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Colgate-Palmolive Company

Colgate-Palmolive Company

300 Park Avenue
New York, New York 10022-7499
U.S.A.
Telephone: (212) 310-2000
Toll Free: (800) 850-2654
Fax: (212) 310-2475
Web site: http://www.colgate.com

Public Company
Incorporated: 1806 as The Colgate Company
Employees: 36,000
Sales: $10.58 billion (2004)
Stock Exchanges: New York Euronext Frankfurt London Zurich
Ticker Symbol: CL
NAIC: 311111 Dog and Cat Food Manufacturing; 325611 Soap and Other Detergent Manufacturing; 325612 Polish and Other Sanitation Good Manufacturing; 325620 Toilet Preparation Manufacturing; 325998 All Other Miscellaneous Chemical Product and Preparation Manufacturing; 335211 Electric Housewares and Household Fan Manufacturing; 339994 Broom, Brush, and Mop Manufacturing

Colgate-Palmolive Company's growth from a small candle and soap manufacturer to one of the most powerful consumer products giants in the world is the result of aggressive acquisition of other companies, persistent attempts to overtake its major U.S. competition, and an early emphasis on building a global presence overseas where little competition existed. The company is organized around four core segmentsoral care, personal care, home care, and pet nutritionthat market such well-known brands as Colgate toothpaste, Irish Spring soap, Softsoap liquid soap, Mennen deodorant, Palmolive and Ajax dishwashing liquid, Ajax cleanser, Murphy's oil soap, Fab laundry detergent, Soupline and Suavitel fabric softeners, and Hill's Science Diet and Hill's Prescription Diet pet foods. Colgate-Palmolive has operations in more than 200 countries and generates about 70 percent of its revenue outside the United States.

Beginnings

In 1806, when the company was founded by 23-year-old William Colgate, it concentrated exclusively on selling starch, soap, and candles from its New York City-based factory and shop. Upon entering his second year of business, Colgate became partners with Francis Smith, and the company became Smith and Colgate, a name it kept until 1812 when Colgate purchased Smith's share of the company and offered a partnership to his brother, Bowles Colgate. Now called William Colgate and Company, the firm expanded its manufacturing operations to a Jersey City, New Jersey, factory in 1820; this factory produced Colgate's two major products, Windsor toilet soaps and Pearl starch.

Upon its founder's death in 1857, the firm changed its name to Colgate & Company and was run by President Samuel Colgate until his death 40 years later. During his tenure several new products were developed, including perfumes, essences, and perfumed soap. The manufacture of starch was discontinued in 1866 after a fire destroyed the factory.

In 1873 Colgate began selling toothpaste in a jar, followed 23 years later by the introduction of Colgate Ribbon Dental Cream, in the now familiar collapsible tube. By 1906 the company was also producing several varieties of laundry soap, toilet paper, and perfumes. Colgate & Company shifted its headquarters to Jersey City in 1910.

While the Colgate family managed its manufacturing operations on the East Coast, soap factories were also opened in 1864 by B.J. Johnson in Milwaukee, Wisconsin (under the name B.J. Johnson Soap Company), and in 1872 by the three Peet brothers in Kansas City, Kansas. In 1898 Johnson's company introduced Palmolive soap, which soon became the best-selling soap in the world and led the firm to change its name to the Palmolive Company in 1916. The Peets, who sold laundry soap mainly in the Midwest and western states, merged their company (Peet Brothers) with Palmolive in 1926, forming Palmolive-Peet Company. Two years later that firm joined with Colgate & Company to form Colgate-Palmolive-Peet Company, with headquarters in Jersey City. Palmolive-Peet's management initially assumed control of the combined organization.

On October 25, 1929, management signed an agreement to merge the company with Kraft Phenix Cheese Corporation (forerunner of Kraft Foods) and Hershey Chocolate Company. The three companies would continue to operate independently, but they would become subsidiaries of a holding company slated to be called International Quality Products Corporation. Just four days after the deal was signed, however, the stock market crashed, forcing the huge amalgamation to be scuttled. In the wake of the crash, the Colgate family regained control of Colgate-Palmolive-Peet and installed Bayard Colgate as president in 1933.

International Expansion

Colgate & Company had been a pioneer in establishing international operations, creating a Canadian subsidiary in 1913 and one in France in 1920. In the early 1920s the firm expanded into Australia, the United Kingdom, Germany, and Mexico. Colgate or its successor firm next created subsidiaries in the Philippines, Brazil, Argentina, and South Africa in the late 1920s. In 1937 the company moved into India and by the end of the 1940s had operations in most of South America. By 1939 Colgate-Palmolive-Peet's sales hit $100 million.

In the 1940s and 1950s the company also built upon its strategy of growth by acquisition, buying up a number of smaller consumer product companies. Organic growth remained on the agenda as well, and in 1947 the company introduced two of its best-known products, Fab detergent and Ajax cleanser. These acquisitions and new products, however, did little to close the gap between Colgate and its arch-rival, the Procter & Gamble Company, a firm that had been formed in the 1830s and had by now assumed a commanding lead over Colgate in selling detergent products in the United States. Meanwhile, the firm adopted its present name in 1953 and moved its offices for domestic and international operations to New York City in 1956.

In 1960 George H. Lesch was appointed Colgate's president in the hopes that his international experience would produce similar success in the domestic market. Under his leadership, the company embarked upon an extensive new product development program that created such brands as Cold Power laundry detergent, Palmolive dishwashing liquid, and Ultra Brite toothpaste. In an attempt to expand beyond these traditional, highly competitive businesses into new growth areas, Colgate also successfully introduced a new food wrap called Baggies in 1963. As a result of these product launches, the company's sales grew between 8 and 9 percent every year throughout the 1960s. Sales topped the $1 billion mark in 1967.

Lesch assumed the chairmanship of Colgate, and David Foster became president in 1970 and CEO in 1971. Foster was the son of the founder of Colgate-Palmolive's U.K. operations. He joined the company in 1946 as a management trainee and rose through the sales and marketing ranks both in the United States and overseas.

New Strategies for the 1970s

During the 1970s, as environmental concerns about phosphate and enzyme detergent products grew, the company faced additional pressure to diversify beyond the detergent business. In response to this pressure, Foster instituted a strategy that emphasized internal development via a specialized new venture group; joint ventures for marketing other companies' products; and outright acquisitions of businesses in which Colgate could gain a marketing advantage over Procter & Gamble. In 1971, for example, the company began selling British Wilkinson Sword Company razors and blades in the United States and other countries. In 1972 Colgate-Palmolive acquired Kendall & Company, a manufacturer of hospital and industrial supplies. It was originally hoped that the Kendall acquisition would bolster the pharmaceutical sales of Colgate's Lakeside Laboratories subsidiary, which had been acquired in 1960. The partnership never materialized, however, and Lakeside was sold in 1974. The Kendall business proved to be one of Foster's most successful acquisitions. Within two years, the subsidiary was producing sales and earnings results well above the company's targeted goals. On the product development side, meanwhile, Irish Spring deodorant soap was introduced in 1972.

In 1971 the U.S. Federal Trade Commission enacted restrictions on in-store product promotions, such as couponing. In response to these restrictions, Foster began to employ other tactics designed to enhance Colgate's visibility in the marketplace. Two such programs awarded money to schools and local civic groups whose young people collected the most labels and boxtops from selected Colgate products. Under Foster, Colgate-Palmolive also began to sponsor a number of women's sporting events, including the Colgate-Dinah Shore Winner's Circle, a women's professional golf tournament. Foster chose women's sports in an effort to appeal to Colgate-Palmolive's primarily female customer base. He even went so far as to have Colgate buy the tournament's home course, the Mission Hills Country Club in Palm Springs, California, so that he could supervise the maintenance of the greens.

In 1973 Colgate acquired Helena Rubinstein, a major cosmetics manufacturer with strong foreign sales but a weak U.S. presence. Believing that its marketing expertise could solve Rubinstein's problems, Colgate reduced both the number of products in the company's line and the number of employees in its workforce, increased advertising expenditures, and moved the products out of drugstores and into department stores. The following year the company acquired Ram Golf Corporation and Bancroft Racket Company, and in 1976 it bought Charles A. Eaton Company, a golf and tennis shoe manufacturer.

Company Perspectives:

Our long history of strong performance comes from absolute focus on our core global businesses, combined with a successful worldwide financial strategy. This financial strategy is designed to increase gross profit margin and reduce costs in order to fund growth initiatives and generate greater profitability.

Although total U.S. sales of consumer products appeared to be slowing by the end of 1974, particularly in soaps and detergents, Colgate's international sales continued to carry the company forward. It maintained its leadership position abroad through new product development geared specifically to local tastes throughout Europe as well as through its involvement in the growing markets of less-developed countries in Latin America, Africa, and Asia.

Setbacks Beginning in the Late 1970s

Foster's diversification strategy initially improved earnings, but Colgate's domestic sales, market share, and profit margins were beginning to soften. This was due, in large part, to an economic recession and an advertising cutback the company had made in an attempt to boost earnings. Colgate was consistently losing the marketing battle in personal care products to Procter & Gamble. It had no leading brands and few successful new product introductions because of reduced spending for research and development. In an effort to remedy this problem and broaden its product mix, Colgate moved into food marketing in 1976 with the acquisition of Riviana Foods, a major producer of Texas long-grain rice with its own subsidiaries in pet food (Hill's Pet Products), kosher hot dogs (Hebrew National Kosher Foods), and candy. The Riviana acquisition, however, did not live up to the company's expectations. Along with purchasing a successful rice-milling business, Colgate found that it had also saddled itself with two unprofitable restaurant chains and a low-quality candy company. In 1977 declines in the price of rice seriously eroded Riviana's cash flow.

Helena Rubinstein created additional headaches. Whereas other cosmetic manufacturers had moved their products from department store distribution to higher-volume drugstores, Colgate's management elected to keep Rubinstein products in department stores even though stores' demands for marketing support eroded the company's margins so severely that it lost money on every cosmetic item sold. Colgate finally sold the business in 1980 to Albi Enterprises.

Foster had become chairman in 1975. In 1979, embattled by a series of marketing failures and the pressures of an acquisition strategy that yielded more losers than winners, Foster suddenly resigned, citing ill health. The company's president and chief operating officer, Keith Crane, was appointed as Foster's successor. A 42-year Colgate employee, Crane quickly instituted a new management structure consisting of several group vice-presidents, reunited all domestic operations under one group, and realigned division managers in an attempt to promote a more cohesive organization. Consumer advertising and product research were given renewed emphasis to support the company's basic detergent and toothpaste lines.

Over the next two years, Crane sold a number of Foster's acquisitions that no longer fit with the company's long-term strategic plan, including Hebrew National Kosher Foods, which had been part of the Riviana purchase; Ram Golf; and the Bancroft Racket Company. Crane also put the Mission Hills Country Club up for sale and withdrew Colgate's sponsorship of the sporting events his predecessor had nurtured.

Also during the late 1970s and the 1980s, Colgate found itself named as a defendant in two lawsuits. In 1981 the company lost a suit brought by United Roasters, who successfully argued that Colgate had violated the terms of a contract between the two firms for Colgate to market Bambeanos, a soybean snack produced by United Roasters, and was awarded $950,000. The following year the company was sued by the federal government for alleged job discrimination. According to a complaint filed with the U.S. Equal Employment Opportunity Commission, Colgate had failed or refused to hire people between the ages of 40 and 70 since 1978 and had also deprived employees in that age group of opportunities for promotion.

By the end of 1982 Crane also experienced problems at Colgate. Several attempts at new product development never made it out of the test-market stage. Increased advertising expenditures for a limited number of major brands produced only temporary gains in market share while slowly killing off other products receiving little or no media support. Even Fresh Start detergent, one of the most successful new products to come out of the Foster era, was having problems retaining market share. Thus while Procter & Gamble's sales and margins were increasing, Colgate's were on the decline. To make matters worse, the strong dollar overseas hurt Colgate's international sales, and changes in Medicare policy weakened Kendall's business.

