The Top 50

Household & Personal Products Industry, July, 2001 by Tom Branna

The company insists it has a simple, but powerful value creating strategy that is based on three principles:

* Drive global growth;

* Fund that growth and

* Make Colgate-Palmolive the best place to work.

Mr. Mark gave shareholders an overview of the principles during the annual meeting. Some of the issues driving global growth include creating outstanding advertising throughout the world, powerful consumer promotions and a 360 [degrees] marketing program. "Media is losing its impact with consumers due to diversity," explained Mr. Mark. "So we surround the consumers wherever they may be."

Other factors contributing to that growth include superior knowledge of the consumer, increasing Colgate's already dominant coverage of traditional (smaller store) trade and building strong partnership with larger retailers including Wal-Mart and Target.

In order to fund that growth, Colgate-Palmolive continues to improve gross margins, a key concern of Mr. Mark and Dill Shanahan, C-P's long-time president. Since Mr. Mark took over as CEO, the gross margin has risen from 39.2% in 1983 to 54.5% in 2000. In the first quarter of this year, the company reached 55% gross margins and has set its sights on 60% in the not-too-distant future. Other ways to fund the growth include streamlining the supply chain, using technology to create new cost savings, capitalizing on its unique SAP partnership and moving to regionalization. Under Colgate's regionalization strategy, several countries are treated as a region to provide cost savings and regional sourcing. Regionalization, according to Mr. Mark, leads to faster, more solid growth.

Colgate-Palmolive has enjoyed solid growth since 1983 and the company has been rewarded on Wall Street. From 1983 to 2000, the S&P 500's total return has been 1,197%. At the same time, however, Colgate-Palmolive's stock has returned 3,720%, well above its peer group's return of 1,768%.

"Extreme focus and precise global execution is what Colgate-Palmolive has and our competition doesn't," Mr. Mark boasted to shareholders.

Colgate's strong growth has continued into 2001. Colgate-Palmolive worldwide top-line unit volume increased 7% while earnings per share grew 16% in the first quarter. Each of Colgate's operating divisions achieved strong volume growth and also increased operating earnings in the period. Net income increased 12% to $267.9 million, and global sales of continuing businesses excluding exchange rose 9%. Including the effect of the strong dollar, continuing sales rose 3.5%.

"We are delighted that strong market share gains here and abroad have again generated strong top-line growth momentum," said Mr. Mark. "Every division increased volume at a mid-single-digit rate or better.

"This increased volume, combined with gross profit increases, led to another significant profit gain. The goal we set in 1995 of reaching a gross margin of 55% by the end of 2002 has been achieved almost two years early, in the first quarter of 2001. This gives us confidence in our ability to reach our 2008 gross margin goal of 60% earlier as well."