Colgate-Palmolive Company

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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 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. 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 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 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, 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 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 Palmolive’s 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 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 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 company’s 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-Palmolive’s 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 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.

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 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 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 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.

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.

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 the pet food, kosher hot dog, and candies businesses.

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. While 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 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 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. 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 & 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, while changes in Medicare policy weakened Kendall’s business.

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, and one year later 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 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 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 employee motivation and involvement in 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.

With a 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% 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 product’s 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.

Mark’s 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.

Marks’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.

Colgate’s 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 Hill’s 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-Palmolive’s U.S. profits come from the Hill’s 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. Colgate’s 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); Hill’s 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.