Colgate brushes up plan to woo the great Indian middle class

India will account for probably the biggest contribution to the middle class in the world over the next decade, said Noel Wallace, global chief executive officer at Colgate-Palmolive, adding that the country is its top priority.

"Middle class is everything to our businesses. That drives premiumisation. That drives penetration in the categories. That drives per capita consumption. So, long term, we are very bold on India," he said, addressing the dbAccess Global Consumer Conference. "We have seen a little bit of a slowdown in urban (areas). But long term, a huge middle class opportunity. We are well-positioned to go after that, and I think we've got some very clear strategies in place on the ground to deliver on it."

The company behind the eponymous toothpaste brand controls half the oral care segment in the country and has seen slowing demand in India. Colgate-Palmolive reported a 2% year-on-year fall in its revenue for the quarter to March, while its net profit declined 7%.

Demand for daily groceries and other household and personal products plunged to a two-year low during the March quarter, indicating delayed turnaround for India's fast-moving consumer goods (FMCG) sector. Kantar said FMCG volume sales growth in the January-March quarter was 3.5%, slowest since the 2023 March quarter. A year ago, the market had grown 5.5% during the quarter.

"We have seen some slowdown in the urban markets as of late, but the rural market seems to be performing well. We have an outstanding team on the ground that's very digitally forward thinking about where the future is going in that market in terms of both our distribution mechanisms as well as our marketing mechanisms, and we think executing very, very well," said Wallace.

Last month, Colgate India said more than two-thirds of urban Indian consumers are facing financial stress, leading to a slowdown in overall consumer demand, including for oral care products while 30% urban consumers are resilient.

Earlier this year, Colgate had said India was the most prominent market globally to experience fierce competition among consumer goods companies, marked by steep discounting to attract urban shoppers, indicating sluggish urban demand was forcing companies to engage in bleeding price wars.

While most companies keep product prices intact across markets, channels such as ecommerce and modern trade often use their sourcing clout to drive deep discounting. Rivals have been cutting prices or giving promotional offers occasionally at select channels for short-term market share and sales gains.

"While Colgate has been able to drive growth in its premium range, reviving growth in core brands remains critical. While the management's guidance entailed a recovery anticipated in the second half of this fiscal, we expect competitive intensity to remain elevated, which should keep margins under pressure," said a report by InCred Equities.