Colgate Max Fresh: Global Brand Roll-Out

For the exclusive use of P. Cameron, 2016.

9-508-009 OCTOBER 23, 2007

JOHN A. QUELCH

JACQUIE LABATT-RANDLE

Colgate Max Fresh: Global Brand Roll-Out

In February 2005, Nigel Burton, in his third year as president of global oral care at Colgate- Palmolive Company (CP), had every reason to feel optimistic. Worldwide market shares were strong and Colgate Max Fresh (CMF), a new toothpaste that had helped drive Colgate to a record 34.8%1 value share in the important U.S. market, was in the global pipeline for 2005. Burton had on his desk the proposed marketing launch plans for CMF in China and Mexico. Each plan sought to maximize the business potential in the local market. Burton had to assess the plans from a global perspective. He wondered if the costs of adapting the CMF marketing programs in each country would generate sufficient incremental sales and profits to justify the added complexity.

Company Background

The Business

By January 2005, CP was a $10.6 billion global company2 operating in 200 countries worldwide. The company focused on two core product segments: Oral, Personal, and Home Care; and Pet Nutrition. Some of CP’s well-known brands included Colgate, Palmolive, Speed Stick, Ajax, and Hill’s Science Diet. Colgate was the world’s leading toothpaste and toothbrush brand; Palmolive was the world’s third largest soap brand.3 CP derived 70% of its sales outside of the U.S.4

CP had enjoyed a strong year in 2004, reporting +6.5% unit volume growth, +7% sales dollar growth, and +0.1% point growth in gross profit margin to 55.1%. Operating profit and net income were negatively affected (-2% and -7%, respectively, versus 2003) by the combined effect of increased marketing spending and increases in raw material and packing material costs.5

To drive growth, CP focused on its higher margin core businesses. Advertising spending was carefully targeted at new high margin products and at high potential markets, notably the U.S., China, Russia, India, Mexico, and Brazil.6 In 2004, approximately 40% of total company sales were from products launched within the past five years. These new products drove market share growth and market leadership in key categories.7

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Professor John A. Quelch and Research Associate Jacquie Labatt-Randle prepared this case. Certain details have been disguised. HBS cases are developed solely as the basis for class discussion. Cases are not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective management.

Copyright © 2007 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-545-7685, write Harvard Business School Publishing, Boston, MA 02163, or go to http://www.hbsp.harvard.edu. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means—electronic, mechanical, photocopying, recording, or otherwise—without the permission of Harvard Business School.

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508-009 Colgate Max Fresh: Global Brand Roll-Out

Organizational Structure

CP was organized along geographic lines with management teams responsible for the financial results of their respective regions: North America, Latin America, Europe, and Asia/Africa. Each region had a president with profit-and-loss responsibility who reported to the chief operating officer. Each region oversaw local country managements. Consumer Innovation Centers (CICs) including marketers, “insighters,” and product developers were set up to develop shorter term (2–3 years) innovations for each region. They meshed local market knowledge with global protocols and know- how. CICs evaluated ideas against “action standards,” an assessment tool measuring an initiative’s ability to meet pre-determined financial, product quality, consumer acceptance, and timing objectives. Once a marketing or product idea was qualified for a region, it was handed over to the Go To Market (GTM) team in each CP country organization for launch planning and execution.

Separate from the geographic divisions were global business development groups organized along category lines. Located at the corporate headquarters in New York City, global category presidents also reported to the chief operating officer and were measured on global market share rather than profit-and-loss. Each global group was responsible for the global category strategy, resource allocation, and best-practices idea transfer across regions. (See Exhibit 1 for the marketing roles and responsibilities of different parts of the CP organization.) Success in a global business development role depended on previous credible line management experience and on an ability to work well with regional management in the absence of any formal reporting relationships. Burton, formerly vice president and general manager in Spain, and then later in the U.K., explained the key challenge of his global role: “All responsibility, no accountability.”

2004 Restructuring Activity

In December 2004, CP announced the beginning of a new four-year restructuring and business- building plan. The objective was to enhance CP’s global leadership position in its core businesses. As part of this plan, CP planned to streamline its global supply chain by closing one-third of its manufacturing facilities.8 Plans were also developed to centralize purchasing and other business support functions. Finally, CP aimed to better concentrate its marketing resources against key category opportunities and high potential emerging markets while consolidating organization structures in certain mature markets.

Evolution of the Toothpaste Market

With sales of $5.2 billion,9 oral care was CP’s largest business and included products such as toothpaste, electric and manual toothbrushes, and mouthwash. CP held a 39.7% global value share10 in toothpaste, more than double that of its nearest competitor, Procter & Gamble (P&G), at 14.7%.11

Colgate was the world’s first commercial toothpaste; Colgate Dental Cream was launched in 1873 in tins. In those days, dental creams provided little more than a superficial cleaning and had few, if any, lasting therapeutic benefits, such as cavity or gum-disease prevention. This remained the case until 1955 when P&G launched Crest, the first fluoride toothpaste. Field research on toothpaste with fluoride conducted in 1950 by Procter & Gamble and Indiana University found a 50% reduction in cavities.12 P&G patented this technology, then obtained the American Dental Association’s seal of approval. The patent prevented competitors including Colgate from launching a fluoride toothpaste in the U.S. until 1967. As a result, CP largely had to concede the therapeutic market to Crest and instead promise a cosmetic “fresh breath” benefit with its toothpaste brand. During this time, CP

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focused on developing its business internationally and quickly established dominance in most global markets while Crest continued to dominate in the U.S. (See Table A.)

Table A Global Toothpaste Market—Value Share

2000 2001 2002 2003 2004

Colgate-Palmolive 39.7% 40.6% 39.8% 38.8% 39.7%a Procter & Gamble 12.2 12.5 13.8 13.9 14.7

Source: Company records. aIncludes 1.1 share points from GABA acquisition, a Swiss-based company with brands marketed in Switzerland, France, Italy, and Germany.

By the 1990s, virtually all toothpastes in the U.S. offered fluoride protection and consumers had evolved to additional oral care concerns including stained teeth, sensitive gums, and bad breath.13 In December 1997, CP launched Colgate Total in the U.S. as a premium product that promised 12-hour protection against a full range of oral health problems including gum disease, gingivitis, and plaque.14 Colgate Total threatened Crest’s dominance of the therapeutic toothpaste market. Launched with a $100 million marketing campaign, Colgate Total enabled Colgate to soon become the leading U.S. toothpaste brand with a 30% value share,15 upsetting Crest’s 30-year reign. Colgate still retained its share lead in the U.S. in February 2005.

