: $1

Recommendation 1

Organizational Restructuring •  Geographic Divisions, Global Business

Development Units and the Consumer Innovation Center groups should have communication and reporting protocols in place.

•  Everyone should have ROI accountability

•  Control and allocation of marketing budget

Change in Organizational Structure Geographic Division – Asia/Latin America •  EXECUTION •  Responsible for all products in the region •  Supervised regional CIC •  P&L responsibility •  Report to COO

Global Business Development Group – Oral Care (Category Lines) •  STRATEGY •  Evaluated on Global Market Share •  Resource Allocation •  Report to COO

Consumer Innovation Center (CIC) – Asia/Latin America

•  Work on strategy with GBD Groups •  Marketers and product developers •  Involved in new product development (Global R&D) •  Report to Regional Division Marketing VP

Country Subsidiary – China/Mexico •  Develop and execute

local marketing campaigns

•  Report to Geographic Division

Go to Market Team

•  Launch plan and execution

$

$

$Product launches evaluated by ROI

Recommendation 2

Streamline Product Development •  Develop product features and packaging with

strict regulations in mind to avoid waste of R&D resources.

•  Local market adaptations and added complexities should only be executed if it can contribute to the bottom line.

Recommendation 3

Optimize Marketing Operations •  Marketing dollars need to be spent with ROI

in mind.

•  Marketing campaigns should be executed by country subsidiaries because they have better knowledge of the market.

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