Key Dates:

1806:
Company is founded by William Colgate in New York to make starch, soap, and candles.
1857:
After founder's death, company becomes known as Colgate & Company.
1873:
Toothpaste is first marketed.
1896:
Collapsible tubes for toothpaste are introduced.
1898:
B.J. Johnson Soap Company (later renamed Palmolive Company) introduces Palmolive soap.
1910:
Colgate moves from original location to Jersey City, New Jersey.
1926:
Palmolive merges with Peet Brothers, creating Palmolive-Peet Company.
1928:
Colgate and Palmolive-Peet merge, forming Colgate-Palmolive-Peet Company.
1947:
Fab detergent and Ajax cleanser are introduced.
1953:
Company changes its name to Colgate-Palmolive Company.
1956:
Corporate headquarters shifts back to New York.
1966:
Palmolive dishwashing liquid is introduced.
1967:
Sales top $1 billion.
1968:
Colgate toothpaste is reformulated with fluoride; Ultra Brite is introduced.
1976:
Hill's Pet Products is purchased.
1987:
The Softsoap brand of liquid soap is acquired.
1992:
The Mennen Company is acquired; Total toothpaste is introduced overseas.
1995:
Latin American firm Kolynos Oral Care is acquired; Colgate-Palmolive undergoes major restructuring.
1997:
Total toothpaste is launched in the United States; Colgate takes lead in domestic toothpaste market.
2004:
Company acquires European oral care firm GABA Holding AG; major restructuring is launched.

Turnaround Under Reuben Mark, Mid- to Late 1980s

In 1983 Crane relinquished the title of president to Reuben Mark, one of the company's three executive vice-presidents and a member of Crane's management advisory team. Mark also assumed the position of chief operating officer at that time; one year later he succeeded Crane as CEO. Mark built upon his predecessor's restructuring efforts in an attempt to increase profits and shareholder value. Between 1984 and 1986 several inefficient plants were closed, hundreds of employees laid off, and noncore businesses sold, including the remnants of the Riviana Foods acquisition, except for the Hill's Pet Products subsidiary.

In an attempt to refocus the company's marketing and profitability, Mark developed a set of corporate initiatives intended to address business areas ranging from production-cost reduction to new product development, with a heavy emphasis on motivating employees and involving them in company decision-making. In response to the implementation of these ideas, the company's U.S. toothpaste business enjoyed a boost with first-to-the-market introductions of a gel toothpaste and a pump-type dispenser bearing the Colgate brand name. Similar U.S. market share gains were earned by new and improved versions of its Palmolive and Dynamo detergents and Ajax cleaner. Palmolive automatic dishwashing liquid debuted in 1986.

With the company's turnaround firmly underway, business units managed by key executives were formed to develop plans for the company's major product categories. The purpose of each plan was to identify how products under development could be best introduced in domestic and international markets. Two years into this strategic reorganization, coinciding with Mark's appointment as chairman in 1986, Colgate confronted an embarrassing controversy.

Since the early 1920s Hawley & Hazel Chemical Company had marketed a product called Darkie Black and White Toothpaste in the Far East. Colgate had acquired a 50 percent interest in this company in 1985. The following year, the Interfaith Center on Corporate Responsibility, a coalition of Protestant and Roman Catholic groups, demanded that Colgate change what it deemed to be the product's racially offensive name and packaging, which depicted a likeness of Al Jolson in blackface. The company acknowledged the criticism and agreed to make the necessary changes.

Colgate also continued to seek out growth areas in its personal care product and detergent businesses. In 1987 it acquired a line of liquid soap products (including the Softsoap brand) from Minnetonka Corporation, the first transaction the company had made in the personal care area in several years. Building upon its success in launching an automatic dishwashing detergent in liquid form ahead of its competitors, the company also beat Procter & Gamble to the market with a laundry detergent packaged in a throw-in pouch called Fab 1 Shot, although this product failed to sustain consumer interest or reach sales expectations over the long term.

Buoyed by product development breakthroughs and a renewed commitment to consumer products marketing, Colgate sold its Kendall subsidiary and related healthcare businesses in 1988 to Clayton & Dubilier. The sale enabled Colgate to retire some debt, sharpen its focus on its global consumer products businesses, and invest in new product categories. Moreover, Mark's global approach enabled the company to maintain its overall profitability despite not having a leadership position in the United States. Although Colgate lagged behind Procter & Gamble in the toothpaste category, for example, it held a commanding 40 percent share of the toothpaste market worldwide.

Mark's strategy appeared to pay off handsomely. By the end of the third quarter of 1989 Colgate's international operations performed strongly while the profitability of its U.S. operations rose, due mostly to manufacturing-cost economies and greater control over promotional and sales expenses. Not yet ready to concede the U.S. market for personal care products to Procter & Gamble, though, Colgate acquired Vipont Pharmaceutical, a manufacturer of oral-hygiene products, toward the end of that year. Vipont's products, several of which Colgate had already been marketing overseas, enabled Colgate to strengthen the market position it had recently established with the introduction of a new tartar-control formula toothpaste.

Major Acquisitions in the 1990s

Colgate continued to make significant acquisitions in the early and mid-1990s while it attempted to gear up its product development program, which had been unable to introduce more than a few new products each year. In 1991 Colgate acquired the Murphy-Phoenix Company (whose top brand was Murphy's Oil Soap) to bolster its household care segment. That same year, Mark initiated a restructuring aimed at improving the firm's profitability and gross margins, which lagged behind the industry leaders. A major part of the effort was the elimination or reconfiguration of 25 factories throughout the world and an 8 percent reduction in the workforce. Consequently, Colgate took a $243 million charge in September 1991, which reduced significantly the firm's net income for the full year.

Colgate's most dramatic acquisition to date came in 1992 with the $670 million purchase of the Mennen Company, which added to its personal care line the top U.S. deodorant brand, Mennen Speed Stick, and the number two baby-care brand, Baby Magic. In addition, Colgate gained footholds in skin-care and hair products, and the Mennen brands gained the power of Colgate's worldwide distribution and marketing reach. This major acquisition was followed in 1993 by the purchase of S.C. Johnson & Son, Inc.'s liquid hand and body soap brands in Europe and the South Pacific, which enabled Colgate to become the worldwide leader in liquid soap.

Gross margins steadily improved in the early 1990s, reaching 48.4 percent by 1994 (up from 39.2 percent in 1984). This provided Colgate with additional funds for research and development and advertising. The North American sector also experienced gains in gross margins, which resulted in part from pricing increases on Colgate detergents. In turn, this cut into overall North American sales, which declined 8 percent from 1993 to 1994. Mark's strategy was to turn North American sales around through new product introductions such as a variant of Irish Spring soap and an extension of the Murphy's Oil Soap brand into a Murphy's Kitchen Care line of all-purpose cleaners. Under the leadership of Lois D. Juliber, who formerly headed up new product development, the North American sector was able to introduce several products within a short span for the first time.

A hidden jewel within the Colgate empire in the 1990s was its pet foods sector, Hill's Pet Nutrition. The worldwide leader in therapeutic and specialty wellness pet food, Hill's enjoyed a compound annual growth rate of 14.6 percent from 1989 to 1994. During this period the market for premium pet food increased dramatically in Europe and Japan, with Hill's snatching a substantial portion of this growth. Overall, pet foods were one of Colgate's leading profit generators, boasting gross margins of 55 to 60 percent.

Early in 1995 Colgate made another major acquisition with the $1.04 billion purchase of Kolynos Oral Care from American Home Products, which gained it the Kolynos toothpaste brand, the top brand in Brazil and a leader in several other Latin American countries. This purchase pushed Colgate's share of the Latin American oral-care market from 54 percent to 79 percent.

In September 1995 Colgate announced another major restructuring of its operations to close or reconfigure 24 additional factories and cut 3,000 more employees (more than 8 percent of the workforce). Mark said the action was necessary to finance new growth initiatives; Colgate took a $369 million charge as a result. The 1995 figures were also affected by a deepening recession in Mexico, which had accounted for 11 percent of sales and 20 percent of profits in 1994.

Boosting Sales with the Introduction of Total

Beginning in the late 1980s, Colgate had begun development of a toothpaste that contained a gingivitis-fighting antimicrobial agent, triclosan. Researchers found a way to use polymers to bind triclosan to teeth for up to 14 hours, allowing users to fight bleeding gums and bad breath continuously with only two brushings a day. The company began marketing the product overseas in 1992 under the name Total, eventually distributing it to 100 countries. The toothpaste was a major success, and enabled Colgate to increase its worldwide share of that market segment.

In the United States, however, introduction of Total was held up by the Food and Drug Administration (FDA), which required extensive tests to prove the product's effectiveness before Colgate could make gingivitis-fighting claims on package labels. After some five years the agency granted final approval, and Total reached store shelves in December 1997. The company backed it with a $100 million marketing blitz, its largest product introduction to date.

The response was even stronger than anticipated, and cemented Colgate's place as leader of the U.S. toothpaste market, a position it had actually reached in the months prior to Total's introduction. This was the first time since 1962 that ACNielsen's rankings had shown Colgate on top. Following the successful launch, the company's profits and stock price climbed steadily. In December 1998 the FDA also approved a variant of Total, Total Fresh Stripe, which reached stores several months later. A year after Total's release it was the number one toothpaste brand in the United States. Competitors such as Procter & Gamble, which already marketed a triclosan-based toothpaste in Canada, were prevented from mounting a quick response by the lengthy FDA approval process. Powered by Total and the strong U.S. economy, Colgate continued to do well in 1999, with record earnings approaching the $1 billion mark.

New Challenges in the Early 2000s

Under Mark's continued leadership, Colgate-Palmolive maintained its momentum into the early 2000s. By keeping a tight rein on costs, the company boosted its gross profit margin to 54.6 percent by 2002, when net income reached $1.29 billion on sales of $9.29 billion. On the new product front, the Colgate Actibrush battery-powered toothbrush was brought to market in 2000, soon followed by products in the burgeoning at-home tooth-whitening sector, such as Simply White gel and Total Plus Whitening toothpaste. In pet food, the company in 2002 introduced Hill's Science Diet Nature's Best, a new line of premium dog and cat food made with natural ingredients.

Long unable to compete with Procter & Gamble in that firm's mainstay detergent lines, Colgate pulled back from that sector in certain markets. In 2001 it sold its detergent business in Mexico, headed by the Viva brand, to Henkel KGaA, and then two years later off-loaded its European detergent brands to Procter & Gamble. In 2004 Colgate sold its detergent business in Ecuador and Peru. In June of that year, the company completed its first major acquisition since the 1995 purchase of Kolynos. Colgate spent $866 million for GABA Holding AG, a privately held European oral care company based in Switzerland. GABA, operating in 15 countries, had annual sales of about $300 million. Its strength in the pharmacy channel complemented Colgate's leading presence in the European retail market. The addition of GABA boosted Colgate's share of the European toothpaste market to 33 percent.

Although revenues increased another 7 percent in 2004, topping the $10 billion mark for the first time, profits fell 7 percent, to $1.33 billion. Intense global competitionparticularly from a resurgent Procter & Gambleforced Colgate to allocate additional money for advertising, and the firm also had to contend with increased raw material and packaging costs and the growing power of discount retailers such as Wal-Mart Stores, Inc. who were forcing consumer product makers to hold the line on price increases. To free up funds for marketing initiatives and new product development efforts, Colgate launched a sweeping restructuring in December 2004, its first major overhaul since 1995. The latest reorganization, a four-year program, aimed to generate between $250 million and $300 million in after-tax cost savings by 2008 by closing 26 of the firm's 78 factories around the world and eliminating about 12 percent of the workforce, or more than 4,400 jobs. Cumulative after-tax restructuring charges of between $550 million and $650 million were anticipated. As part of the restructuring, further divestments of noncore lines were very possible. As Colgate continued to deemphasize its detergent business, it seemed likely to seek buyers for its Fab and Ajax brands. Just as the restructuring began, however, Colgate faced the prospect of an even more formidable chief foe. Procter & Gamble reached an agreement to acquire The Gillette Company in January 2005 for $57 billion, which would add Gillette's Oral-B toothbrushes and toothpastes to P&G's Crest line. This deal was likely to compound the competitive pressures that Colgate-Palmolive faced, making the successful implementation of the restructuring that much more important.

