We all know that IR is about communications. So it should not come as too much of a surprise that Colgate-Palmolive’s award-winning investor relations officer Bina Thompson’s first degree was in English literature.
But when it came to warbling her native woodnotes wild in business, she realized that metrics meant more than meters. At one time, working at a computer company, she was advised that her career path would be much smoother with an engineering or finance degree. Despite being the mother of two she took an MBA at night school and, thus equipped, became treasurer of the company when it went public. That began her involvement with investor relations. Nowadays people study IR at school, but Thompson admits that, when she began, ‘It was often fortuitous accident that led us into it.’
Colgate-Palmolive brushed her up in 1992 to run the company’s investor relations program. To begin with she worked with her predecessor, Kathy Tarbox, but after six months she found herself in sole charge of IR for one of the world’s most stellar branded companies. ‘If you’d asked me in the mid-1980s what my future was,’ says Thompson, ‘I wouldn’t have said I’d be doing this.’
However she goes on to wax positively poetic about her chosen profession. ‘I guess I like it because it’s all about people. To me, it’s like entertaining, like giving a party. You need to do a lot of preparation work, which is the nuts and bolts, but at the end of the day, it’s having conversations with people – and enjoying it,’ Thompson remarks.
Global expansion
Today Colgate-Palmolive is expanding globally, and the $9 bn plus company is returning gross profit margins of over 53 percent. ‘Our company believes in the IR function,’ Thompson says firmly. CEO Reuben Mark is actively involved in IR work. ‘The commitment that our senior level people give to IR is the best aspect of our program. I report directly to the CEO, which is somewhat unique. And it’s not just a formality: I sit in on all the board meetings and senior staff meetings, since I’m one of them.’ The advantage of this approach for an IRO is clear: ‘It means that investors know that I know what’s going on.’
Thompson’s seven-strong team includes Anne Crawford, IR director responsible for the annual report, annual meeting and financial media relations; Kathya Guerra, who helps Crawford and sets up investor meetings; and Craig Jones, who deals with individual shareholders on stock transfer issues and also talks to brokers.’He’s my stock jockey,’ says Thompson. ‘He runs charts for me, does analysis and has a financial background, so he takes care of the department budget. Patricia Dougherty, our IR analyst, is really my right hand. She helps set up meetings and get presentations in order. She knows all the analysts as well as I do.’
There is a noticeable emphasis in Colgate’s IR on the buy side. ‘We’re followed by 14-15 brokerage firms. But there are certainly people on the buy side who are following several industries who don’t have time to build models on all the companies, so I think it is important for them to be on the right track.’ Thompson admits that it helps to have analysts with a buy on the stock so the company can count on brokerage help.
Within the States the first half of the year imposes a heavy travel schedule. ‘I’d like to say that it is a very formal and exact process, but it is more ad hoc. Still, it seems to work.’ The tours and one-on-ones deploy a range of senior operating management and I think they enjoy it,’ Thompson hazards. ‘For the people within a company, investor relations is often somewhat of a mystery, so it’s nice for them to learn what it is we do and how we do it.’
Colgate’s IR is rigorously targeted, but with some overlap to allow for contingencies. ‘Obviously, you don’t spend time talking to the index funds, and you want to go after the growth investor. But you don’t want to be too narrow – you may lose an investor who at a particular time may be appropriate for the stock,’ she says – this before Procter & Gamble’s tumble in March. ‘There’ll come a time for the value guy who normally thinks that your stock is expensive. If you’ve met with them on a regular basis so that they understand the business, when the moment comes they can buy the stock because they feel comfortable.’
Simple science
‘It’s not rocket science,’ Thompson comments laconically. ‘IR is relatively simple: it’s basically developing relationships, going back year after year to major holders here and around the world, and making sure they understand the story. With our range of products, the story doesn’t change a lot year in and year out; the strategy is consistent and the result is consistent. My challenge is how you tell the same story in a different way, so that you don’t get sick of the same presentation all the time. But it seems to work out quite well.’