Colgate Max Fresh Product Development

Global Research and Development (R&D) worked with the CICs to develop new products. Once a promising technology was identified, discussions between R&D and the CICs were held to agree on the product formula, particularly the sourcing of ingredients and selection of flavors in light of local consumer preferences.

In late 2002, R&D invited the CIC directors to a briefing on a new toothpaste formula, a sensorial- driven, breath-freshening product that was later launched as Colgate Max Fresh. This product utilized its patented technology of dissolvable mini breath strips as a point of differentiation. The breath strip category, which had been introduced to the consumer in 200116 by a leading mouthwash manufacturer, was developed to provide consumers with a convenient alternative to traditional mouth fresheners. The product consisted of small pieces of “tape,” packaged in a convenient carrying case, which dissolved on the tongue releasing a flavor designed to freshen breath. By 2002,17 the product category was estimated to generate $250 million in retail sales globally and was particularly successful in the U.S. where it obtained strong distribution and impulse sales at retail check-out counters.

Regional interest in the “breath strip in toothpaste” technology was strong, but high manufacturing costs were of concern to CP managers from emerging markets because they could not be easily passed through in higher retail prices. The basic formula contained a high-quality, high- cleaning silica with an expensive but effective whitening ingredient. To address margin concerns, a cost-optimized formula was created for emerging markets.

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508-009 Colgate Max Fresh: Global Brand Roll-Out

Initiatives and Cannibalization

When evaluating any project’s viability, CP looked at total franchise growth, net of “cannibalization,”18 in addition to the individual product’s volume and profit potential. Experience showed that four factors most influenced franchise growth: consumer substitution, marketing spending, distribution penetration, and transaction size.19 Consumer substitution with the parent brand usually equated to “fair share” or higher.20 If marketing dollars were diverted from the long- established parent brand to support a new product, the result was often a decline in parent brand share. Though the parent brand did not lose shelf space, its low-performing stock keeping units (SKUs) were often delisted to find room for the new product. A final challenge was that average transaction size was typically lower for a new product than the parent brand because consumers experimented first with smaller sizes.

U.S. Toothpaste Market

In 2004, the $2,438 million U.S. retail toothpaste market had grown in dollar value by 8% since 2000 and was dominated by four manufacturers.21 (See Table B.)

Table B Value Shares of Leading U.S. Toothpaste Manufacturers

2004 Value Share of Manufacturer Brands Toothpaste Market

Colgate-Palmolive Colgate 34.8% Procter & Gamble Crest 31.6 GlaxoSmithKline Aquafresh, Sensodyne 14.5 Church & Dwight Arm & Hammer, Close-Up, Mentadent, Aim, Pepsodent 10.2 All Other 8.9

Source: Company records.

Since 2001, Crest’s value share of the retail toothpaste market had been growing, thanks to new product initiatives such as Crest + Scope (C+S), launched in the U.S. in January 2002, and Crest Whitening Expressions (CWE), launched in September 2004.

C+S was positioned as a toothpaste and mouthwash product that also whitened teeth. Results were strong with C+S achieving a 5.4% retail value share in 2004.22 CWE was positioned as a “flavor- based experiential toothpaste that also whitens teeth.”23 CWE was supported by heavy advertising to drive awareness and trial, and achieved a 5.2% share by the end of 2004 behind an 18.8% media advertising share of voice.24 Adding to the competition in the cosmetic segment of the toothpaste market was Aquafresh Extreme Clean, launched in September 2004, which promised to “go beyond clean and fresh breath.”

Market Segments

Consumer research (see Exhibit 2A) indicated that cavity/fluoride protection was the key benefit sought, followed by reduction in plaque build-up, breath-freshening, and tartar control. The importance of the whitening segment was growing yet was considered by CP to be the “price of entry” with any premium-priced product launch.

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In 2004, the U.S. toothpaste market was split evenly between toothpastes that emphasized therapeutic (cavity/fluoride protection, sensitivity relief) benefits and those that stressed cosmetic benefits (freshening, whitening). (See Exhibit 2B for market segment trends by benefit.) Historically, Crest had dominated the therapeutic segment with its patented fluoride anti-cavity formula until Colgate launched Colgate Total in 1998. To offset losses in the therapeutic market, Crest turned to the cosmetic segment, historically Colgate’s stronghold, with the launch of C+S and CWE, which appealed to consumers’ concerns about personal appearance. Between 2000 and the end of 2004, the cosmetic segment had nearly doubled its value share of the toothpaste category.

The toothpaste category could also be segmented into four retail pricing tiers: super premium ($3.49+), premium ($2.49–$2.99), mid-tier ($1.99–$2.49), and value (<$1.99). The premium segment represented more than half of category value sales (55.3% in 2004) but growth was strongest in the super premium segment driven by Crest’s recent cosmetic offerings (see Exhibit 2C for trends by retail price segment).

Colgate Max Fresh

The CMF launch in the U.S. in August 2004 contributed to Colgate’s record share of 34.8% that year.25 CMF cannibalized other CP toothpaste brands less than expected (48% of CMF volume was sourced from Colgate brands) and successfully traded many existing Colgate consumers up to higher-priced variants.26 Six months after launch, consumer trial of CMF was at 5.1%, second only to Colgate Total and on par with C+S. In addition, the “repeat purchase” rate of 19.5% was considered strong, exceeding BASES market test projections and ahead of C+S.27 These early results gave Burton confidence to pursue a global roll-out of CMF as fast as possible.

Positioning CMF was positioned as a premium brand, parity priced with CWE. The concept promised consumers freshness with a whitening reassurance, using mini breath strips as the distinctive reason to believe (see Exhibit 3 for the U.S. concept statement). Concept test results were strong with CMF scoring in the top 20% of new products on all measures except uniqueness, for which the score was in the top 40% (see Exhibit 4 for U.S. concept results).