Principal Subsidiaries

Colgate Flavors and Fragrances, Inc.; Colgate (Guangzhou) Co. Ltd. (China); Colgate Oral Pharmaceuticals, Inc.; Colgate-Palmolive (America), Inc.; Colgate-Palmolive (Asia) Pte. Ltd. (Singapore); Colgate-Palmolive Argentina S.A.; Colgate-Palmolive A/S (Denmark); Colgate-Palmolive Belgium S.A./N.V.; Colgate-Palmolive Beteiligungsgesellschaft mbH (Germany); Colgate-Palmolive Canada, Inc.; Colgate-Palmolive (Central America), Inc.; Colgate-Palmolive (Centro America) S.A. (Guatemala); Colgate-Palmolive Chile S.A.; Colgate-Palmolive Cia.; Colgate-Palmolive (Hellas) S.A.I.C. (Greece); Colgate-Palmolive Compania Anonima (Venezuela); Colgate-Palmolive Company, Distr. (Puerto Rico); Colgate-Palmolive del Ecuador S.A.I.C.; Colgate-Palmolive de Puerto Rico, Inc.; Colgate-Palmolive Deutschland Holding GmbH (Germany); Colgate-Palmolive (Dominican Republic), Inc.; Colgate-Palmolive (Eastern) Pte. Ltd. (Singapore); Colgate-Palmolive España, S.A./N.V. (Spain); Colgate-Palmolive Europe S.A. (Belgium); Colgate-Palmolive Europe Sarl (Switzerland); Colgate-Palmolive G.m.b.H. (Germany); Colgate-Palmolive (Guangzhou) Co., Ltd. (China); Colgate-Palmolive (H.K.) Ltd. (Hong Kong); Colgate-Palmolive Holding Inc.; Colgate-Palmolive Holdings (UK) Limited; Colgate-Palmolive Holding S. Com. p.a. (Spain); Colgate-Palmolive Inc. S.A. (Uruguay); Colgate-Palmolive (India) Limited; Colgate-Palmolive Industria e Comercio Ltda. (Brazil); Colgate-Palmolive Industrial Unipessoal, Lda. (Portugal); Colgate-Palmolive International LLC; Colgate-Palmolive Investments, Inc.; Colgate-Palmolive Ltd. (New Zealand); Colgate-Palmolive (Malaysia) Sdn Bhd; Colgate-Palmolive (Marketing) Sdn Bhd (Malaysia); Colgate-Palmolive Nederland BV (Netherlands); Colgate-Palmolive Norge A/S (Norway); Colgate-Palmolive Philippines, Inc.; Colgate-Palmolive (Poland) Sp. z 0.0.; Colgate-Palmolive Pty Limited (Australia); Colgate-Palmolive (Pty) Limited (South Africa); Colgate-Palmolive Services, S.A. (France); Colgate-Palmolive, S.A. de C.V. (Mexico); Colgate-Palmolive S.p.A. (Italy); Colgate-Palmolive Temizlik Urunleri Sanayi ve Ticaret, A.S. (Turkey); Colgate-Palmolive (Thailand) Ltd.; Colgate Sanxiao Company Limited (China); Cotelle S.A. (France); CPIF Venture, Inc.; GABA Holdings Delaware, LLC; GABA Holding A.G. (Switzerland); Hawley & Hazel Chemical Company (HK) Limited (Hong Kong); Hawley & Hazel Chemical Company (Zhongshou) Limited (China); Hawley & Hazel Chemical (Taiwan) Corporation Ltd.; Hill's Pet Nutrition, Inc.; Hill's Pet Nutrition Indiana, Inc.; Hill's Pet Nutrition Limited (U.K.); Hill's Pet Nutrition Sales, Inc.; Hill's Pet Nutrition Manufacturing, B.V. (Netherlands); Hill's Pet Nutrition SNC (France); Hill's Pet Products, Inc.; Hill's-Colgate (Japan) Ltd.; Inmobiliara Hills, S.A. de C.V. (Mexico); Kolynos Corporation; Mission Hills, S.A. de C.V. (Mexico); Norwood International Incorporated; Softsoap Enterprises, Inc.

Principal Competitors

The Procter & Gamble Company; Unilever; The Clorox Company; S.C. Johnson & Son, Inc.; The Gillette Company; Johnson & Johnson; Alberto-Culver Company; Reckitt Benckiser plc; Sara Lee Corporation; Church & Dwight Co., Inc.; The Dial Corporation.

Further Reading

Abelson, Alan, "Colgate-Palmolive: Overseas Markets Have Put New Sparkle in a Century-Old Concern," Barron's, November 25, 1957, pp. 15+.

Behar, Richard, "Colgate's Challenge," Forbes, October 3, 1988, pp. 39+.

Byrne, John A., "Becalmed," Forbes, December 20, 1982, pp. 48+.

Campanella, Frank W., "Soap to Nuts: Colgate-Palmolive Is Steadily Broadening Its Product Mix," Barron's, February 23, 1976, pp. 9+.

"Colgate's Outlook Glows on Rapid Gains Overseas," Barron's, January 4, 1960, pp. 20+.

"Colgate: Time to Brush Up That Bottom Line," Business Week, November 11, 1985, pp. 134+.

Dash, Eric, "Colgate to Cut Jobs and Use Savings to Spur Sales," New York Times, December 8, 2004, p. C1.

Doherty, Jacqueline, "Colgate Squeezed: But Future Looks Brighter," Barron's, September 27, 2004, p. 14.

, "Colgate's Revenge: After Ceding Market Share to P&G, the Toothpaste Titan Is Brushing Up Its Defenses," Barron's, April 19, 2004, pp. 1920.

, "Fighting Profit Decay," Barron's, April 9, 2001, pp. 1718.

Ellison, Sarah, "Colgate's Fight for Market Share Will Likely Erode Profit," Wall Street Journal, December 13, 2004, p. C1.

, "Colgate to Cut 12% of Work Force and Close a Third of Its Factories," Wall Street Journal, December 8, 2004, p. A3.

, "New Task for Colgate CEO: Grooming His Replacement," Wall Street Journal, July 12, 2004, p. B1.

Foster, David R., The Story of Colgate-Palmolive: One Hundred and Sixty-Nine Years of Progress, New York: Newcomen Society in North America, 1975, 40 p.

Grant, Linda, "Outmarketing P&G," Fortune, January 12, 1998, p. 150.

Hager, Bruce, "Can Colgate Import Its Success from Overseas?," Business Week, May 7, 1990, pp. 114, 116.

, "Colgate: Oh What a Difference a Year Can Make," Business Week, March 23, 1992, pp. 9091.

Kindel, Stephen, "The Bundle Book: At Reuben Mark's Colgate, Attention to Small Details Creates Large Profits," Financial World, January 5, 1993, pp. 3435.

Menzies, Hugh D., "The Changing of the Guard at Colgate," Fortune, September 24, 1979, p. 92.

Morgenson, Gretchen, "Is Efficiency Enough?," Forbes, March 18, 1991, pp. 10809.

Nayyar, Seema, "Colgate Buys Its Way Back into the Game," Adweek, February 17, 1992.

O'Connell, Vanessa, and Bill Platt, "Colgate to Acquire GABA in Europe," Wall Street Journal, December 19, 2003, p. B4.

Ono, Yumiko, "Colgate Slates Cuts in Jobs and a Charge," Wall Street Journal, September 21, 1995, p. A3.

Parker-Pope, Tara, "Colgate Places a Huge Bet on a Germ-Fighter," Wall Street Journal, December 29, 1997, p. B1.

, "Colgate Puts Lois Juliber in Line for Top," Wall Street Journal, January 20, 1997, p. B1.

Rudnitsky, Howard, "Making His Mark," Forbes, September 26, 1994, pp. 4748.

Sasseen, Jane A., and Zachary Schiller, "For Colgate-Palmolive, It's Time for Trench Warfare," Business Week, September 19, 1994, pp. 5657.

Schwartz, Nelson D., "Colgate Cleans Up," Fortune, April 16, 2001, p. 179.

, "Colgate's Reuben Misses the Mark," Fortune, October 18, 2004, p. 46.

Steinbreder, H. John, "The Man Brushing Up Colgate's Image," Fortune, May 11, 1987, pp. 106+.

Sandy Schusteff

updates: Frank Uhle;

David E. Salamie

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Schusteff, Sandy; Uhle, Frank; Salamie, David. "Colgate-Palmolive Company." International Directory of Company Histories. 2005. Encyclopedia.com. 24 Aug. 2016 <http://www.encyclopedia.com>.

Schusteff, Sandy; Uhle, Frank; Salamie, David. "Colgate-Palmolive Company." International Directory of Company Histories. 2005. Encyclopedia.com. (August 24, 2016). http://www.encyclopedia.com/doc/1G2-3444800035.html

Schusteff, Sandy; Uhle, Frank; Salamie, David. "Colgate-Palmolive Company." International Directory of Company Histories. 2005. Retrieved August 24, 2016 from Encyclopedia.com: http://www.encyclopedia.com/doc/1G2-3444800035.html

Colgate-Palmolive Company

Colgate-Palmolive Company

300 Park Avenue
New York, New York 10022-7499
U.S.A.
Telephone: (212) 310-2000
Toll Free: (800) 850-2654
Fax: (212) 310-3405
Web site: http://www.colgate.com

Public Company
Incorporated:
1923 as the Eastern Operating Company
Employees: 37,200
Sales: $9.12 billion (1999)
Stock Exchanges: New York Amsterdam Frankfurt London Paris Zurich
Ticker Symbol: CL
NAIC: 325611 Soap and Other Detergent Manufacturing; 311111 Dog and Cat Food Manufacturing; 32562 Toilet Preparation Manufacturing; 325998 All Other Miscellaneous Chemical Product and Preparation Manufacturing; 325612 Polish and Other Sanitation Good Manufacturing; 339994 Broom, Brush, and Mop Manufacturing; 327212 Other Pressed and Blown Glass and Glassware Manufacturing

Colgate-Palmolive Companys growth from a small candle and soap manufacturer to one of the most powerful consumer products giants in the world is the result of aggressive acquisition of other companies, persistent attempts to overtake its major U.S. competition, and an early emphasis on building a global presence overseas where little competition existed. Today the company is organized around five core segmentsoral care, personal care, household surface care, fabric care, and pet nutritionthat market such well-known brands as Colgate toothpaste, Irish Spring soap, Softsoap liquid soap, Mennen deodorant, Palmolive dishwashing liquid, Fab laundry deter-gent, Soupline/Suavitel fabric softeners, and Hills Science Diet dog food.

Beginnings

In 1806, when the company was founded by 23-year-old William Colgate, it concentrated exclusively on selling starch, soap, and candles from its New York City-based factory and shop. Upon entering his second year of business, Colgate became partners with Francis Smith, and the company became Smith and Colgate, a name it kept until 1812 when Colgate purchased Smiths share of the company and offered a partnership to his brother, Bowles Colgate. Now called William Colgate and Company, the firm expanded its manufacturing operations to a Jersey City, New Jersey, factory in 1820; this factory produced Colgates two major products, Windsor toilet soaps and Pearl starch.

Upon its founders death in 1857, the firm changed its name to Colgate & Company and was run by President Samuel Colgate until his death 40 years later. During his tenure several new products were developed, including perfumes, essences and perfumed soap. The manufacture of starch was discontinued in 1866 after a fire destroyed the factory.

In 1873 Colgate began selling toothpaste in ajar, followed 23 years later by the introduction of Colgate Ribbon Dental Cream, in the now familiar collapsible tube. By 1906 the company was also producing several varieties of laundry soap, toilet paper, and perfumes.

While the Colgate family managed its manufacturing operations in New York, soap factories were also opened in 1864 by BJ. Johnson in Milwaukee, Wisconsin, and in 1872 by the three Peet brothers in Kansas City, Kansas. In 1898 Johnsons company introduced Palmolive soap, which soon became the best-selling soap in the world and led the firm to change its name to the Palmolive Company in 1916. The Peets, who sold laundry soap mainly in the Midwest and western states, merged their company with Palmolive in 1926. Two years later the company that resulted from that merger joined with Colgate & Company to form Colgate-Palmolive-Peet, with headquarters in Jersey City.

