Urban demand dips, tax changes disrupt trade, and rivals bite into Colgate’s market share amid a delayed recovery outlook
Urban Demand Slumps, Recovery Delayed
Despite a strong consumer appetite across sectors, Colgate-Palmolive is facing a rare downturn in India, one of its largest and most strategic markets. The global CEO, Noel Wallace, acknowledged during an investor call that a recovery is unlikely before 2026, citing weak urban demand and trade disruptions following recent tax changes.
- Urban India is showing sluggish purchasing patterns, while rural regions remain relatively steady.
- Colgate has now reported three straight quarters of declining sales—a significant anomaly in its growth history.
GST Cut Leads to Inventory Turmoil
A key disruptor has been the reduction of GST on oral care products from 18% to 5%, which forced sudden price revisions and created inventory distortions across trade channels.
- In Q2 FY25 (September quarter), Colgate’s India revenue fell 6.3% year-on-year.
- The company attributed the slump to supply chain and inventory realignments, not just demand softness.
Rivals Gain While Colgate Slips
While Colgate battles headwinds, local and multinational competitors have capitalized on the gap:
- Dabur’s oral care segment grew by 14% in the same quarter.
- Hindustan Unilever’s Close-Up brand posted modest gains.
- GSK Consumer and Patanjali Ayurved have seen their market shares climb by over 110 basis points in two years.
Colgate’s own share in India’s ₹16,700 crore oral care market has dropped from 46.1% to 42.6%, according to NIQ data.
Premium Push, But Results Still Elusive
To counter the slowdown, Colgate is doubling down on premiumisation and innovation. The company recently relaunched its mass-market brand Colgate Strong Teeth to win back rural buyers and is also focusing on premium variants in urban retail.
“We’re focused on executing core innovations and pushing premium offerings in modern trade,” Wallace said.
However, these efforts have yet to significantly boost volume growth or arrest share erosion, especially in the mainstream segment.
Changing Consumer Behavior Adds Pressure
Colgate has observed a shift not in price sensitivity but in consumption patterns—consumers are using toothpaste longer, extending product life rather than switching to cheaper brands.
- This behavior, coupled with the lack of aggressive promotional campaigns, has led to volume declines, particularly in its core product lines.
Analysts Downgrade Growth Outlook
A recent report by InCred Equities paints a cautious outlook. While premium products are holding ground, Colgate’s core portfolio struggles in the face of heightened competition.
- The report notes that growth revival is expected to be gradual, not immediate.
- It downgraded Colgate’s FY26 sales forecast by 2% and EPS by 3.5%, reflecting near-term headwinds.
Strategic Rethink Underway
Despite the setbacks, Colgate remains committed to the India market and is reviewing its business strategy intensively.
“We’re excited about the long-term potential and are identifying strategic growth areas,” Wallace emphasized.
The company aims to leverage its innovation pipeline, improve rural distribution, and enhance trade engagement as it prepares for a slow but deliberate comeback.
Colgate-Palmolive is facing continued sales decline in India due to weak urban demand and GST-driven trade disruptions. As rivals gain market share, Colgate is investing in premium products and rural revamps, but analysts expect a slow recovery amid intense competition.