The U.S. CMF product line consisted of two product forms (a liquid-bottle and a gel-tube) in two flavors (blue Cool Mint and green Clean Mint). (See Exhibit 5 for the U.S. CMF product line.) The visual impact of the liquid-bottle form was considered an important advantage at the retail shelf with mini breath strips being clearly visible through the clear plastic container.

Advertising Media advertising to generate awareness accounted for 73% of the Year 1 marketing budget.28 Advertising aimed to convince consumers that CMF would provide them with a whole new dimension of freshness because CMF was infused with mini breath strips packed with mouthwash freshness. CMF was targeted at adults 18–34, with a female skew. Psychographically, target consumers were “fresh breath experientialists, active, social, who enjoy interacting with others and for whom a clean fresh mouth is a top priority.”29 U.S. advertising launched with “Emily Procter,” a celebrity known for her CSI Miami television character who “looks beyond the obvious.” (See Exhibit 6 for storyboard.)

Marketing support The CMF launch was supported by a website which incorporated “Emily Procter,” creative promotions which leveraged package visuals, and program sponsorships on MTV, AOL Music, AOL First Look and Yahoo Launch. To drive trial, offline consumer plans included in- store sampling, merchandising displays offering money-back rebates, and various special packs such as “buy-one-get-one-free” and two-pack trial packs.

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508-009 Colgate Max Fresh: Global Brand Roll-Out

China

Overall, the CP toothpaste franchise in China, which included the market shares of its local brands Darlie (owned 50-50 by CP and Hawley Hazel) and San Xiao, was the category leader. (See Table C.) However, a challenge to CP management was to restore growth to the Colgate Equity franchise while defending against CWE’s launch in China, which was considered imminent.

Table C Value Shares in the China Toothpaste Market

2000 2001 2002 2003 2004

Colgate Equitya 19.2% 24.7% 24.2% 23.9% 23.6% Total Colgate-Palmoliveb 25.2 31.6 32.7 32.6 32.1 Crest 11.8 12.9 14.8 18.0 21.2

Source: Company records. aColgate Equity refers to all toothpaste products carrying the Colgate brand name. bTotal Colgate-Palmolive includes the 50/50 joint venture Darlie brand and San Xiao brand.

Toothpaste market In 2004, the toothpaste market was an $868 million retail business which had grown +38% since 2000.30 The market was heavily skewed towards the therapeutic segment (see Exhibit 7A for benefit preferences of Chinese consumers) as was true in most emerging markets. However, the freshness segment was growing behind the launch of Crest Tea Fresh which emphasized whitening, and Darlie, the leading brand in the premium segment, which was positioned with a cosmetic taste platform: freshness and whiteness. (See Exhibit 7B for Chinese consumer reasons for buying toothpaste.)

The market was also heavily skewed towards lower-priced local brands, with only 30% of the market by value in the premium segment. The price difference was significant: a 150g premium priced product sold at retail for 11–12 RMB versus 4 RMB for a value brand. Both Colgate and Crest offered products at both price points. (See Exhibit 8 for brand shares by price segment.)

Colgate Max Fresh—Qualifying the Product for Market

In early 2004, Del Levin, CIC director for oral care in Asia, and his team briefed R&D to begin the technology- and product-qualification processes. Technology qualification typically took four months. Product validation required an additional four months. The qualification process for Colgate Max Fresh was easier because the technology for stabilizing the breath strips in the toothpaste had already been developed and patented.

Regional management looked favorably on CMF because, compared to other developing regions, Asia had a large freshness segment. CP management in Asia felt, in retrospect, that they would have preferred to have participated earlier in the CMF development process so that they could have launched the product sooner.

Communication challenges The biggest challenge in launching CMF was getting the consumer communication right. First, Levin and his team discovered that Colgate Max Fresh did not test as well as other names in China, which led to the name being changed to “Icy Fresh.” Second, the term “breath strips” was meaningless since the niche breath strip category was practically

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unknown in China. “Cooling crystals” was identified and qualified as the most relevant and meaningful phrase to describe the breath strips to Chinese consumers. (The modified concept statement for China, which was qualified in quantitative testing, is presented in Exhibit 9.) The concept outperformed the norm for new toothpaste products in China on key quantitative measures of purchase intent, uniqueness, value for money, believability, and the importance of the main message. The product also outperformed the norm on purchase intent and on meeting expectations. (See Exhibits 10A and 10B for concept and product test results.)

Freshness was still a relatively new idea for Chinese consumers in the toothpaste category. Accordingly, communicating freshness in advertising was expected to be challenging. CP’s advertising agency believed they “needed to connect with youth at an emotional level” and that rational arguments explaining cooling crystals were not going to work in advertising copy. Further, Emily Procter’s character and role in CSI were unknown in China. As a result, brand management advocated developing unique advertising for the Chinese market at considerably more expense rather than adapting the existing U.S. “Emily Procter” spot. In the end, celebrity advertising was developed using Jay Chow, the leading rock star in China, who embodied “extreme living.” (See Exhibit 11 for storyboards.)

There was internal debate about the cost of a celebrity. Shooting a new commercial would cost around $500,000 and celebrity “talent fees” could reach $1 million.31 This would be in contrast to less than $50,000 to adapt the existing “Emily Procter” spot for China. In addition, advertising using a celebrity always ran the risk that consumer advertising “recall” would be of the celebrity at the expense of the brand and its message.

Go big or go home Levin wanted to create maximum impact with the CMF launch in China. “Colgate needed a big hit to signal we had strong momentum, both to our competition and to our sales force,” he stated.

Levin sought to use new flavors, graphics, and aesthetics to create differentiation and appeal. The Chinese toothpaste market was developing quickly, in part due to the popularity of new flavors. For example, P&G offered a tea-flavored toothpaste and Colgate a salt-flavored one. Levin’s team undertook extensive new flavor development to select a third flavor. After “screening” fifteen options, three flavors were qualified including a new tea flavor. This process lasted 32 weeks and cost $200,000.

Levin also explored new packaging to provide maximum visual impact at point-of-sale. Cost considerations prevented CP China from using the clear bottles used in the U.S., leaving the traditional tube-in-carton as the only option. A clear “stand-up tube” was developed. When tested, its novel shape and modernity proved appealing to the Chinese consumer. The package conveyed the product’s aesthetics and point-of-differentiation (breath strips). Consumers preferred the clear stand-up tube over the carton. However, execution of this package required an extra $1.5 million in capital expenditure for filling machines and a 20% variable cost premium per package. Packaging costs for the existing tube in carton format accounted for 40% of cost of goods sold. Package prototype development and testing took 12 weeks and cost $7,000. Unfortunately, Levin discovered six months prior to launch that the new package prototypes did not meet CP’s rigorous packaging standards; fixing this problem required a six-month delay in launch timing to February 2006.