Although Palmolives management initially assumed control of the combined organization, the Colgate family regained control of the company after the 1929 stock market crash and installed Bayard Colgate as president in 1933. The firm adopted its present name in 1953 and moved its offices for domestic and international operations to New York City in 1956.

International Expansion

Between 1914 and 1933 the company began establishing international operations, with subsidiaries in Canada, Australia, Europe, and Latin America. It also built upon its strategy of growth by acquisition, buying up a number of smaller consumer product companies over the next two decades. These acquisitions did little to close the gap between Colgate and its arch-rival, Procter & Gamble, a company that had been formed in the 1830s and had by now assumed a commanding lead over Col-gate in selling detergent products in the United States.

In 1960 George H. Lesch was appointed Colgates president in the hopes that his international experience would produce similar success in the domestic market. Under his leadership, the company embarked upon an extensive new product development program that created such brands as Cold Power laundry detergent, Palmolive dishwashing liquid, and Ultra Brite toothpaste. In an attempt to expand beyond these traditional, highly competitive businesses into new growth areas, Colgate also successfully introduced a new food wrap called Baggies in 1963. As a result of these product launches, the companys sales grew between eight and nine percent every year throughout the 1960s.

Lesch assumed the chairmanship of Colgate, and David Foster became president in 1970 and CEO in 1971. Foster was the son of the founder of Colgate-Palmolives U.K. operations. He joined the company in 1946 as a management trainee and rose through the sales and marketing ranks both in the United States and overseas.

New Strategies for the 1970s

During the 1970s, as environmental concerns about phosphate and enzyme detergent products grew, the company faced additional pressure to diversify beyond the detergent business. In response to this pressure, Foster instituted a strategy that emphasized internal development via a specialized new venture group; joint ventures for marketing other companies products; and outright acquisitions of businesses in which Colgate could gain a marketing advantage over Procter & Gamble. In 1971, for example, the company began selling British Wilkinson Sword Company razors and blades in the United States and other countries. In 1972 Colgate-Palmolive acquired Kendall & Company, a manufacturer of hospital and industrial supplies. It was originally hoped that the Kendall acquisition would bolster the pharmaceutical sales of Colgates Lakeside Laboratories subsidiary, which had been acquired in 1960. The partnership never materialized, however, and Lakeside was sold in 1974. The Kendall business proved to be one of Fosters most successful acquisitions. Within two years, the subsidiary was producing sales and earnings results well above the companys targeted goals.

In 1971 the U.S. Federal Trade Commission enacted restrictions on in-store product promotions, such as couponing. In response to these restrictions, Foster began to employ other tactics designed to enhance Colgates visibility in the marketplace. Two such programs awarded money to schools and local civic groups whose young people collected the most labels and boxtops from selected Colgate products. Under Foster, Colgate-Palmolive also began to sponsor a number of womens sporting events, including the Colgate-Dinah Shore Winners Circle, a womens professional golf tournament. Foster chose womens sports in an effort to appeal to Colgate-Palmolives primarily female customer base. He even went so far as to have Colgate buy the tournaments home course, the Mission Hills Country Club in Palm Springs, California, so that he could supervise the maintenance of the greens.

In 1973 Colgate acquired Helena Rubinstein, a major cosmetics manufacturer with strong foreign sales but a weak U.S. presence. Believing that its marketing expertise could solve Rubinsteins problems, Colgate reduced both the number of products in the companys line and the number of employees in its workforce, increased advertising expenditures, and moved the products out of drugstores and into department stores. The following year the company acquired Ram Golf Corporation and Bancroft Racket Company, and in 1976 it bought Charles A. Eaton Company, a golf and tennis shoe manufacturer.

Although total U.S. sales of consumer products appeared to be slowing by the end of 1974, particularly in soaps and detergents, Colgates international sales continued to carry the company forward. It maintained its leadership position abroad through new product development geared specifically to local tastes throughout Europe as well as through its involvement in the growing markets of less-developed countries in Latin America, Africa, and Asia.

Company Perspectives:

To meet the needs of this vast world, Colgate sets and attains the highest standards for our products and our company. Quality is the hallmark of everything we do. So, too, is consumer value. We continually work to understand consumers changing needs, and then meet those needs with innovative products that are affordable to the greatest number of people.

We are also sensitive to our environment, and work to fulfill our business mission in ways that will not be harmful to the delicate world in which we live.

By balancing all these elements, we try to live up to our vision of becoming the best truly global consumer products company and a responsible and contributing member of the global community.

Setbacks Beginning in the Late 1970s

Fosters diversification strategy initially improved earnings, but Colgates domestic sales, market share, and profit margins were beginning to soften. This was due, in large part, to an economic recession and an advertising cutback the company had made in an attempt to boost earnings. Colgate was consistently losing the marketing battle in personal care products to Procter & Gamble. It had no leading brands and few successful new product introductions because of reduced spending for research and development. In an effort to remedy this problem and broaden its product mix, Colgate moved into food marketing in 1976 with the acquisition of Riviana Foods, a major producer of Texas long-grain rice with its own subsidiaries in the pet food, kosher hot dog, and candies businesses. The Riviana acquisition, however, did not live up to the companys expectations. Along with purchasing a successful rice-milling business, Colgate found that it had also saddled itself with two unprofitable restaurant chains and a low-quality candy company. In 1977 declines in the price of rice seriously eroded Rivianas cash flow.

Helena Rubinstein created additional headaches. Whereas other cosmetic manufacturers had moved their products from department store distribution to higher-volume drugstores, Colgates management elected to keep Rubinstein products in department stores even though stores demands for marketing support eroded the companys margins so severely that it lost money on every cosmetic item sold. Colgate finally sold the business in 1980 to Albi Enterprises.

David Foster had become chairman in 1975. In 1979, embattled by a series of marketing failures and the pressures of an acquisition strategy that yielded more losers than winners, Foster suddenly resigned, citing ill health. Colgate President and Chief Operating Officer Keith Crane was appointed as Fosters successor. A 42-year Colgate employee, Crane quickly instituted a new management structure consisting of several group vice-presidents, reunited all domestic operations under one group, and realigned division managers in an attempt to promote a more cohesive organization. Consumer advertising and product research were given renewed emphasis to support the companys basic detergent and toothpaste lines.

Over the next two years, Crane sold a number of Fosters acquisitions that no longer fit with the companys long-term strategic plan, including Hebrew National Kosher Foods, which had been part of the Riviana purchase; Ram Golf; and the Bancroft Racket Company. Crane also put the Mission Hills Country Club up for sale and withdrew Colgates sponsorship of the sporting events his predecessor had nurtured.

Also during the late 1970s and the 1980s, Colgate found itself named as a defendant in two lawsuits. In 1981 the company lost a suit brought by United Roasters, who successfully argued that Colgate had violated the terms of a contract between the two firms for Colgate to market Bambeanos, a soybean snack produced by United Roasters, and was awarded $950,000. The following year the company was sued by the federal government for alleged job discrimination. According to a complaint filed with the U.S. Equal Employment Opportunity Commission, Colgate had failed or refused to hire people between the ages of 40 and 70 since 1978 and had also deprived employees in that age group of opportunities for promotion.

By the end of 1982 Crane also experienced problems at Colgate. Several attempts at new product development never made it out of the test-market stage. Increased advertising expenditures for a limited number of major brands produced only temporary gains in market share while slowly killing off other products receiving little or no media support. Even Fresh Start detergent, one of the most successful new products to come out of the Foster era, was having problems retaining market share. Thus while Procter & Gambles sales and margins were increasing, Colgates were on the decline. To make matters worse, the strong dollar overseas hurt Colgates international sales, and changes in Medicare policy weakened Kendalls business.

Turnaround Under Reuben Mark

In 1983 Crane relinquished the title of president to Reuben Mark, one of the companys three executive vice-presidents and a member of Cranes management advisory team. Mark also assumed the position of chief operating officer at that time; one year later he succeeded Crane as CEO. Mark built upon his predecessors restructuring efforts in an attempt to increase profits and shareholder value. Between 1984 and 1986 several inefficient plants were closed, hundreds of employees laid off, and noncore businesses sold, including the remnants of the Riviana Foods acquisition, except for the Hills Pet Products subsidiary.

Key Dates:

1806:
Company is founded by William Colgate in New York to make starch, soap, and candles.
1873:
Toothpaste is first marketed.
1896:
Collapsible tubes for toothpaste are introduced.
1898:
B.J. Johnson Company (later renamed Palmolive Co.) introduces Palmolive soap.
1910:
Colgate moves from original location to Jersey City, New Jersey.
1928:
Colgate and Palmolive companies merge.
1947:
Fab and Ajax cleansers are introduced.
1956:
Corporate headquarters shifts back to New York.
1963:
Baggies food storage bags are launched.
1966:
Palmolive dishwashing liquid is introduced.
1967:
Sales top $1 billion.
1968:
Colgate toothpaste is reformulated with fluoride; Ultra Brite is introduced.
1973:
Cosmetics maker Helena Rubinstein is acquired.
1976:
Hills Pet Products is purchased.
1992:
Mennen Co. is acquired; Total toothpaste is introduced overseas.
1993:
Liquid soap brands of Johnsons Wax are purchased.
1995:
Company undergoes major restructuring.
1997:
Total toothpaste is launched in the United States; Colgate takes lead in domestic toothpaste market.

In an attempt to refocus the companys marketing and profitability, Mark developed a set of corporate initiatives intended to address business areas ranging from production-cost reduction to new product development, with a heavy emphasis on motivating employees and involving them in company decision making. In response to the implementation of these ideas, the companys U.S. toothpaste business enjoyed a boost with first-to-the-market introductions of a gel toothpaste and a pump type dispenser bearing the Colgate brand name. Similar U.S. market share gains were earned by new and improved versions of its Palmolive and Dynamo detergents and Ajax cleaner.

With the companys turnaround firmly underway, business units managed by key executives were formed to develop plans for the companys major product categories. The purpose of each plan was to identify how products under development could be best introduced in domestic and international markets. Two years into this strategic reorganization, coinciding with Marks appointment as chairman in 1986, Colgate confronted an embarrassing controversy.

Since the early 1920s Hawley & Hazel Chemical Company had marketed a product called Darkie Black and White Tooth-paste in the Far East. Colgate had acquired a 50 percent interest in this company in 1985. The following year, the Interfaith Center on Corporate Responsibility, a coalition of Protestant and Roman Catholic groups, demanded that Colgate change what it deemed to be the products racially offensive name and packaging, which depicted a likeness of Al Jolson in blackface. The company acknowledged the criticism and agreed to make the necessary changes.

Colgate also continued to seek out growth areas in its personal care product and detergent businesses. In 1987 it acquired a line of liquid soap products from Minnetonka Corporation, the first transaction the company had made in the personal care area in several years. Building upon its success in launching an automatic dishwashing detergent in liquid form ahead of its competitors, the company also beat Procter & Gamble to the market with a laundry detergent packaged in a throw-in pouch called Fab 1 Shot, although this product failed to sustain consumer interest or reach sales expectations over the long term.

Buoyed by product development breakthroughs and a renewed commitment to consumer products marketing, Colgate sold its Kendall subsidiary and related healthcare businesses in 1988 to Clayton & Dubilier. The sale enabled Colgate to retire some debt, sharpen its focus on its global consumer products businesses, and invest in new product categories. Moreover, Marks global approach enabled the company to maintain its overall profitability despite not having a leadership position in the United States. Although Colgate lagged behind Procter & Gamble in the toothpaste category, for example, it held a commanding 40 percent share of the toothpaste market worldwide.

Marks strategy appeared to pay off handsomely. By the end of the third quarter of 1989 Colgates international operations performed strongly while the profitability of its U.S. operations rose, due mostly to manufacturing-cost economies and greater control over promotional and sales expenses. Not yet ready to concede the U.S. market for personal care products to Procter & Gamble, though, Colgate acquired Vipont Pharmaceutical, a manufacturer of oral-hygiene products, toward the end of that year. Viponts products, several of which Colgate had already been marketing overseas, enabled Colgate to strengthen the market position it had recently established with the introduction of a new tartar-control formula toothpaste.