Of course, in recent times she has had a major disadvantage in that Colgate is definitely old economy compared to high-flying tech stocks. Colgate sells lots of real products for real money and makes real profits, but the only dots it deals with are the cavities that the toothpastes avert. Against the ephemeral successes of the dot-coms Thompson points out that since new management took over 16 years ago, a dollar invested in Colgate would have brought a $37 return while the S&P would have brought a mere 13 times reward over the equivalent period.
While many American investors look at Colgate-Palmolive’s business as a mature industry, Thompson is persuading them that ’50 percent of our business is high growth.’ There are billions of teeth in the world, just waiting for toothpaste, and millions of scalps just waiting for shampoos and conditioners. She points to countries like India where Colgate has had a foothold for 60 years: ‘Those are the places where people are not brushing their teeth three times a day, twice a day, or at all. So as the economy takes off, there will be a great opportunity there.’ Proving the company’s adaptability to local conditions, she points out, ‘We sell a lot of tooth powder in India.’
There is a strong overseas IR program to match the company’s global spread and global investor base. Almost a quarter of a new offering in 1991 was consciously marketed to European investors. ‘If you’re a global company like Colgate, with two-thirds of your business overseas, it makes sense to have an overseas ownership,’ Thompson comments.
Overseas ownership is about 10 percent, mostly in Europe with some in Japan. Although she makes occasional visits to the government of Singapore, whose pension fund invests significantly in the US market, Thompson freely admits that Asia has not really benefited much from her IR efforts, even in Japan. Citing ‘language barriers, the length of time it takes to get there, and the cost of the meetings’ as reasons, she adds that, anyway, Japanese banks are well represented in New York.
Thompson admits that developing markets can cause investor indigestion if a company is too closely identified with them, but counters with Colgate’s numbers. ‘For years and years, we have found that the great opportunities are in developing markets. You’ve had the Mexican crisis, Russian crisis, and Asian crisis within the last few years. We always need to have our reaction ready when people want to sell stocks.’
That reaction is to point out the company’s long track record in these markets. ‘It’s a question of being in contact with them on a regular basis to understand them; and then being in regular contact with investors to share our understanding.’
She reminisces about Brazil’s currency crisis at the beginning of last year, when the company’s $600 mn business there was almost halved by the devaluation. ‘You have to communicate as much as possible and be up-front with everybody about what’s going on. So, I simply got on the phone and said, okay, this is the evaluation: the worst case is that this costs us x earnings per share. We may be able to make it up, but take down your numbers to reflect that, and we’ll keep in touch.’
Rational investing
Alan Greenspan may have coined the phrase ‘irrational exuberance’ to describe the markets, but in March 2000 irrational despondency became dominant when Procter & Gamble announced an earnings failure and investors dumped all stocks in the personal products sector in response. Proving that there is still some element of rationality in investing, Colgate, with its unblemished earnings record, rapidly climbed back up; it even had a boost from life-raft investors who abandoned the dot-coms at the beginning of April.
The company’s success has certainly persuaded its own employees, who now own 14 percent of the stock, up from 2 percent several years ago. That has helped Thompson internalize investor relations for management. ‘I spend a lot of time talking to them about what it is I take to the Street, and that’s easier since they’re shareholders.’
Employee shareholders apart, Thompson doesn’t spend a lot of time with retail investors, ‘But both Anne Crawford and Kathya Guerra attend a number of individual investor conferences every year, particularly in locations where we have a high retiree population.’
Colgate has a philosophy of putting out the welcome mat for retail investors. New registered shareholders get a letter from the chairman and a package of coupons for company products. ‘It costs a lot of money to have a lot of registered shareholders, but you have to have them for a consumer product company with a very well-known brand name. After all, they are also our potential consumers.’
Thompson’s approach to investor relations remains as brisk as minty toothpaste, even after all these years and crises. ‘I suppose the stress factor is challenging in its own way. And when the market is up, it keeps you refreshed. There is always something new and you have to know a little bit about everything. It is a question of developing relationships with people within the company as well as people outside the company.’
