Euromonitor analyst weighs in on Colgate-Palmolive potential sale

Recent reports suggest that chief executive Ian Cook has indicated that he is prepared to sell the company: according to The New York Post,​ Cook is looking for a price in the region of USD 88 billion.

Nicholas Micallef, senior beauty and personal care analyst at Euromonitor International,​ gave the firm’s perspective on the impact this potential sale could have.

How would a sale of Colgate-Palmolive impact the cosmetics industry at large?​

Colgate-Palmolive had held a stable share of 3.6% in the global beauty and personal care industry over 2011-2016. As the fourth largest company in the industry, it requires an acquirer with a larger enough market capitalisation.

Should the likes of P&G or Unilever make a move, L’Oréal’s position at the helm of the industry would be short-lived (following P&G multi-brand divestment to Coty). Nevertheless, L’Oréal may have little interest in such a move, as it does not play in oral care, and hence tends to exclude oral care players when evaluating its strength and position in the beauty industry.

With Unilever making a string of premium acquisitions in skin care and hair care over the past years, a bid for Colgate-Palmolive would lift the company to the top for the first time in beauty and personal care.

What’s to be gained from the acquisition?​

In terms of market share, the acquirer would earn 4th position in the industry, and rise to the top in oral care given the relatively insurmountable share of 26% that Colgate-Palmolive commands in the category.

The company also ranks 2nd in bath and shower with 8% in 2016, behind Unilever with 21.6%. While Colgate’s share has been in constant decline since 2011, its other rivals remain distant, and hence a buyer is likely to secure the 2nd position in this category.

With Colgate-Palmolive’s bid, there is potential for the buyer to gain the dynamic Tom’s of Maine niche brand, and benefit from Colgate’s recent premiumisation drive. If we assume that Unilever is the interested bidder, then it is understandable that Colgate could be its target.

Unilever’s recent acquisitions are evidence of its quest for a strong premium portfolio. Unilever may decide to retain its low-end brands Signal and Close-Up in emerging markets, and streamline Colgate to keep the higher-priced functional lines only.

What cosmetics/personal care companies would you say are primed to take over Colgate-Palmolive and why?​

P&G would be rather unlikely not only due to antitrust laws (given the sizeable share that Oral-B commands in oral care, it could be deemed by authorities as detrimental to competition), but also given that Colgate’s higher-priced toothpaste lines compete directly with Oral-B. If that had to be the case, several SKUs would need to be dropped to prevent sales cannibalisation.

Besides Unilever (discussed above), Colgate-Palmolive could divest brands to different companies. J&J might be an interested contender in the natural brand Tom’s of Maine, which is arguably Colgate’s most dynamic brand, recently boosted with the 2014 launch of a baby care line. This could be of interest to J&J, as the latter also seeks growth alternatives to the flagging Johnson’s brand.