Major Acquisitions in the 1990s

Colgate continued to make significant acquisitions in the early and mid-1990s while it attempted to gear up its product development program, which had been unable to introduce more than a few new products each year. In 1991 Colgate acquired the Murphy-Phoenix Company (whose top brand was Murphys Oil Soap) to bolster its household care segment. That same year, Mark initiated a restructuring aimed at improving the firms profitability and gross margins, which lagged behind the industry leaders. A major part of the effort was the elimination or reconfiguration of 25 factories throughout the world and an eight percent reduction in the workforce. Consequently, Colgate took a $243 million charge in September 1991, which reduced significantly the firms net income for the full year.

Colgates most dramatic acquisition to date came in 1992 with the $670 million purchase of Mennen Co., which added to its personal care line the top U.S. deodorant brand, Mennen Speed Stick, and the number two baby-care brand, Baby Magic. In addition, Colgate gained footholds in skin-care and hair products, and the Mennen brands gained the power of Colgates worldwide distribution and marketing reach. This major acquisition was followed in 1993 by the purchase of S.C. Johnson Waxs liquid hand and body soap brands, which enabled Colgate to become the worldwide leader in liquid soap.

Gross margins steadily improved in the early 1990s, reaching 48.4 percent by 1994 (up from 39.2 percent in 1984). This provided Colgate with additional funds for research and development and advertising. The North American sector also experienced gains in gross margins, which resulted in part from pricing increases on Colgate detergents. In turn, this cut into overall North American sales, which declined eight percent from 1993 to 1994. Marks strategy was to turn North American sales around through new product introductions such as a variant of Irish Spring soap and an extension of the Murphys Oil Soap brand into a Murphys Kitchen Care line of all-purpose cleaners. Under the leadership of Lois D. Juliber, who formerly headed up new product development, the North American sector was able to introduce several products within a short span for the first time.

A hidden jewel within the Colgate empire in the 1990s has been its pet foods sector, Hills Pet Nutrition. The worldwide leader in therapeutic and specialty wellness pet food, Hills enjoyed a compound annual growth rate of 14.6 percent from 1989 to 1994. During this period the market for premium pet food increased dramatically in Europe and Japan, with Hills snatching a substantial portion of this growth. Overall, pet foods were one of Colgates leading profit generators, boasting gross margins of 55 to 60 percent.

Early in 1995 Colgate made another major acquisition with the $ 1.04 billion purchase of Kolynos Oral Care from American Home Products, which gained it the Kolynos toothpaste brand, the top brand in Brazil and a leader in several other Latin American countries. This purchase pushed Colgates share of the Latin American oral-care market from 54 percent to 79 percent.

In September 1995 Colgate announced another major restructuring of its operations to close or reconfigure 24 additional factories and cut 3,000 more employees (more than eight percent of the workforce). Mark said the action was necessary to finance new growth initiatives; Colgate took a $369 million charge as a result. The results in 1995 were also affected by a deepening recession in Mexico, which had accounted for 11 percent of sales and 20 percent of profits in 1994.

Boosting Sales with the Introduction of Total

Beginning in the late 1980s, Colgate had begun development of a toothpaste that contained a gingivitis-fighting antimicrobial agent, triclosan. Researchers found a way to use polymers to bind triclosan to teeth for up to 14 hours, allowing users to fight bleeding gums and bad breath continuously with only two brushings a day. The company began marketing the product overseas in 1992 under the name Total, eventually distributing it to 100 countries. The toothpaste was a major success, and enabled Colgate to increase its worldwide share of that market segment.

In the United States, however, introduction of Total was held up by the Food and Drug Administration (FDA), which required extensive tests to prove the products effectiveness before Colgate could make gingivitis-fighting claims on package labels. After some five years the agency granted final approval, and Total reached store shelves in December 1997. The company backed it with a $100 million marketing blitz, its largest product introduction to date.

The response was even stronger than anticipated, and cemented Colgates place as leader of the U.S. toothpaste market, a position it had actually reached in the months prior to Totals introduction. This was the first time since 1962 that ACNielsens rankings had shown Colgate on top. Following the successful launch, the companys profits and stock price climbed steadily. In December 1998 the FDA also approved a variant of Total, Total Fresh Stripe, which reached stores several months later. A year after Totals release it was the number one toothpaste brand in the United States. Competitors such as Procter and Gamble, which already marketed a triclosan-based toothpaste in Canada, were prevented from mounting a quick response by the lengthy FDA approval process. Powered by Total and the strong U.S. economy, Colgate continued to do well in 1999 and into 2000, with record earnings approaching the $1 billion mark.

As the 21st century dawned, Colgates global presence as a consumer products company extended to over 200 countries, with leading positions for several of its key brands. Colgate will likely continue to aggressively defend these positions, increase market share of its trailing brands whenever possible, and seek additional brands and product types within its primary product sectors through acquisitions and a revitalized product development program.

Principal Subsidiaries

Alexandril S.A (Uruguay); Arkay Pty Limited (Australia); Asia Pioneer Co., Ltd. (Hong Kong); Barbados Cosmetics Products Limited (Barbados); Baser Kimya Sanayii Ve Ticaret Anonim Sirketi (Turkey); Baser Turketim Pazarlama Ve Ticaret Anonim Sirketi (Turkey); Bella, S.A. (France); Cachet Investments Limited (U.K.); Chemtech (BVI) Co. Ltd. (British Virgin Islands); Chet (Chemicals) (Proprietary) Limited (South Africa); CKS, Inc.; Cleaning Dimensions, Inc.; Colgate Flavors and Fragrances, Inc.; Colgate Music Direct; Colgate Oral Pharmaceuticals, Inc.; Colgate Sports Foundation, Inc. (The Philippines); Colgate Venture Company, Inc.; Colgate-Palmolive (America), Inc.; Colgate-Palmolive Canada, Inc. (Canada); Colgate-Palmolive Charitable Foundation; Colgate-Palmolive Development Corp.; Colgate-Palmolive Enterprises, Inc.; Colgate-Palmolive Global Trading Company; Colgate-Palmolive Holding Inc.; Colgate-Palmolive International Incorporated; Colgate-Palmolive Investment Co., Inc.; Colgate-Palmolive Investments, Inc.; Col-gate-Palmolive (Research & Development), Inc.; Colgate-Palmolive Transnational Inc.; Consumer Viewpoint Center, Inc.; CPC Funding Company; CPIF, Inc.; Delpha, S.A. (France); DF Soap Co.; Dimac Development Corp.; Direct Development, Inc.; EKIB, Inc.; Empresa de Maquilas, S.A. de C.V (Mexico); Global Trading and Supply Company; Hamol, Ltd.; Hawley & Hazel Chemical Co. (H.K.) Ltd. (Hong Kong); Herrick International Limited (British Virgin Islands); Hills Funding Company; Hills Pet Nutrition, Inc.; Hills Pet Nutrition Sales, Inc.; Hills-Colgate (Japan) Ltd. (Japan); HL Soap Co.; Hopro Liquidating Corp.; Inmobiliara Hills, S.A. de C.V (Mexico); Innovacion Creativa, S.A. de C.V (Mexico); InterHamol, S.A. (Luxembourg); JG Soap Co.; JP Soap Co.; K.G. Caviar Im-Und Export, GmbH & Co. (Germany); Kolynos Corporation; Lournay Sales, Inc.; Mennen Interamerica Limited; Mennen Investments Inc.; Mennen Limited; Mission Hills Property Corporation; New Science, Inc.; Norwood International Incorporated; ODOL Sociedad Anonima Industrial y Commercial (Argentina); Olive Music Publishing Corporation; Paramount Research, Inc.; Pet Chemicals Inc.; Princess House de Mexico, S.A. de C.V. (Mexico); Productors Halogenados Copalven, C.A. (Venezuela); Purity Holding Company; Purity Music Publishing Corporation; Refresh Company Limited (Dominican Republic); Samuel Taylor Holdings B.V. (Netherlands); Softsoap Enterprises, Inc.; Somerset Collections Inc.; Southhampton-Hamilton Company; The Lournay Company, Inc.; The Murphy-Phoenix Company; VCA, Inc.; Veterinary Companies of America, Inc.; Village Bath Products, Inc.; Vipont Pharmaceutical, Inc.; XEB, Inc.

Principal Competitors

Alberto-Culver Company; Amway Corp.; Avon Products, Inc.; Block Drug Company, Inc.; Carter-Wallace, Inc.; Chattem, Inc.; Church & Dwight Co., Inc.; The Clorox Company; Cosmair, Inc.; The Dial Corp.; The Gillette Company; H.J. Heinz Company; Henkel KGaA; Herbalife International, Inc.; The lams Company; Johnson & Johnson; Mars, Inc.; Nestle S.A.; Nu Skin Enterprises, Inc.; The Procter & Gamble Company; Ralston Purina Company; Reckitt Benckiser plc; S.C. Johnson & Son, Inc.; SmithKline Beecham plc; Unilever pic/ Univlever N.V.; USA Detergents, Inc.; Warner-Lambert Company.

Further Reading

Foster, David R., The Story of Colgate-Palmolive: One Hundred and Sixty-Nine Years of Progress, New York: Newcomen Society in North America, 1975.

Grant, Linda, Outmarketing P&G, Fortune, January 12, 1998, p. 150.

Hager, Bruce, Can Colgate Import Its Success from Overseas?, Business Week, May 7, 1990, pp. 114, 116.

, Colgate: Oh What a Difference a Year Can Make, Business Week, March 23, 1992, pp. 9091.

Kindel, Stephen, The Bundle Book: At Reuben Marks Colgate, Attention to Small Details Creates Large Profits, Financial World, January 5, 1993, pp. 3435.

Morgenson, Gretchen, Is Efficiency Enough?, Forbes, March 18, 1991, pp. 10809.

Nayyar, Seema, Colgate Buys Its Way Back into the Game, Adweek, February 17, 1992.

Ono, Yumiko, Colgate Slates Cuts in Jobs and a Charge, Wall Street Journal, September 21, 1995, p. A3.

Parker-Pope, Tara, Colgate Places a Huge Bet on a Germ-Fighter, Wall Street Journal, December 29, 1997, p. B1.

, Colgate Puts Lois Juliber in Line for Top, Wall Street Journal, January 20, 1997, p. B1.

Rudnitsky, Howard, Making His Mark, Forbes, September 26, 1994, pp. 4748.

Sasseen, Jane A., and Zachary Schiller, For Colgate-Palmolive, Its Time for Trench Warfare, Business Week, September 19, 1994, pp. 5657.

updated by David E. Salamie and Frank Uhle

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"Colgate-Palmolive Company." International Directory of Company Histories. 2001. Encyclopedia.com. 24 Aug. 2016 <http://www.encyclopedia.com>.

"Colgate-Palmolive Company." International Directory of Company Histories. 2001. Encyclopedia.com. (August 24, 2016). http://www.encyclopedia.com/doc/1G2-2843900036.html

"Colgate-Palmolive Company." International Directory of Company Histories. 2001. Retrieved August 24, 2016 from Encyclopedia.com: http://www.encyclopedia.com/doc/1G2-2843900036.html

Colgate-Palmolive Company

Colgate-Palmolive Company

300 Park Avenue
New York, New York 10022-7499
U.S.A.
(212) 310-2000
Fax: (212) 310-3284

Public Company
Incorporated:
1923 as the Eastern Operating Company
Employees: 32,800
Sales: $7.59 billion
Stock Exchanges: New York Amsterdam Frankfurt London
Paris Zürich
SICs: 2844 Toilet Preparations; 2841 Soap & Other
Detergents; 2048 Prepared Foods, Not Elsewhere
Classified

Colgate-Palmolive Companys growth from a small candle and soap manufacturer to one of the most powerful consumer products giants in the world is the result of aggressive acquisition of other companies, persistent attempts to overtake its major U.S. competition, and an early emphasis on building a global presence overseas where little competition existed. Today the company is organized around five core segmentsoral care, personal care, household surface care, fabric care, and pet nutritionthat market such well-known brands as Colgate toothpaste, Irish Spring soap, Softsoap liquid soap, Mennen deodorant, Palmolive dishwashing liquid, Fab laundry detergent, Soupline/Suavitel fabric softeners, and Hills pet food.