Lastly, CP research in Thailand revealed that consumers preferred a lighter shade of green for the mint-flavored product. The CIC then tested and qualified this color for the Chinese market. Yet, as one manager acknowledged: “Sometimes we take the need for data too far; we will test ten different shades of yellow.” Color testing cost $7,000 and took four weeks.

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508-009 Colgate Max Fresh: Global Brand Roll-Out

Brand Recommendation

Eventually, the China team recommended an August 2005 launch for CMF. The aim was to achieve a 2% value share of the toothpaste category in Year 1 and 2.8% in Year 2. The product line would comprise three flavors (Tea, Citrus, and Mint) in a conventional tube-and-carton in three sizes priced in the premium segment. The mint variant would be in the light green shade.

The retail pricing objective was parity versus Crest Whiteness Expressions. The 100g size was expected to account for 38% of CMF toothpaste volume with a manufacturer price (MSP) of RMB 7.19 and a suggested retail price (RSP) of RMB 8.90. The balance of the volume was fairly evenly split between the 50g and 165g sizes. (Exhibit 12 summarizes projected volumes by size and manufacturer and retail pricing objectives.) The prices would have been the same if the new package had been developed.

CMF would be launched with Internet advertising and a dedicated website, a public relations event, in-store displays, trade support, consumer sampling, and advertising. The advertising objective was to convince extreme living young adults who wanted the most out of life that Colgate Icy Fresh would provide “a whole new dimension of freshness” thanks to the product being infused with cooling crystals that instantly dissolve. Using Jay Chow as a celebrity endorser, the aim was to achieve 6% share of voice (SOV)32 behind a nearly $13.5 million media investment, representing 24% of total CP toothpaste media spending, in the first six months after launch. (See Exhibit 13 for China’s pro forma CMF launch profit-and-loss statement.)

Mexico

Colgate dominated in Mexico with an 82% value share of the $348 million retail toothpaste market in 2004.33 This, combined with relatively flat toothpaste demand, meant it was hard to secure incremental shelf space to accommodate new product launches. Crest market share approximated 10%.

The toothpaste market was heavily skewed towards the therapeutic segment (87% of value share) but growth was slow (+2.6 share points since 2000). (See Exhibit 14 for market segments by benefit.) As in most developing countries, the vast majority of consumers in Mexico were focused on basic oral care (cavity prevention). Price sensitivity and sales promotion activity were both high in Mexico, with average income per capita just over $4,000 per year.34

Colgate Max Fresh Launch

The CMF launch in Mexico would neutralize the anticipated launch of CWE (called Crest Cool Explosions in Mexico). A testing plan was executed to assess the consumer appeal of the concept pre- and post-product use, expected sales volume, sources of volume and optimal pricing. Management commissioned a BASES simulated test market to assess the likelihood of long-term success; the key performance measures were purchase intent, liking, value, and uniqueness.

Some managers argued that the CMF launch should have been accelerated to pre-empt the Crest Cool Explosions launch in November 2004. Though CP U.S. launched CMF in August 2004, Mexico was targeting a launch in May 2005, nine months later. Others argued that adapting the launch marketing program for Mexico was more important than speed to market. They contended that Colgate’s share dominance in Mexico meant that Crest would not gain much ground by being first to market.

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Colgate Max Fresh: Global Brand Roll-Out 508-009

Concept and product results Concept consumer appeal of CMF was strong, driven by the extreme freshness benefit promise and the cooling crystals35 as a unique ingredient (see Exhibit 15 for Mexico concept statement). However, consumers suspected a corresponding lack of cavity prevention and whitening benefits. Some managers recommended incorporating those benefits in the brand concept to boost trial. José Torres, group brand manager, oral care, Latin America, argued for being single-minded and clear in the CMF positioning. He noted that “everyone involved in the research process for CMF’s launch marketing plan has an idea of how to make it better.” In his view, incorporating extra benefit messages would dilute the “new dimension of freshness” message.

Product acceptance among consumers was polarized, resulting in net acceptance that was slightly below par in terms of benchmarks for comparable new personal care products tested in Mexico. CMF results were below success benchmarks in top box purchase intent (“definitely would buy”) and liking. Overall consumer responses suggested that the product underperformed versus expectations established by the concept statement. (See Exhibit 16.)

Finally, a Consumer Viability Index (CVI) was calculated based on product acceptance, product value perceptions, and concept appeal. A CVI of 62% for CMF suggested that the initiative had an “average” chance of in-market success, defined as maintaining stable distribution for at least two years after launch.

Sources of volume Encouragingly, testing suggested that CMF volume sourced from Colgate would be slightly below fair share whereas Crest would lose more than fair share. In Year 1, 73% of CMF volume was expected to come from CP brands, notably Colgate Big Red, and 21% from Crest. Finally, as Torres stated, “the shelf is not elastic” so understanding which Colgate SKUs might be at risk of delisting was important. (See Exhibit 17 for market share and price points by brand in Mexico.)

Pricing CMF’s retail pricing objective was to achieve parity with Crest’s Cool Explosions. Price/value perceptions were above average for CMF. In addition, few consumers mentioned price as a like or dislike. However, further analysis revealed that volume was maximized at 14.50–15.00 pesos. CMF was tested at a retail price of 15.99 pesos. It was estimated that CMF could increase volume by +25% if the price was decreased from 15.99 to 14.99.

Advertising As in CP China, concerns over the transferability of the U.S. “Emily Procter” advertising led the brand group to want to develop new advertising for the Mexican market. The agency argued for advertising that combined the explosive power to freshen with extreme living. They proposed an advertising idea, “a joy ride for your mouth,” that was depicted in advertising entitled “Snowsurfer” (see Exhibit 18 for storyboard). The brand group decided to have it produced. Incremental production and talent costs combined were $500,000.36

Brand Recommendation

The brand group recommended launching CMF in May 2005. The objective was to achieve a Year 1 CMF value share of 5% and a Year 2 share of 6%. The Mexican product line would include three flavors (Cool Mint, Clean Mint, and Cinnamint) in two packaging formats (tube in carton and bottle). Two sizes would be offered (75ml and 100ml) where 100ml was expected to account for 94% of CMF toothpaste volume because the 75ml size would have limited distribution.

