The Star in the movie RNBDJ
Shah Rukh Khan is arguably Star No. 1 in Bollywood, nay India. So this recent news item in The Economic Times suggesting that he has just signed up to endorse Colgate, “India’s most trusted brand” is no surprise.
On the contrary.
The big surprise is, why did this tie-up not happen earlier ?
Let me explain.
- As a previous post on India’s oral care market suggests, market penetration of oral care products like toothpastes and toothpowders in India is low :
– only half (51% to be precise) of the population use a toothbrush and toothpaste.
– of these, again just over half (28% of overall population) do what the doctor (um.. sorry…dentist) orders i.e. brush twice a day.
- Now, Colgate India’s annual turnover* is Rs. 1700 crores (1 crore = 10 million) of which 90% or Rs. 1530 crores approximately is from oral care (toothpaste, toothpowder, toothbrush & whiteners), with toothpastes being by far the biggest segment.
- The company has about half the oral care market. Specifically, it has 52% volume share for toothpastes. For the two smaller segments, toothpowders and toothbrushes, it has 49% and 38% share respectively. Say then, it has 50% of the total market.
- Thus, the existing served market for oral care products (Colgate + competitors) is approx. Rs. 3060 crores (1530 / 0.5). This is the money consumers today pay for oral care products.
- Considering only half the market (51%) uses oral care products, the total available market for oral care products is Rs. 6000 crores (3060 / 0.51).
- If we instead define the market potential in more optimistic terms as ‘brush teeth twice a day’, the latent market will be over Rs. 10,700 crores (6000*50/28 = 10,714 crores).Now Colgate’s oral care sales are just Rs. 1530 crores, leaving a gap of over Rs. 9000 crores.In fact, at 108 gm per capita per year, India has one of the lowest toothpaste consumptions in the world.
- The company has been going heavy on demonstrations and consumer education . It has conducted dental camps in schools for over three decades, reaching millions of children.But when it comes to oral care, there is only that much of rational appeal (product reasons) that can create the brushing habit and persuade a purchase. A large part of the persuasion will need to play on the consumer’s emotions.This is even more true as the company increases it’s penetration into rural markets and with lower SEC (socio-economic class) consumers, as it now must. Print media becomes less useful and films and TV increasingly so.
- Now, arguably Shah Rukh Khan today has a more mass market appeal than any other star nay Indian. His is a pan-family appeal cutting across age and class barriers. His films, in particular those from the Yash Raj Films stable, connect at a mass emotional level. His presence suitably leveraged can help expand the oral care category & grow share for Colgate more than that of any other celebrity.
- SRK is known to charge Rs. 3 to Rs. 9 crore per endorsement, or so says Economic Times. Let’s say Rs. 9 crores.Colgate, as the above back-of-envelope calculations show, is chasing an unrealized Rs. 9000 plus crores market.And on an annual turnover of Rs. 1700 crores, Colgate makes over Rs. 400 crores of profit. This, after an ad spend of over Rs. 200 crores in a year.In other words, SRK was always an eminently affordable proposition.
- Colgate’s been working to improve market penetration for decades now. And SRK’s been a star now for years.If anything, he is a little though not very much past his prime.
Thus, to sum up, the 2 billion dollar (Rs. 9000 crores 🙂 ) question: why did they not sign him up earlier ??
Any thoughts !
P.S. :
It’s not that Colgate has not earlier used filmstars. Saif Ali Khan and Asin recently starred in commercials for Colgate Max Fresh.
25 odd brands have in the past signed up SRK including ICICI Bank, Dish TV, Nokia, Hyundai, Linc Pens, Compaq, Sunfeast, Emami, TAG Heuer, and Omega. None barring possibly Nokia or ICICI are exactly mass i.e. household names.
P.P.S. :
The above is not a plug for Shah Rukh or for Colgate, I know them not 🙂
* Have quoted liberally from the company’s press releases and reports on their website.