In 1806, when the company was founded by 23-year-old William Colgate, it concentrated exclusively on selling starch, soap, and candles from its New York City-based factory and shop. Upon entering his second year of business, Colgate became partners with Francis Smith, and the company became Smith and Colgate, a name it kept until 1812 when Colgate purchased Smiths share of the company and offered a partnership to his brother, Bowles Colgate. Now called William Colgate and Company, the firm expanded its manufacturing operations to a Jersey City, New Jersey, factory in 1820; this factory produced Colgates two major products, Windsor toilet soaps and Pearl starch.

Upon its founders death in 1857, the firm changed its name to Colgate & Company and was run by President Samuel Colgate until his death 40 years later. During his tenure several new products were developed, including perfumes, essences and perfumed soap. The manufacture of starch was discontinued in 1866 after a fire destroyed the factory.

In 1873 Colgate began selling toothpaste in ajar, followed 23 years later by the introduction of Colgate Ribbon Dental Cream, in the now-familiar collapsible tube. By 1906 the company was also producing several varieties of laundry soap, toilet paper, and perfumes.

While the Colgate family managed its manufacturing operations in New York, soap factories were also opened in 1864 by B. J. Johnson in Milwaukee, Wisconsin, and in 1872 by the three Peet brothers in Kansas City, Kansas. In 1898 Johnsons company introduced Palmolive soap, which soon became the best-selling soap in the world and led the firm to change its name to the Palmolive Company in 1916. The Peets, who sold laundry soap mainly in the Midwest and western states, merged their company with Palmolive in 1926. Two years later the company that resulted from that merger joined with Colgate & Company to form Colgate-Palmolive-Peet, with headquarters in Jersey City.

Although Palmolives management initially assumed control of the combined organization, the Colgate family regained control of the company after the 1929 stock market crash and installed Bayard Colgate as president in 1933. The firm adopted its present name in 1953 and moved its offices for domestic and international operations to New York City in 1956.

Between 1914 and 1933 the company began establishing international operations, with subsidiaries in Canada, Australia, Europe, and Latin America. It also built upon its strategy of growth by acquisition, buying up a number of smaller consumer product companies over the next two decades. These acquisitions did little to close the gap between Colgate and its archrival, Procter & Gamble, a company that had been formed in the 1830s and had by now assumed a commanding lead over Colgate in selling detergent products in the United States.

In 1960 George H. Lesch was appointed Colgates president in the hopes that his international experience would produce similar success in the domestic market. Under his leadership, the company embarked upon an extensive new product development program that created such brands as Cold Power laundry detergent, Palmolive dishwashing liquid, and Ultra Brite toothpaste. In an attempt to expand beyond these traditional, highly competitive businesses into new growth areas, Colgate also successfully introduced a new food wrap called Baggies in 1963. As a result of these product launches, the companys sales grew between eight and nine percent every year throughout the 1960s.

Lesch assumed the chairmanship of Colgate, and David Foster became president in 1970 and CEO in 1971. Foster was the son of the founder of Colgate-Palmolives U.K. operations. He joined the company in 1946 as a management trainee and rose through the sales and marketing ranks both in the United States and overseas.

During the 1970s, as environmental concerns about phosphate and enzyme detergent products grew, the company faced additional pressure to diversify beyond the detergent business. In response to this pressure, Foster instituted a strategy that emphasized internal development via a specialized new venture group; joint ventures for marketing other companies products; and outright acquisitions of businesses in which Colgate could gain a marketing advantage over Procter & Gamble. In 1971, for example, the company began selling British Wilkinson Sword Company razors and blades in the United States and other countries. In 1972 Colgate-Palmolive acquired Kendall & Company, a manufacturer of hospital and industrial supplies. It was originally hoped that the Kendall acquisition would bolster the pharmaceutical sales of Colgates Lakeside Laboratories subsidiary, which had been acquired in 1960. The partnership never materialized, however, and Lakeside was sold in 1974. The Kendall business proved to be one of Fosters most successful acquisitions. Within two years, the subsidiary was producing sales and earnings results well above the companys targeted goals.

In 1971 the U.S. Federal Trade Commission enacted restrictions on in-store product promotions, such as couponing. In response to these restrictions, Foster began to employ other tactics designed to enhance Colgates visibility in the marketplace. Two such programs awarded money to schools and local civic groups whose young people collected the most labels and box-tops from selected Colgate products. Under Foster, Colgate-Palmolive also began to sponsor a number of womens sporting events, including the Colgate-Dinah Shore Winners Circle, a womens professional golf tournament. Foster chose womens sports in an effort to appeal to Colgate-Palmolives primarily female customer base. He even went so far as to have Colgate buy the tournaments home course, the Mission Hills Country Club in Palm Springs, California, so that he could supervise the maintenance of the greens.

In 1973 Colgate acquired Helena Rubinstein, a major cosmetics manufacturer with strong foreign sales but a weak U.S. presence. Believing that its marketing expertise could solve Rubinsteins problems, Colgate reduced both the number of products in the companys line and the number of employees in its workforce, increased advertising expenditures, and moved the products out of drugstores and into department stores. The following year the company acquired Ram Golf Corporation and Bancroft Racket Company, and in 1976 it bought Charles A. Eaton Company, a golf and tennis shoe manufacturer.

Although total U.S. sales of consumer products appeared to be slowing by the end of 1974, particularly in soaps and detergents, Colgates international sales continued to carry the company forward. It maintained its leadership position abroad through new product development geared specifically to local tastes throughout Europe as well as through its involvement in the growing markets of less-developed countries in Latin America, Africa, and Asia.

Fosters diversification strategy initially improved earnings, but Colgates domestic sales, market share, and profit margins were beginning to soften. This was due, in large part, to an economic recession and an advertising cutback the company had made in an attempt to boost earnings. Colgate was consistently losing the marketing battle in personal-care products to Procter & Gamble. It had no leading brands and few successful new product introductions because of reduced spending for research and development. In an effort to remedy this problem and broaden its product mix, Colgate moved into food marketing in 1976 with the acquisition of Riviana Foods, a major producer of Texas long-grain rice with its own subsidiaries in the pet food, kosher hot dog, and candies businesses. The Riviana acquisition, however, did not live up to the companys expectations. Along with purchasing a successful rice-milling business, Colgate found that it had also saddled itself with two unprofitable restaurant chains and a low-quality candy company. In 1977 declines in the price of rice seriously eroded Rivianas cash flow.

Helena Rubinstein created additional headaches. Whereas other cosmetic manufacturers had moved their products from department store distribution to higher-volume drugstores, Colgates management elected to keep Rubinstein products in department stores even though stores demands for marketing support eroded the companys margins so severely that it lost money on every cosmetic item sold. Colgate finally sold the business in 1980 to Albi Enterprises.

David Foster had become chairman in 1975. In 1979, embattled by a series of marketing failures and the pressures of an acquisition strategy that yielded more losers than winners, Foster suddenly resigned, citing ill health. Colgate president and chief operating officer Keith Crane was appointed as Fosters successor. A 42-year Colgate employee, Crane quickly instituted a new management structure consisting of several group vice-presidents, reunited all domestic operations under one group, and realigned division managers in an attempt to promote a more cohesive organization. Consumer advertising and product research were given renewed emphasis to support the companys basic detergent and toothpaste lines.

Over the next two years, Crane sold a number of Fosters acquisitions that no longer fit with the companys long-term strategie plan, including Hebrew National Kosher Foods, which had been part of the Riviana purchase; Ram Golf; and the Bancroft Racket Company. Crane also put the Mission Hills Country Club up for sale and withdrew Colgates sponsorship of the sporting events his predecessor had nurtured.

Also during the late 1970s and the 1980s, Colgate found itself named as a defendant in two lawsuits. In 1981 the company lost a suit brought by United Roasters, who successfully argued that Colgate had violated the terms of a contract between the two firms for Colgate to market Bambeanos, a soybean snack produced by United Roasters, and was awarded $950,000. The following year the company was sued by the federal government for alleged job discrimination. According to a complaint filed with the U.S. Equal Employment Opportunity Commission, Colgate had failed or refused to hire people between the ages of 40 and 70 since 1978 and had also deprived employees in that age group of opportunities for promotion.

By the end of 1982 Crane also experienced problems at Colgate. Several attempts at new product development never made it out of the test-market stage. Increased advertising expenditures for a limited number of major brands produced only temporary gains in market share while slowly killing off other products receiving little or no media support. Even Fresh Start detergent, one of the most successful new products to come out of the Foster era, was having problems retaining market share. Thus while Procter & Gambles sales and margins were increasing, Colgates were on the decline. To make matters worse, the strong dollar overseas hurt Colgates international sales, and changes in Medicare policy weakened Kendalls business.

In 1983 Crane relinquished the title of president to Reuben Mark, one of the companys three executive vice-presidents and a member of Cranes management advisory team. Mark also assumed the position of chief operating officer at that time; one year later he succeeded Crane as CEO. Mark built upon his predecessors restructuring efforts in an attempt to increase profits and shareholder value. Between 1984 and 1986 several inefficient plants were closed, hundreds of employees laid off, and noncore businesses sold including the remnants of the Riviana Foods acquisition, except for the Hills Pet Products subsidiary.

In an attempt to refocus the companys marketing and profitability, Mark developed a set of corporate initiatives intended to address business areas ranging from production-cost reduction to new product development, with a heavy emphasis on motivating employees and involving them in company decision making. In response to the implementation of these ideas, the companys U.S. toothpaste business enjoyed a boost with first-to-the-market introductions of a gel toothpaste and a pump-type dispenser bearing the Colgate brand name. Similar U.S. market share gains were earned by new and improved versions of its Palmolive and Dynamo detergents and Ajax cleaner.

With the companys turnaround firmly under way, business units managed by key executives were formed to develop plans for the companys major product categories. The purpose of each plan was to identify how products under development could be best introduced in domestic and international markets. Two years into this strategic reorganization, coinciding with Marks appointment as chairman in 1986, Colgate confronted an embarrassing controversy.

Since the early 1920s Hawley & Hazel Chemical Company had marketed a product called Darkie Black and White Toothpaste in the Far East. Colgate had acquired a 50 percent interest in this company in 1985. The following year, the Interfaith Center on Corporate Responsibility, a coalition of Protestant and Roman Catholic groups, demanded that Colgate change what it deemed to be the products racially offensive name and packaging, which depicted a likeness of Al Jolson in blackface. The company acknowledged the criticism and agreed to make the necessary changes.

Colgate also continued to seek out growth areas in its personal-care product and detergent businesses. In 1987 it acquired a line of liquid soap products from Minnetonka Corporation, the first transaction the company had made in the personal-care area in several years. Building upon its success in launching an automatic dishwashing detergent in liquid form ahead of its competitors, the company also beat Procter & Gamble to the market with a laundry detergent packaged in a throw-in pouch called Fab 1 Shot, although this product failed to sustain consumer interest or reach sales expectations over the long term.

Buoyed by product development breakthroughs and a renewed commitment to consumer products marketing, Colgate sold its Kendall subsidiary and related health care businesses in 1988 to Clayton & Dubilier. The sale enabled Colgate to retire some debt, sharpen its focus on its global consumer products businesses, and invest in new product categories. Moreover, Marks global approach enabled the company to maintain its overall profitability despite not having a leadership position in the United States. And though Colgate lagged behind Procter & Gamble in the toothpaste category, for example, it held a commanding 40 percent share of the toothpaste market worldwide.

Marks strategy appeared to pay off handsomely. By the end of the third quarter of 1989 Colgates international operations performed strongly while the profitability of its U.S. operations rose, due mostly to manufacturing-cost economies and greater control over promotional and sales expenses. Not yet ready to concede the U.S. market for personal-care products to Procter & Gamble, though, Colgate acquired Vipont Pharmaceutical, a manufacturer of oral-hygiene products, toward the end of that year. Viponts products, several of which Colgate had already been marketing overseas, enabled Colgate to strengthen the market position it had recently established with the introduction of a new tartar-control formula toothpaste.