The retail pricing objective was parity versus Crest Cool Explosions. The 100 ml size would be priced at 13.95 pesos (MSP) and 15.30 pesos (RSP). The 75ml size would be priced at 11.64 pesos (MSP) and 14.93 pesos (RSP). (See Exhibit 19 for pricing objectives.)

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A media investment of almost two million dollars in the first eight months after the CMF launch was expected to deliver a 14.7% share of voice. In-store merchandising, sampling, and public relations would reinforce the “Snowsurfer” advertising and all would communicate single-mindedly the brand’s core benefit: the new dimension of freshness. (See Exhibit 20 for CMF pro forma profit- and-loss statement.)

Conclusion

As Burton reviewed the recommendations from China and Mexico, he noted that the U.S. marketing plan “as is” had not been tested by either management. Accordingly, it was hard to evaluate whether the time and cost of the proposed local adaptations would deliver results over and above what the base U.S. plan would have achieved. Burton wondered how he could add value to the process at this stage. He considered the following questions:

• Did China and Mexico each do a good job of adapting the launch to meet local consumer needs? What is the likely profit impact of each plan? Which of the proposed adaptations were “must haves” versus “nice to haves”?

• From a global CMF perspective, what is the short- and long-term impact of the complexity born out of these local adaptations? Is this added complexity good or bad for the global CMF business?

• What guidelines could Burton propose going forward to optimize new product introductions for CP worldwide, for the regions, and for the country subsidiaries?

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Exhibit 1 Marketing Roles and Responsibilities

Global Business Development Geographic Divisions Consumer Innovation Centers Subsidiaries

Titular head: President Titular head: President Titular head: VP/GM Titular head: GM Reports to: Chief Operating Officer Reports to: Chief Operating Officer Reports to: Division Marketing VP Reports to: Geographic Division President

This document is authorized forThis document isauthorized use only by Preston Cameronin2016. GBD Oral Care Latin America (Latam) Europe/South Pacific Asia North America Africa/Middle East

Develop the Category Strategy P&L responsibility Responsible for new product Develops and executes local marketing For theexclusive useofP. Cameron, 2016. Highlight Major Innovation Needs Translates global category strategy to development plans, including local sales promotion and each region; directs innovation and Alignment with GBD on Strategy media plans marketing investments

Long-Term Planning Responsible for regional Consumer Facilitates cross-region sharing of Participates in Regional Go-To-Market Gaps and Opportunities Innovation Centers and their new consumer knowledge and best practices Teams where appropriate Acquisition Targets product development activity Cooperation with Technology Resource Allocation

“Own” the Equity, Including Responsible for advertising development Executes on the ground marketing, Communication Strategy promotion, advertising, and in-store events

Global Communication and Oversees development of subsidiary Activity Coordination marketing plans

Source: Company document.

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Exhibit 2A U.S. Toothpaste Benefit Importance

• Whitening is part of the second tier, up from its tier three position in 1997.

Nice Nice To Have But Not To Have A Consideration When and Buying/ Must HaveConsider Don’t Need Base: Total Respondents (1,216) % % %

Protects against cavities/contains fluoride 72 22 6 Reduces plaque build-up 63 30 7 Freshens breath 63 29 8 Controls tartar 62 30 8 Whitens teeth 50 36 14 Reduces tooth sensitivity 26 36 38 Has mint flavors 19 41 40 Has baking soda and peroxide 14 35 51 Has unique flavors (e.g., citrus, vanilla) 10 28 62 Has only natural ingredients 10 26 64

Average Number of Mentions: 4.6

Source: Company documents.

Exhibit 2B Value Shares of U.S. Toothpaste Segments by Principal Consumer Benefit

2000 2004 Change

Family Anti-Cavity/Tartar 41.3% 18.3% -22.7 Kids Anti-Cavity 3.8 3.7 -0.1 Premium Multi-Benefita 17.3 18.8 +1.5 Sensitivity Relief 6.6 7.7 +1.0 Herbal/Natural 0.0 1.9 +1.9 TOTAL THERAPEUTIC 72.7 53.4 -19.3

Whitening 13.9 30.3 +16.4 Freshening/Cleaning 13.4 16.3 +2.9 TOTAL COSMETIC 27.3 46.6 +19.3

TOTAL MARKET 100.0 100.0

Source: Company document. aThree benefits or more such as Colgate Total.

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Exhibit 2C U.S. Toothpaste Segments by Retail Price Point

2003 2004 Change

% Category Volume Sales

Super Premium ($3.49+) 13.7 16.8 +3.1 Premium ($2.49–$2.99) 55.0 55.3 +0.3 Mid-Tier ($1.99–$2.49) 27.2 24.4 -2.8 Value (<$1.99) 4.0 3.5 -0.5 TOTAL 100% 100%

% Colgate-Palmolive Volume Sales

Super Premium 2.4 7.8 +5.4 Premium 51.9 54.0 +2.1 Mid-Tier 43.2 35.9 -7.3 Value 2.5 2.2 -0.3 TOTAL 100% 100%

Source: Company document.

Exhibit 3 U.S. Colgate Max Fresh Concept Statement

Introducing Colgate Max Fresh Toothpaste infused with mini Breath Strips Experience a whole new dimension of freshness

When you brush your teeth you expect to freshen your breath—now it’s time to raise your expectations so you can leave the house with that ready-for-anything confidence.

When you brush with Colgate Max Fresh whitening toothpaste infused with mini Breath Strips you don’t just get fresh breath, you experience a whole new dimension of freshness.

The mini Breath Strips are packed with mouthwash freshness to enhance the freshening experience. As you brush, they instantly dissolve, releasing an extra rush of breath freshening power so you can be confident that you’re ready to take on the day.

New from Colgate, the only whitening toothpaste infused with mini Breath Strips, experience a whole new dimension of freshness.

Source: Company document.

