Indian Economy
Indias growth continues to be resilient despite some signs of
moderation in growth, says the World Bank. A conducive domestic policy environment and the
Governments sustained focus on structural reforms have kept Indias economic
activity robust despite global headwinds. Emerging as a beacon of resilience in the global
economy, despite a drop in growth rate projections, India continues to be the worlds
fastest-growing economy in the world, as reported by the World Economic Outlook report by
the International Monetary Fund (IMF).
India is expected to maintain its position as one of the fastest
growing G-20 nations in the foreseeable forthcoming years. Stabilizing inflation
trajectory, rising disposable income and the Governments growing investment in
capital expenditure will augur well for Indias sustainable development and long term
growth. Indias efforts in leveraging digitalization to overcome the challenges posed by
the pandemic, has not only helped the country weather the storm but also created new
opportunities for growth and employment.
Overall, demand circumstances in India remain favorable for economic
growth. India enters the new fiscal year with optimism bolstered by underlying and overall
macroeconomic stability.
Source:
https://www.worldbank.org/en/news/press-release/2023/04/04/indian-economy-continues-to-show-resilience-amid-global-uncertainties#:Rs:text=The%20
INDUSTRY OVERVIEW
Colgate-Palmolive (India) is committed to improving Oral Health in the
country. Oral health issues are becoming more prevalent around the world and in India, as
a result of rapid changes in lifestyles, living standards, and an increase in sugar-rich
diets. Post the pandemic, there has been a rise in awareness of Oral hygiene, however,
there is still work to be done. Per capita usage of toothpaste remains low in India and
driving this represents an opportunity for category growth. A more detailed analysis
reveals that approximately only 20% of Urban consumers brush the recommended, twice a day
and around 55% of rural households do not brush daily.
The industry is also expanding as a result of increased premiumisation,
customer demand for more tailored solutions, and a growing number of active practicing
dentists. India adds about 25,000 qualified dentists a year.
There is also an opportunity for premium and innovative products in
metros and urban cities in the space of family health, therapeutic toothpaste and oral
beauty. There is also significant room to expand the penetration of oral care adjuncts
like Floss and mouthwash.
Outside of Oral Care, the company sees opportunity in Skin Care, Hair
Care, Bath & Shower products, that have the largest market size within the beauty
& personal care segment. Rising incomes, rising aspiration and the democratization of
availability through e-commerce has led to rapid growth in these categories.
GOVERNMENT INITIATIVES
The Government of India has placed significant emphasis on driving Oral
Health in the nation. In order to deliver comprehensive and integrated oral healthcare
services, the Indian government has established the National Oral Health Programme (NOHP).
This aims to enhance oral health determinants, decrease morbidity associated with oral
diseases, integrate oral health promotion and preventive services into the overall
healthcare system, and foster public-private partnerships (PPP) to achieve improved oral
health outcomes.
To accomplish these goals, the Indian government has provided
assistance to state governments in delivering dental care alongside other existing health
programs at different levels of the primary healthcare system.
COMPANY OVERVIEW
Colgate-Palmolive (India), is a caring, innovative growth company that
is reimagining a healthier future for all people and the planet. The Company has
steadfastly nurtured the culture of oral care in India for decades, which has made it
Indias most preferred oral care brand and Indias most penetrated FMCG brand,
reaching nine out of ten households.
The product line of the Company comprises a oral care range of
toothpastes, toothbrushes, mouth washes, and personal care items such as hand washes and
shower gels. The companys products reach over 1.7 million stores, 95% of which are
active every quarter.
The Company believes in science-led innovation across all areas of its
business and has a vast team of specialists including scientists, engineers, innovators,
technologists, regulatory experts and data scientists. The Company recognizes India as a
key part of its global Research and Development (R&D) agenda. With over 85 years of
presence in India, the Company has established a state-of-the-art R&D center in
Mumbai, which is one of its largest R&D facilities globally.
The Company has a rich experience in the oral care & personal care
industry and with support from external partners, on a global level has developed a wealth
of patents and proprietary technologies, enabling the company to develop some of the most
effective products for the Indian market. Some of the recent product introductions
include, Colgate Max-Fresh Charcoal Toothpaste, Colgate PerioGard Toothpaste, KEEP
Toothpaste, advanced Electric
Toothbrush, Visible White O2
Toothbrush, Super Flexi Toothbrush, etc.
The detailed update on the same is provided in the Directors Report on
Page No 110.
The Company is also committed to building a strong personal care
portfolio leveraging the high recall of the brand name ‘Palmolive as well as
considering relevant opportunities from the Colgate-Palmolive global portfolio. The
product portfolio includes premium body wash and hand wash.
The Company is committed to ethical and responsible business practices
and is well-positioned to achieve continuous growth by leveraging its strategic market
position. Apart from decades-long vendor relationships, the Company has great partnerships
with all key modern trade customers and e-commerce. This offers a huge opportunity, as
these channels will grow rapidly in the coming years.