Colgate continued to make significant acquisitions in the early and mid-1990s while it attempted to gear up its product development program, which had been unable to develop and introduce more than a few new products each year. In 1991 Colgate acquired the Murphy-Phoenix Company (whose top brand was Murphys Oil Soap) to bolster its household care segment. That same year, Mark initiated a restructuring aimed at improving the firms profitability and gross margins, which lagged behind the industry leaders. A major part of the effort was the elimination or reconfiguration of 25 factories throughout the world and an eight percent reduction in the workforce. Consequently, Colgate took a $243 million charge in September 1991, which reduced significantly the firms net income for the full year.

Colgates most dramatic acquisition to date came in 1992 with the $670 million purchase of the Mennen Co., which added to its personal care line the top U.S. deodorant brand, Mennen Speed Stick, and the number-two baby-care brand, Baby Magic. In addition, Colgate gained footholds in skin-care and hair products, and the Mennen brands gained the power of Colgates worldwide distribution and marketing reach. This major acquisition was followed in 1993 by the purchase of S. C. Johnson Waxs liquid hand and body soap brands, which enabled Colgate to become the worldwide leader in liquid soap.

Gross margins steadily improved in the early 1990s, reaching 48.4 percent by 1994 (up from 39.2 percent in 1984). This provided Colgate with additional funds for research and development and advertising. The North American sector also experienced gains in gross margins, which resulted in part from pricing increases on Colgate detergents. In turn, this cut into overall North American sales, which declined eight percent from 1993 to 1994. Marks strategy was to turn North American sales around through new product introductions such as a variant of Irish Spring soap and an extension of the Murphys Oil Soap brand into a Murphys Kitchen Care line of all-purpose cleaners. Under the leadership of Lois D. Juliber, who formerly headed up new product development, the North American sector was able to introduce several products within a short span for the first time.

A hidden jewel within the Colgate empire in the 1990s has been its pet foods sector, Hills Pet Nutrition. The worldwide leader in therapeutic and specialty wellness pet food, Hills enjoyed a compound annual growth rate of 14.6 percent from 1989 to 1994. During this period the market for premium pet food increased dramatically in Europe and Japan, with Hills snatching a substantial portion of this growth. Overall, pet foods were one of Colgates leading profit generators, boasting gross margins of 55 to 60 percent.

Early in 1995 Colgate made another major acquisition with the $1.04 billion purchase of Kolynos Oral Care from American Home Products, which gained it the Kolynos toothpaste brand, the top brand in Brazil and a leader in several other Latin American countries. This purchase pushed Colgates share of the Latin American oral-care market from 54 percent to 79 percent.

In September 1995 Colgate announced another major restructuring of its operations to close or reconfigure 24 additional factories and cut 3,000 more employees (more than eight percent of the workforce). Mark said the action was necessary to finance new growth initiatives; Colgate took a $369 million charge as a result. The results in 1995 were also affected by a deepening recession in Mexico, which had accounted for 11 percent of sales and 20 percent of profits in 1994.

By 1995 Colgates global presence as a consumer products company extended to 194 countries, with leading positions for several of its key brands. Colgate will likely continue to aggressively defend these positions, increase market share of its trailing brands whenever possible, and seek additional brands and product types within its primary product sectors through acquisitions and a revitalized product development program.

Principal Subsidiaries

Murphy-Phoenix Company; Softsoap Enterprises, Inc.; Colgate-Palmolive S.A.I.C. (Argentina); Colgate-Palmolive Pty. Ltd. (Australia); Colgate-Palmolive (Barbados); Colgate-Palmolive Belgium; Colgate-Palmolive Ltda. (Brazil); Colgate-Palmolive Canada; Javex Manufacturing Co. (Canada); Colgate-Palmolive CIA (Colombia); Colgate-Palmolive (Central America), Inc. (Costa Rica); Colgate-Palmolive C.I.S.A. (Cote dIvoire); Colgate-Palmolive A/S (Denmark); Colgate-Palmolive, Inc. (Dominican Republic); Colgate-Palmolive Del Ecuador, S.A.; Colgate-Palmolive (Central America), Inc. (El Salvador); Colgate-Palmolive (Fiji) Ltd.; Colgate-Palmolive France; Hills Products (France); Colgate-Palmolive A.B. (Germany); Colgate-Palmolive Gmbh (Germany); Colgate-Palmolive (Hellas) S.A. (Greece); Colgate-Palmolive (Central America) S.A. (Guatemala); Colgate-Palmolive (Guyana) Ltd.; Colgate-Palmolive (Central America), Inc. (Honduras); Colgate-Palmolive (Hong Kong) Ltd.; Hawley & Hazel Chemical Co., (Hong Kong) Ltd.; Colgate-Palmolive (India) Ltd.; Colgate-Palmolive (Ireland); Colgate-Palmolive S.p.A. (Italy); Viset (Italy); Colgate-Palmolive Co. (Jamaica) Ltd.; JCR (Japan) Ltd.; Colgate-Palmolive (E. Africa) Ltd. (Kenya); Colgate-Palmolive (Malaysia) Sdn. Bhd.; Colgate-Palmolive, S.A. De C.V. (Mexico); Colgate-Palmolive (Morocco); Colgate-Palmolive Nederland (Netherlands); Colgate-Palmolive Ltd. (New Zealand); Colgate-Palmolive (Central America) (Panama); Colgate-Palmolive Philippines Inc.; Colgate-Palmolive Portuguese Ltda. (Portugal); Colgate-Palmolive (Eastern) Pte. Ltd. (Singapore); Colgate-Palmolive Ltd. (South Africa); Colgate-Palmolive S.A.E. (Spain); Colgate-Palmolive AB (Sweden); Colgate-Palmolive AG (Switzerland); Colgate-Palmolive (Thailand) Ltd.; Colgate-Palmolive (Caribbean), Inc. (Trinidad & Tobago); Colgate-Palmolive (Tunisia); Colgate-Palmolive Ltd. (U.K.); Colgate-Palmolive, Inc. (Uruguay); Colgate-Palmolive Co. Anonima (Venezuela); Colgate-Palmolive (Zambia) Ltd.

Further Reading

Foster, David R., The Story of Colgate-Palmolive: One Hundred and Sixty-Nine Years of Progress, New York: Newcomen Society in North America, 1975.

Hager, Bruce, Can Colgate Import Its Success from Overseas?, Business Week, May 7, 1990, pp. 114, 116.

, Colgate: Oh What a Difference a Year Can Make, Business Week, March 23, 1992, pp. 90-91.

Kindel, Stephen, The Bundle Book: At Reuben Marks Colgate, Attention to Small Details Creates Large Profits, Financial World, January 5, 1993, pp. 34-35.

Morgenson, Gretchen, Is Efficiency Enough? Forbes, March 18, 1991, pp. 108-9.

Nayyar, Seema, Colgate Buys Its Way Back into the Game, Adweek, February 17, 1992.

Rudnitsky, Howard, Making His Mark, Forbes, September 26, 1994, pp. 47-48.

Sasseen, Jane A., and Zachary Schiller, For Colgate-Palmolive, Its Time for Trench Warfare, Business Week, September 19, 1994, pp. 56-57.

updated by David E. Salamie

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"Colgate-Palmolive Company." International Directory of Company Histories. 1996. Encyclopedia.com. 24 Aug. 2016 <http://www.encyclopedia.com>.

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"Colgate-Palmolive Company." International Directory of Company Histories. 1996. Retrieved August 24, 2016 from Encyclopedia.com: http://www.encyclopedia.com/doc/1G2-2841800045.html

Colgate-Palmolive Company

Colgate-Palmolive Company

300 Park Avenue
New York, New York 10022
U.S.A.
(212) 310-2000
Fax: (212) 310-3284

Public Company
Incorporated: 1923 as the Eastern Operating Company
Employees: 24,100
Sales: $5.04 billion
Stock Exchanges: New York Amsterdam Frankfurt London Paris Zürich

Colgate-Palmolive Companys growth from a small candle and soap manufacturer to one of the most powerful consumer products giants in the world is the result of aggressive acquisition of other companies, persistent attempts to overtake its major U.S. competition, and an early emphasis on building a global presence overseas where little competition existed. Today the company markets a wide range of household and personal-care products, including such well-known brands as Colgate toothpaste, Irish Spring soap, Softsoap liquid soap, Fab laundry detergent, and Palmolive dishwashing liquid.

In 1806, when the company was founded by 23-year-old William Colgate, it concentrated exclusively on selling starch, soap, and candles from its New York City-based factory and shop. Upon entering his second year of business, Colgate became partners with Francis Smith, and the company became Smith and Colgate, a name it kept until 1812 when Colgate purchased Smiths share of the company and offered a partnership to his brother, Bowles Colgate. Now called William Colgate and Company, the firm expanded its manufacturing operations to a Jersey City, New Jersey factory in 1820, this factory produced Colgates two major products, Windsor toilet soaps and Pearl starch.

Upon its founders death in 1857, the firm changed its name to Colgate & Company and was run by President Samuel Colgate until his death 40 years later. During his tenure several new products were developed, including perfumes and essences and perfumed soap. The manufacture of starch was discontinued in 1866 after a fire destroyed the factory.

In 1873, Colgate began selling toothpaste in ajar, followed 23 years later by the introduction of Colgate Ribbon Dental Cream, in the now-familiar collapsible tube. By 1906, the company was also producing several varieties of laundry soap, toilet paper, and perfumes.

While the Colgate family managed its manufacturing operations in New York, soap factories were also opened in 1864 by B. J. Johnson in Milwaukee, Wisconsin, and in 1872 by the three Peet brothers in Kansas City, Kansas. In 1898, Johnsons company introduced Palmolive soap, which soon became the best-selling soap in the world and led the firm to change its name to the Palmolive Company in 1916.

The Peets, who sold laundry soap mainly in the midwest and western United States, merged their company with Palmolive in 1926. Two years later the company that resulted from that merger joined with Colgate & Company to form Colgate-Palmolive-Peet, with headquarters in Jersey City.

Although Palmolives management initially assumed control of the combined organization, the Colgate family regained control of the company after the 1929 stock market crash and installed Bayard Colgate as president in 1933. The firm adopted its present name in 1953 and moved its offices for domestic and international operations to New York City in 1956.

Between 1914 and 1933, the company began establishing international operations, with subsidiaries in Canada, Australia, Europe, and Latin America. It also built upon its strategy of growth by acquisition by buying a number of smaller consumer product companies over the next two decades. These acquisitions did little to close the gap between Colgate and its archrival, Procter & Gamble, a company which had been formed in the 1830s and now assumed a commanding lead over Colgate in selling detergent products in the United States.

In 1960 George H. Lesch was appointed Colgates president in the hopes that his international experience would produce similar success in the domestic market. Under his leadership, the company embarked upon an extensive new-product-development program which created such brands as Cold Power laundry detergent, Palmolive dishwashing liquid, and Ultra Brite toothpaste. In an attempt to expand beyond these traditional, highly competitive businesses into new growth areas, Colgate also successfully introduced a new food wrap called Baggies in 1963. As a result of these product launches, the companys sales grew between 8% and 9% every year throughout the 1960s.

Lesch assumed the chairmanship of Colgate, and David Foster became president in 1970 and CEO in 1971. Foster was the son of the founder of Colgate-Palmolives United Kingdom operations. He joined the company in 1946 as a management trainee and rose through the sales and marketing ranks both in the United States and overseas.

During the 1970s, as environmental concerns about phosphate and enzyme detergent products grew, the company faced additional pressure to diversify beyond the detergent business. In response to this pressure, Foster instituted a strategy that emphasized internal development via a specialized new venture group; joint ventures for marketing other companies products; and outright acquisitions of businesses in which Colgate could gain a marketing advantage over Procter & Gamble. In 1971, for example, the company began selling British Wilkinson Sword Company razors and blades in the United States and other countries. In 1972 Colgate-Palmolive acquired Kendall & Company, a manufacturer of hospital and industrial supplies. It was originally hoped that the Kendall acquisition would bolster the pharmaceutical sales of Colgates Lakeside Laboratories subsidiary, which had been acquired in 1960. The partnership never materialized, however, and Lakeside was sold in 1974. The Kendall business proved to be one of Fosters most successful acquisitions. Within two years, the subsidiary was producing sales, and earnings results well above the companys targeted goals.