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508-009 Colgate Max Fresh: Global Brand Roll-Out

Exhibit 4 U.S. Concept Key Measures

Colgate Max Fresh Results Benchmarked Colgate Versus Other Max Fresha Product Launchesb (N) (213)

Purchase Intent (%) Definitely Would Buy and Probably Would Buy 60 Top 20%c Definitely Would Buy 22 Top 20%

Mean Liking Rating (6-point scale) 4.5 Top 20% Mean Value Rating (5-point scale) 3.7 Top 20% Mean Uniqueness Rating (5-point scale) 3.6 Top 40%

Source: Company document. aConsumers were exposed to the Colgate Max Fresh concept statement and then presented with a price card showing flavors and sizes (February 2004). bOther toothpaste product launches in the BASES database. cTop 20% is read as follows: CMF Purchase Intent of 60% scores in the top 20% of all new toothpaste product launch test results in BASES database.

Exhibit 5 U.S. Colgate Max Fresh Product Line by Form and Flavor

Colgate Max Fresh Cool Mint Colgate Max Fresh Cool Mint Gel Liquid

Colgate Max Fresh Clean Mint Gel Colgate Max Fresh Clean Mint Liquid

Source: Company document.

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Colgate Max Fresh: Global Brand Roll-Out 508-009

Exhibit 6 “Emily Procter” Storyboard

Source: Company document.

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508-009 Colgate Max Fresh: Global Brand Roll-Out

Exhibit 7A Value Shares of China Toothpaste Segments by Principal Consumer Benefit

2000 2004 Change

Family Anti-Cavity/Tartar 58.3% 28.5% -29.8 Kids Anti-Cavity 0.1 0.6 +0.5 Premium Multi-Benefita 3.3 2.2 -1.1 Sensitivity Relief 8.9 0.4 -8.5 Herbal/Natural 5.7 15.8 +10.1 TOTAL THERAPEUTIC 89.3 82.9 -6.4

Whitening 5.1 8.9 +3.8 Freshening/Cleaning 5.6 8.2 +2.6 TOTAL COSMETIC 10.7 17.1 +6.4

TOTAL MARKET 100.0 100.0

Source: Company document. aThree benefits or more such as Colgate Total.

Exhibit 7B Consumer Reasons for Using Toothpaste in China

Top Reason (N = 1,660)

Fresh Breath 28% Anti-Cavity 14 Gum Protection 11 Whitening 10 Reduces Toothache Pain 10 Cleaning 10 Strengthening Teeth 6 Makes teeth stronger and more resistant to pain 5 Sensitivity Relief 3 Other 3

Source: “Category Consumer Usage and Attitude Study,” Colgate-Palmolive, February 2004.

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Colgate Max Fresh: Global Brand Roll-Out 508-009

Exhibit 8 China—Shares by Brand and by Price Point

Value Share Volume Share 2004 2004

CORPORATE CP 32.1% 29.0% COLGATE EQUITY (EXCL. JIE YIN) 23.6 23.5 HI-END SEGMENT 6.8 4.3 COLGATE CDC PASTE 2.9 1.9 COLGATE CDC Gel NA NA COLGATE PROPOLIS 0.1 0.0 COLGATE TOTAL 0.7 0.4 COLGATE TOTAL PLUS WHITEN 0.8 0.5 COLGATE WHITENING 1.9 1.3 COLGATE MAX FRESH NA NA COLGATE SIMPLY WHITE NA NA COLGATE KIDS 0.4 0.2 LOW-END SEGMENT (EXCL. JIE YIN) 16.8 19.2 COLGATE LPP 8.8 9.8 COLGATE VC FRESH NA NA COLGATE TRIPLE ACTION 1.8 2.0 COLGATE HERBAL 4.0 5.1 COLGATE HERBAL WHITEN 1.6 1.7 COLGATE HERBAL SALT 0.6 0.6

JIE YIN 0.9 1.0 DARLIE (HI-END) 7.4 4.1 DARLIE REGULAR 4.5 2.6 DARLIE WHITENING 1.9 1.1 DARLIE HYDRO FRESH 0.6 0.3 DARLIE KIDS 0.4 0.1

SAN XIAO 0.2 0.4

CREST 21.2% 17.5% HI-END SEGMENT 11.2 6.7 CREST AC REPAIR 5.6 3.5 CREST WHITENING 1.8 1.0 CREST REFRESHING WTN 0.4 0.2 CREST WTN EXP NA NA CREST VIVID WHITE NA NA CREST TEA FRESH 2.3 1.4 CREST SENSITIVE 0.4 0.3 CREST MIO 0.7 0.4 CREST NIGHT CARE NA NA LOW-END SEGMENT 10.0 10.8 CREST FLUORIDE 2.0 2.5 CREST STRONG ROOT&TIP NA NA CREST HERBAL 5.1 5.5

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508-009 Colgate Max Fresh: Global Brand Roll-Out

Value Share Volume Share 2004 2004

CREST SALT WTN 2.5 2.4 CREST TEA CLEAN 0.4 0.4 CREST HERBAL SENSITIVE NA NA UNILEVER 11.3% 13.1% ZHONGHUA 9.9% 12.1%

ALL OTHERS 35.4% 40.4%

Source: Company documents.

Exhibit 9 China: Colgate Max Fresh Concept Statement

New Colgate Icy Fresh Gel with Cooling Crystals Experience a new dimension in freshness

Brushing is a routine to freshen your breath. Now you can expect more than that to kick off the day with ready-to-conquer confidence.

When you brush with Colgate Icy Fresh gel, infused with cooling crystals, you don’t just get fresh breath, you experience a new dimension of freshness. As you brush they instantly dissolve, releasing a cool burst of freshness that will give you the confidence to take on the day.

It also has Colgate’s clinically proven cavity protection.

New Colgate Icy Fresh Gel, with cooling crystals. Experience a whole new dimension of freshness.

Source: Company documents.

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Colgate Max Fresh: Global Brand Roll-Out 508-009

Exhibit 10A China: Colgate Max Fresh Concept Test Results

Colgate New Product Max Fresh Norma

Base: All respondents 3,840 NA Purchase Intention Definitely would buy 28 27 Definitely/Probably would buy 97 92 Uniqueness Extremely new and different 9 7 Extremely/Very new and different 57 50 Value for Money Very good value for money 6 6 Very good/fairly good value for money 64 57 Believability Completely believable 13 14 Somewhat/Completely believable 99 94 Importance of Main Message Very important 32 41 Very/Somewhat important 98 96

Source: Company document. aDatabase of New Toothpaste Products Tested in China.