BUSINESS OVERVIEW
Digital Transformation
The Company is continuing its digital transformation to enhance its
operations and customer experience. It has been able to effectively simplify and optimize
supply chain, manufacturing operations and boost marketing initiatives. The digitized
supply chain provides improved control and visibility over inventories and logistics. It
has also employed artificial intelligence (AI) and machine learning (ML) technologies to
estimate demand and optimize production, resulting in increased efficiency and cost
optimisation.
To increase consumer reach and brand awareness, the Company has been
effectively using digital marketing strategies and social media channels. It continues to
build customized promotional campaigns using data analytics to gain a better understanding
of consumer behavior and preferences.
Colgate-Palmolive has introduced an AI-based image recognition tool
that allows for in-store aided merchandising, resulting in zero in-store display gaps.
This substantial advancement has eliminated manual input monitoring in favor of a
one-click solution, providing real-time surveillance of crucial in-store merchandising
features such as availability, planogram adherence, and element purity. The app provides
live insights and suggests corrective action within 30 seconds, minimizing manual
intervention. With just one image, the Company can track various in-store efficiency
parameters such as on-shelf availability, planogram compliance, assets utilization,
competition presence, and share of shelf. Real-time dashboards facilitate on-the-go
monitoring and corrections, adding to the apps versatility. This game-changing solution
enhances the Companys efficiency and ensures seamless in-store operations.
Risk Management
This is integral to the Companys strategy and attainment of its
long-term goals. The Companys success lies in its ability to identify the
opportunities generated by the business and the markets it operates in. The primary
objective of the Companys risk management framework is to guarantee timely and effective
identification and mitigation of potential risks, while also enabling flexibility in
adapting a risk-conscious business strategy that can tap into new opportunities.
The Company implemented a comprehensive risk management system that
protects its stakeholders interests by detecting, scrutinizing and managing significant
business risks. This entails various strategies such as risk identification surveys,
environmental business analysis, and gathering feedback from internal and external
stakeholders.
The Company has formulated an Enterprise Risk Management Committee and
the members meet periodically to efficiently identify upcoming risks and work on the
mitigation plans. The risks are rated to various parameters, such as probability of
occurrence, severity of impact and Companys preparedness to mitigate such risks. The
risks identified are placed on a matrix to depict the potential staging and monitoring of
the same. The assessment considers both short and long-term risks, including how these
risks are changing, together with emerging risk areas. These are assessed on an ongoing
basis and officially at least once a year by the Risk Management Committee and the Board.
Opportunities
Colgate-Palmolive is perhaps the only oral care company that has the
full portfolio of oral care products in India – toothpastes for varied benefits and
from basic toothbrushes to premium electric toothbrushes.
With its current reach and extensive product portfolio,
Colgate-Palmolive has the opportunity to drive premiumisation. The equity of Palmolive is
under-served at the moment and there is clearly an opportunity to build a robust personal
care business, as the brand has a 60-65% awareness level, which is difficult to build in a
fragmented market. Additionally, Rs55% of rural India does not brush daily so there lies
an opportunity to get the other 45% to start brushing every day. Only 20% of urban India
brushes twice a day and moving the remaining 80% to brush twice a day adds another
opportunity to drive growth.
The detailed explanation and outcome of each of these risks and
opportunities is given in the Business Responsibility and Sustainability Report, forming
part of the Boards Report.
Health and Well-being
The Company is committed to supporting the physical and mental
well-being of its human capital. It has prioritized providing healthcare benefits to its
workforce, which encompasses medical, dental, and vision coverage, in addition to wellness
programmes and mental health support. The Company also supports a healthy work-life
balance by providing flexible work arrangements and paid time off. It also offers career
development prospects and training programmes to facilitate the professional growth of its
employees.
Flexi-work Policy
Post COVID-19, the Company introduced a hybrid work policy known as
‘BlendIn. This allows employees to choose two days in a week to work from home,
while requiring them to work from the office for three days, with flexible working hours,
except during the core hours.
Diversity, Equity and Inclusion
The Company is committed to creating an inclusive workplace that
promotes diversity, equity, and inclusion (DEI). The Company recognises the value of a
diverse workforce and is dedicated to providing equal opportunities for all employees
regardless of their race, ethnicity, gender, sexual orientation, or any other
characteristic. The Companys DEI initiatives include training and education
programmes for employees, creating an inclusive culture and implementing policies that
ensure fairness and equality for all. The Company regularly monitors and evaluates its
progress towards its DEI goals and takes action to address any issues that might arise.
New Initiatives
The Company introduced a new Parental Support Policy named WIN
(Workplace INclusivity for new and expectant parents). The policy offers equal
opportunities for parental leave to all employees regardless of their gender or sexual
orientation. In addition, the policy offers greater flexibility and support to new and
expectant parents, including extended remote working options and financial assistance in
the form of childcare allowance and creche reimbursements. The Company has also
collaborated with creche facilities to provide additional support to parents.