In 1971 the Federal Trade Commission enacted restrictions on in-store product promotions, such as couponing. In response to these restrictions, Foster began to employ other tactics designed to enhance Colgates visibility in the marketplace. Two such programs awarded money to schools and local civic groups whose young people collected the most labels and boxtops from selected Colgate products. Under Foster Colgate-Palmolive also began to sponsor a number of womens sporting events, including the Colgate-Dinah Shore Winners Circle, a womens professional golf tournament. Foster chose womens sports in an effort to appeal to Colgate-Palmolives primarily female customer base. He even went so far as to have Colgate buy the tournaments home course, the Mission Hills Country Club in Palm Springs, California, so that he could supervise the maintainence of the greens.

In 1973, Colgate acquired Helena Rubinstein, a major cosmetics manufacturer with strong foreign sales but a weak U.S. presence. Believing that its marketing expertise could solve Rubinsteins problems, Colgate reduced both the number of products in the companys line and the number of employees in its workforce, increased advertising expenditures, and moved the products out of drugstores and into department stores. The following year the company acquired Ram Golf Corporation and Bancroft Racket Company, and in 1976 it bought Charles A. Eaton Company, a golf and tennis shoe manufacturer.

Although total U.S. sales of consumer products appeared to be slowing by the end of 1974, particularly in soaps and detergents, Colgates international sales continued to carry the company forward. It maintained its leadership position abroad through new-product development geared specifically to local tastes throughout Europe as well as through its involvement in the growing markets of less-developed countries in Latin America, Africa, and Asia.

Fosters diversification strategy initially improved earnings, but Colgates domestic sales, market share, and profit margins were beginning to soften. This was due, in large part, to an economic recession and an advertising cutback the company had made in an attempt to boost earnings. Colgate was consistently losing the marketing battle in personal-care products to Procter & Gamble. It had no leading brands and few successful new-product introductions because of reduced spending for research and development. In an effort to remedy this problem and broaden its product mix, Colgate moved into food marketing in 1976 with the acquisition of Riviana Foods, a major producer of Texas long-grain rice, with its own subsidiaries in the pet food, kosher hot dog, and candies businesses.

The Riviana acquisition, however did not live up to the companys expectations. Along with purchasing a successful rice-milling business, Colgate found that it had also saddled itself with two unprofitable restaurant chains and a low-quality candy company. In 1977 declines in the price of rice seriously eroded Rivianas cash flow.

Helena Rubinstein created additional headaches. While other cosmetic manufacturers had moved their products from department store distribution to higher-volume drugstores, Colgates management elected to keep Rubinstein products in department stores, even though stores demands for marketing support eroded the companys margins so severely that it lost money on every cosmetic item sold. Colgate finally sold the business in 1980 to Albi Enterprises.

Foster had been made chairman in 1975. In 1979, embattled by a series of marketing failures and the pressures of an acquisition strategy that yielded more losers than winners, David Foster suddenly resigned, citing ill health. Colgate president and chief operating officer Keith Crane was appointed as Fosters successor. A 42-year Colgate employee, Crane quickly instituted a new management structure consisting of several group vice presidents, reunited all domestic operations under one group, and realigned division managers in an attempt to promote a more cohesive organization. Consumer advertising and product research were given renewed emphasis to support the companys basic detergent and toothpaste lines.

Over the next two years, Crane sold a number of Fosters acquisitions that no longer fit with the companys long-term strategic plan, including Hebrew National Kosher Foods, which had been part of the Riviana purchase; Ram Golf; and the Bancroft Racket Company. Crane also put the Mission Hills Country Club up for sale and withdrew Colgates sponsorship of the sporting events his predecessor had nurtured.

Also during the late 1970s and the 1980s, Colgate found itself named as a defendant in two lawsuits. In 1981 the company lost a suit brought by United Roasters. United Roasters successfully argued that Colgate had violated the terms of a contract between the two firms for Colgate to market Bambéanos, a soybean snack produced by United Roasters, and was awarded $950,000. The following year, the company was sued by the federal government for alleged job discrimination. According to a complaint filed with the Equal Employment Opportunity Commission, Colgate had failed or refused to hire people between the ages of 40 and 70 since 1978 and had also deprived employees in that age group of opportunities for promotion.

By the end of 1982, Crane had also begun to have problems at Colgate. Several attempts at new-product development never made it out of the test market stage. Increased advertising expenditures for a limited number of major brands produced only temporary gains in market share, while slowly killing off other products receiving little or no media support. Even Fresh Start detergent, one of the most successful new products to come out of the Foster era, was having problems retaining market share. While Procter & Gambles sales and margins were increasing, Colgates were on the decline. To make matters worse, the strong dollar overseas hurt Colgates international sales, while changes in Medicare policy weakened Kendalls business.

In 1983, Crane relinquished the title of president to Reuben Mark, one of the companys three executive vice presidents and a member of Cranes management advisory team. Mark also assumed the position of chief operating officer at that time, and one year later succeeded Crane as CEO. Mark built upon his predecessors restructuring efforts in an attempt to increase profits and shareholder value. Between 1984 and 1986, several inefficient plants were closed, hundreds of employees were laid off, and non-core businesses were sold, including the remaining parts of the Riviana Foods acquisition, except for the Hills Pet Products subsidiary.

In an attempt to refocus the companys marketing and profitability, Mark developed a set of corporate initiatives intended to address business areas ranging from production cost reduction to new-product development, with a heavy emphasis on employee motivation and involvement in decision making. In response to the implementation of these ideas, the companys U.S. toothpaste business enjoyed a boost with first-to-the-market introductions of a gel toothpaste and a pump-type dispenser bearing the Colgate brand name. Similar U.S. market share gains were earned by new and improved versions of its Palmolive and Dynamo detergents and Ajax cleaner.

With a turnaround firmly underway, business units managed by key executives were formed to develop plans for the companys major product categories. The purpose of each plan was to identify how products under development could be best introduced in domestic and international markets. Two years into this strategic reorganization, coinciding with Marks appointment as chairman in 1986, Colgate confronted an embarrassing controversy.

Since the early 1920s, Hawley & Hazel Chemical Company had marketed a product called Darkie Black and White Toothpaste in the Far East. Colgate had acquired a 50% interest in this company in 1985. The following year, the Inter-faith Center on Corporate Responsibility, a coalition of Protestant and Roman Catholic groups, demanded that Colgate change what it deemed to be the products racially offensive name and packaging, which depicted a likeness of Al Jolson in blackface. The company acknowleged the criticism and agreed to make the necessary changes.

Colgate also continued to seek out growth areas in its personal-care-product and detergent businesses. In 1987, it acquired a line of liquid soap products from Minnetonka Corporation, the first transaction the company had made in the personal-care area in several years. Building upon its success in launching an automatic dishwashing detergent in liquid form ahead of its competitors, the company also beat Procter & Gamble to the market with a laundry detergent packaged in a throw-in pouch called Fab 1 Shot, although this product failed to sustain consumer interest and reach sales expectations over the long term.

Buoyed by product-development breakthroughs and a renewed commitment to consumer products marketing, Colgate sold its Kendall subsidiary and related health-care businesses in 1988 to Clayton & Dubilier. The sale enabled Colgate to retire some debt, sharpen its focus on its global consumer products businesses, and invest in new product categories.

Marks global approach has enabled the company to maintain its overall profitability despite its continuing lack of a leadership position in the United States. Although Colgate lags behind Procter & Gamble in the toothpaste category, for example, it holds a commanding 40% share of the toothpaste market worldwide.

Markss strategy appeared to pay off handsomely. By the end of the third quarter of 1989, Colgates international operations performed strongly while the profitability of its U.S. operations rose, due mostly to manufacturing-cost economies and greater control over promotional and sales expenses. Not yet ready to concede the U.S. market for personal-care products to Procter & Gamble, though, Colgate acquired Vipont Pharmaceutical, a manufacturer of oral-hygiene products, toward the end of that year. Viponts products, several of which Colgate had already been marketing overseas, enabled Colgate to strengthen the market position it had recently established with the introduction of a new tartar-control formula toothpaste.

Colgates global presence as a consumer products company extends to over 160 countries. Its manufacturing and marketing operations are organized into five core segments: toothpaste, soap, detergents, household cleaners, and pet foods. This latter category consists of veterinary food items produced by Hills Pet Products, and other support services for the veterinary profession provided by its subsidiary, Veterinary Companies of America, which was acquired in 1987. A substantial amount of Colgate-Palmolives U.S. profits come from the Hills pet foods.

Colgate continues to seek out opportunities for long-term global growth through a combination of internal product development, strategic acquisitions, and joint ventures. Colgates future depends upon its ability to accurately identify unmet consumer needs and swiftly launch products to satisfy the expectations of the world market.

Principal Subsidiaries

Colgate-Palmolive Development Corporation; Colgate-Palmolive International Inc.; Southampton-Hamilton Company; Purity Holding Company; Kendall do Brasil Industriale Commercia Ltda. (Brazil); Lournay Sales, Inc.; ELM Company Limited (Bermuda); Colgate-Palmolive Global Trading Company; Institutional Financing Services, Inc.; Princess House, Inc.; Colgate-Palmolive S.A. Industrial Y Commercial (Argentina); Softsoap Enterprises, Inc.; Veterinary Companies of America, Inc.; Colgate-Palmolive Pty. Limited (Australia); Colgate-Palmolive Gesellschaft mbh (Austria); CKR, Inc.; CKR, S.A. (Belgium); Colgate-Palmolive, Ltda. (Brazil); Colgate-Palmolive (Caribbean) Inc.; Colgate-Palmolive Cia.; Colgate-Palmolive (Dominican Republic) Inc.; Colgate-Palmolive (Central America) Inc.; Colgate-Palmolive A/S (Denmark); Colgate-Palmolive del Ecuador, S.A.; Colgate-Palmolive (Egypt) S.A.E.; Colgate-Palm-molive (Fiji) Limited; Colgate-Palmolive (France); Colgate-Palmolive Gmbh (Germany); Colgate-Palmolive (Hellas) S.A. (Greece); Colgate-Palmolive Limited (New Zealand); Colgate-Palmolive (Eastern) Pte. Ltd.; (Singapore); Hawley & Hazel Chemical Company (H.K.) Ltd. (Hong Kong); Hills Colgate (Japan) Ltd.; Colgate-Palmolive (H.K.) Limited (Hong Kong); Colgate-Palmolive (India) Limited; P.T. Colgate-Palmolive Indonesia; Colgate-Palmolive S.p.a. (Italy); Colgate-Palmolive Co. (Jamaica) Ltd.; Colgate-Palmolive (East Africa) Limited (Kenya); Colgate-Palmolive (Malaysia) SDN. BHD.; Colgate-Palmolive, S.A. de C.V. (Mexico); CKR Nederland B.V. (Netherlands); Colgate-Palmolive Philippines Inc.; Colgate-Palmolive Portuguesa Lda. (Portugal); Colgate-Palmolive Limited (South Africa); Colgate-Palmolive, S.A.E. (Spain); Colgate-Palmolive A.G. (Switzerland); Colgate Holdings (U.K.) Ltd.; Colgate-Palmolive Compania Anónima (Venezuela); Colgate-Palmolive (Zambia) Ltd.; Colgate-Palmolive (Zimbabwe) (Private) Limited; Vipont Pharmaceutical Inc.

Further Reading

The Marriage of Marketing and Technology to Improve Company Performance: How David Foster runs Colgate-Palmolive, Nations Business, August 1975; Campanella, Frank W., Soap to Nuts: Colgate-Palmolive Is Steadily Broadening Its Product Mix, Barrens, February 23, 1976; Bronson, Gail, Colgate Works Hard to Become the Firm It Was a Decade Ago, The Wall Street Journal, November 23, 1981.

Sandy Schusteff

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"Colgate-Palmolive Company." International Directory of Company Histories. 1991. Encyclopedia.com. 24 Aug. 2016 <http://www.encyclopedia.com>.

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