Exhibit 10B China: Colgate Max Fresh Product Test Resultsa

Colgate Colgate New Product Max Fresh Mint Max Fresh Citrus Normb

Base: All respondents 298 298 NA Purchase Intention Definitely/Probably would buy 87 90 83 Uniqueness Extremely new and different 5 6 Extremely/Very new and different 50 50 Comparison Against Brand Used Most Often Much better 6 4 Much/Somewhat better Value for Money Very good value for money 9 5 Very good/fairly good value for money 58 54 57 Comparison with Expectation Much better than expected 5 5 3 Much better/Better than expected 38 40 38

Source: Company document. aConsumers were provided with product for use after reading concept. Results reflect interviews after product usage. bDatabase of New Toothpaste Products Tested in China.

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Exhibit 11 “Jay Chow” Television Advertising Storyboard This document is authorized forThis document isauthorized use only by Preston Cameronin2016. For theexclusive useofP. Cameron, 2016.

508-009 -21-

Exhibit 11 (continued) This document is authorized forThis document isauthorized use only by Preston Cameronin2016. For theexclusive useofP. Cameron, 2016.

508-009 -22-

Exhibit 11 (continued) This document is authorized forThis document isauthorized use only by Preston Cameronin2016. For theexclusive useofP. Cameron, 2016.

Source: Company document.

For the exclusive use of P. Cameron, 2016.

Colgate Max Fresh: Global Brand Roll-Out 508-009

Exhibit 12 China: Colgate Max Fresh Pricing

Manufacturer Suggested Expected Volume Size Flavors Selling Price Retail Price Split by Size

50 g Mint, Citrus Tea 2.93 RMB 3.90 RMBa 32% 100 g Mint, Citrus, Tea 7.19 8.90 38 165g Mint, Citrus, Tea 9.64 11.90 30

Source: Company document. aCurrency Conversion: 1 RMB = $0.1211 in 2005.

Exhibit 13 China: Pro-Forma Profit-and-Loss for Colgate Max Fresh Launch

Year 1Year 2

SALES (Tons)a 3,882 4,370 NET SALES ($000) 20,303 23,773 COST OF GOODS SOLD 10,054 9,745 % of Sales 50% 41% CONTRIBUTION MARGIN 10,249 14,028 % of Sales 50% 59% NONVARIABLE OVERHEAD 4,710 5,515 23% 23% MARKETING EXPENSES 15,880 10,000 % of Sales 78% 42% Media Advertising 15,000b 9,000 Promotions and Sampling 800 1,000 OPERATING PROFIT (10,261) (1,487) % of Sales -51% -6%

Source: Company document. aVolume conversion: 1 ton = 1000 kg; 1 case of product = 1.604 kg. bMedia Advertising in Year 1 includes $1.5 million for TV production and talent fees.

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508-009 Colgate Max Fresh: Global Brand Roll-Out

Exhibit 14 Value Shares of Mexico Toothpaste Segments by Principal Consumer Benefit

2000 2004 Change

Family Anti-Cavity/Tartar 66.7% 64.8% -1.9 Kids Anti-Cavity 1.1 1.2 +0.1 Premium Multi-Benefita 10.6 12.1 +1.5 Sensitivity Relief 4.2 3.3 -0.9 Herbal/Natural 0.0 2.0 +2.0 TOTAL THERAPEUTIC 84.7 87.3 +2.6 Whitening 4.9 2.7 -2.2 Freshening/Cleaning 10.4 10.0 -0.4 TOTAL COSMETIC 15.3 12.7 -2.6

TOTAL MARKET 100.0 100.0

Source: Company document. aThree benefits or more such as Colgate Total.

Exhibit 15 Mexico: Colgate Max Fresh Concept Statement

Introducing Colgate Max Fresh Toothpaste infused with Cooling Crystals Experience a new dimension of freshness

When you brush your teeth, you expect to freshen your breath – now it’s time to raise your expectations so you can leave the house with that ready-for-anything confidence.

When you brush with Colgate Max Fresh gel, infused with cooling crystals, you don’t just get fresh breath, you experience a new dimension of freshness.

These mini crystals are packed with the freshening power of mouthwash. As you brush they instantly dissolve, releasing a cool burst of freshness that will give you the confidence to take on the day.

New Colgate Max Fresh gel with cooling crystals. Experience a whole new dimension of freshness.

Source: Company document.

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Colgate Max Fresh: Global Brand Roll-Out 508-009

Exhibit 16 Colgate Max Fresh BASES Product Performance Against Key Benchmarks

Max Fresh BASES Total Sample Success (Total Consumers) (282) Benchmarksa

Purchase Intent (%) Definitely would buy 65 71 Definitely or probably would buy 95 95

Mean Liking Rating (6-point scale) 4.8 4.9

Mean Value rating (5-point scale) 4.0 4.0

Product Expectation (%) Better than expected 59 71 Worse than expected 6 3

Source: Company document. aBASES Success Benchmarks represent the scores generally achieved by BASES-tested new personal care products which were subsequently launched in Mexico and then maintained stable distribution for at least two years.

Exhibit 17 Mexico: Value Shares and Price Points by Brand

Average Price Point Value Share 2004per 100 ml. Size

TOTAL COLGATE 82.0% Colgate Big Red 35.6 13.99 pesos Colgate Triple Action 17.7 12.34 Colgate Total 11.7 19.36 Colgate Sensitive 0.3 23.95a All Other Colgate 16.7

TOTAL PROCTER & GAMBLE 10.2 Crest + Scope 3.0 13.35 Calcident 3.0 9.92 Crest Cool Explosions 0.3 12.94 All Other Crest 3.9

ALL OTHER COMPETITORS 7.8 NA

Source: Company document. aSensitive only available in 75 ml. size.

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Exhibit 18 Mexico: “Snowsurfer” Television Advertising Storyboard

Te lleva

This document is authorized forThis document isauthorized use only by Preston Cameronin2016. It takes you…

A una Preparate… dimension de frescura Prepare yourself… Colgate Max Fresh

To a new dimension for freshness. For theexclusive useofP. Cameron, 2016.

con…

With…

Porque sus miles Cristales refrescantes… Because its thousand… Cooling crystals…

Source: Company document.