Leave/ Parental Support Policies
The Company has modified its leave policy to be more inclusive, which
now includes Flexi Festival Leaves, which allow employees of different religions &
communities to choose and celebrate as per their preference. Additionally, the Care &
Compassion Leave policy allows employees to take time off to care for a sick partner,
spouse, child, parent, or pet.
Gender affirmation surgery coverage
The Company has developed a new medical insurance policy for its
transgender employees that covers both outpatient and surgical charges for gender
affirmation operations.
Sustainability
The Company places a significant emphasis on sustainability as a core
focus area. It is committed to integrating sustainable practices throughout its
operations, ensuring responsible and ethical business conduct. One key aspect of
Colgate-Palmolive (India)s sustainability efforts is its commitment to environmental
conservation. The Company strives to minimize its ecological footprint by implementing
initiatives that reduce waste, conserve water, and optimize energy usage. To meet these
objectives, it has established clear and quantifiable targets ESG goals for 2025, which
are governed by strong practices.
The Company continues to align its business practices with sustainable
principles, focusing on - Environmental Stewardship, Social Impact, and Governance
Excellence. As part of its efforts to inspire trust and transparency, this is the second
year of publishing its Environmental, Social and Governance (ESG) Report.
Circularity represents a transformative shift in the way the Company
approaches resource utilization, waste management, and product life cycles. It is about
designing out waste and pollution, keeping materials in use for longer, and regenerating
natural systems. By embracing circular principles, Colgate-Palmolive is committed to
minimizing its environmental footprint while maximizing positive social impact. The
Companys patented, first-ever recyclable tubes are a great example for circular
economy.
The Company is also working towards reducing energy usage and
increasing the use of renewable energy. It has employed the Internet of Things to
transition from preventive to predictive maintenance,in addition to reducing waste and
protecting the environment.
Colgate-Palmolive (India) also prioritizes community engagement and
social responsibility. The Company actively participates in community development
initiatives, supporting oral healthcare awareness, education, women empowerment and water
augmentation, etc.
KEY FINANCIAL RATIOS
Details of changes in key financial ratios as compared to immediate
previous financial year.
Particulars |
FY 2022-23 |
FY 2021-22 |
| Debtors Turnover |
27.16 |
29.65 |
| Inventory Turnover |
5.18 |
4.81 |
| Interest Coverage Ratio^ |
281.82 |
236.30 |
| Current Ratio |
1.43 |
1.37 |
| Debt Equity Ratio* |
0.04 |
0.05 |
| Return on Capital |
84% |
82% |
| Employed |
|
|
| Operating Profit Margin (%) |
26% |
27% |
Net Profit Margin (%) (after
tax) |
20% |
21% |
^Interest expenses appearing in the Financial Statements for the
current year relate to the lease liability as per Ind AS 116.
*Debt mainly pertains to lease liabilities as per Ind AS 116 which are
on reducing balance.
A comprehensive analysis of the Companys financial performance,
including operational performance, adequacy of internal control systems, product-wise
performance, and the use of innovation & technology, is included in the Boards
Report.
INTERNAL CONTROL SYSTEMS
The Company has a highly skilled team of internal auditors who are
entrusted with the responsibility of overseeing internal financial processes, policies,
and providing recommendations for effective financial controls. The implementation of
these robust internal financial controls serves to uphold compliance with the Companys
adopted policies and procedures, thereby fostering seamless and efficient operations.
These internal financial controls play a pivotal role in safeguarding
assets, detecting and preventing instances of fraud or errors, and ensuring the accuracy
and completeness of accounting and financial records. Furthermore, they contribute to the
timely preparation of transparent, comprehensive, and accurate financial information and
statements, aligning with the prescribed accounting standards and principles.
To ensure the continual relevance and adequacy of the internal
financial control system, the Companys Audit Committee conducts periodic assessments and
evaluations, scrutinizing its effectiveness.
OUR APPROACH
The investments required to support growth are developed through
ongoing, company-wide initiatives aimed at improving realizations, reducing costs, and
enhancing asset utilization. These initiatives, referred to as the companys revenue
growth management and growth funding initiatives, aim to make the company more efficient
across its operations.
These initiatives also focus on cost reduction in areas such as direct
materials, indirect expenses, distribution and logistics, advertising and promotions. They
encompass a wide range of projects, including raw material substitution, formulation
simplification, reduced packaging, supplier consolidation to leverage volume, and increase
manufacturing efficiency through SKU optimization.
The macroeconomic conditions are expected to remain volatile in the
near future given tremendous uncertainty in the global economic outlook. However, the
company believes it is well-prepared to face challenges due to its strong financial
condition, experience in operating under difficult circumstances, and ongoing focus on key
priorities.
The priorities include increasing sales through improved consumer
engagement, delivering world-class innovation, collaborating with distributors and retail
partners. The company aims to drive efficiency across all aspects of its income statement
to boost margins. It also strives to generate strong cash flow performance and utilize
that cash effectively to enhance shareholder returns. Lastly, the company aims to win by
staying true to its organizational culture and prioritizing its stakeholders.
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