508-009 -27-

Exhibit 18 (continued)

We see the man is back Solo en

This document is authorized forThis document isauthorized use only by Preston Cameronin2016. in the bathroom. He Max Fresh… looks into the mirror.

De cristales Only in Max Fresh.. refrescantes

Of cooling Our perspective moves behind the crystals… mirror. We see the man lean in and blow

cool air, fogging up For theexclusive useofP. Cameron, 2016. Desatan una our view. avalancha de frescura

Unleash and The mirror continues to fog/ freeze up, blocking avalanche of our view of the man. freshness..

Para tu aliento. As the mirror freezes VO: Colgate Max Crystales refrescantes a pack of MaxFresh Fresh. Una nueva flies through it, dimension de frescura. shattering it. We see For your breath. cold air and “cooling Colgate Max Fresh. A crystals” in place of new dimension of Cooling crystals shattered glass. freshness.

Source: Company documents.

For the exclusive use of P. Cameron, 2016.

508-009 Colgate Max Fresh: Global Brand Roll-Out

Exhibit 19 Mexico: Colgate Max Fresh Pricing

Manufacturer Suggested Expected Volume Size Flavor Selling Price Retail Sales Price Split by Size

75 ml a Cool Mint, Clean Mint, Cinnamint 11.64 pesos b 14.93 pesos 6%

100 ml Cool Mint, Clean Mint, Cinnamint 13.95 15.30 94

Source: Company document. a75 ml. had limited distribution. bCurrency Conversion: 1 Mexican Peso = U.S. $0.09.37

Exhibit 20 Mexico: Pro-Forma Profit-and-Loss for Colgate Max Fresh Launch

Year 1Year 2

SALES (Tons)a 1,600 1,850 NET SALES ($000) $10,336 $13,487 COST OF GOODS SOLDb 4,848 5,458 % of Sales 47% 40% CONTRIBUTION MARGIN 5,488 8,029 % of Sales 53% 60% NONVARIABLE OVERHEAD 1,406 1,834 14% 14% MARKETING EXPENSES 1,500 1,400 % of Sales 15% 10% Media Advertising 1,200b 1,300 Promotions and Sampling 300 100 OPERATING PROFIT 2,582 4,795 % of Sales 25% 36%

Source: Company document. aVolume conversion: 1 ton = 1,000 kg = 1,000,000 g; 1 case of product = 1.2 liters = 1.604 kg. bMedia Advertising in Year 1 includes $500,000 for TV production and talent fees.

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Colgate Max Fresh: Global Brand Roll-Out 508-009

Endnotes

1 Colgate-Palmolive 2004 Annual Report, p. 1. 2 Ibid., Worldwide Sales, p. 1.

3 Adbrands.net, “Colgate-Palmolive (U.S.),” p. 1, updated January 2007, http://www.adbrands.net/ member/us/colgate_us_p.htm, accessed February 26, 2007.

4 Ibid. 5 Colgate-Palmolive 2004 Annual Report, p. 1.

6 Ibid., p. 2.

7 Ibid., p. 3.

8 Ibid., p. 21.

9 Company records. 10 Company records.

11 Company records.

12 “Colgate/Crest: Brand Profiles,” Adbrands.net, http://www.adbrands.net/members/US/Crest_US _p.htm, accessed February 26, 2007, 12:45 p.m.

13 Ibid. 14 Colgate Total website: http://www.colgate.com/app/ColgateTotal/US/EN/HomePage.cvsp, accessed July 16, 2007.

15 “Colgate-Palmolive” (U.S.), Adbrands.net, p. 2, updated January 31, 2007, http://www.adbrands.net member/us/colgate_us_p.htm, accessed February 26, 2007

16 “The Breath Strips Revolution,” Euromonitor Archive, published May 23, 2003, http://www.euromonitor. com/The_breath_strips_revolution, accessed August 29, 2007.

17 Ibid. 18 Cannibalization in marketing refers to a reduction in the sales volume, sales revenue, or market share of one product as a result of the introduction of a new product by the same producer. http://en.wikipedia. org.org/wiki/cannibalization, accessed July 16, 2007.

19 Company records, BASES Concept Pre-Bases report and OBIE Analysis (CI&R Auth #50003-410). 20 “Fair Share Loss” due to cannibalization means that an existing Colgate product would lose sales volume proportionate to its share of the market. For example, if Colgate Total’s share of the market is 5.0% and Colgate Max Fresh’s new share is expected to be 3.0%, then Colgate Total’s fair share loss to CMF would be 5.0% x 3.0%= 0.15 share points.

21 “Colgate/Crest: Brand Profiles,” Adbrands.net, p. 2, update July 2006, http://www.adbrands.net/ member/us/colgate_us_p.htm, accessed February 26, 2007.

22 Company records.

23 Company document: Colgate-Palmolive Max Fresh Workshop, 2007.

24 Company document: Colgate-Palmolive Tracking Document—Media: SOV/SOM–U.S. 25 Colgate-Palmolive 2004 Annual Report, p. 1.

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508-009 Colgate Max Fresh: Global Brand Roll-Out

26 Company records: Max Fresh Key Learnings by Sarah Upbin. “Max Fresh Sources of Volume,” 2006 and 2005 Corporate Mid Year Reviews, 2006 Budget Review.

27 Company records. 28 Ibid.

29 Company documents: Colgate-Palmolive Max Fresh Workshop, January 2007.

30 Company records. 31 Ibid.

32 Share of Voice defined as a brand’s or a group of brands’ advertising weight expressed as a percentage of a defined total market or market segment in a given time period. Source: http://en.wikipedia.org/wiki/ share_of_voice, accessed July 15. 2007. 33 Ibid.

34 Global Market Information Database for Harvard University by Euromonitor International, http://www1.gmid.euromonitor.com.ezpl.harvard.edu/statspage.aspx, accessed: May 4, 2007.

35 Similar to China, “cooling crystals” was used as the reason to believe because “breath strips” had no meaning to the Mexican consumer.

36 Ibid.

37 Source of currency conversion: http://www.bankofcanada.ca/cgi-bin/famecgi_fdps, accessed: July 3, 2007 11:11 a.m. Bank of Canada Rates and Statistics.

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