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1/ High market share co having high valuation means you are betting more on (a) more usage per person (b) higher prices per unit (c) completely new biz to deliver for ensuing profit or cash flow growth to justify current multiple. #Colgate
2/ Beyond a point getting incremental share becomes very tough. The market leader then has to develop the category to grow the market to increase usage. “Daag ache hain” campaign is probably the best example aka more usage
3/ The other alternative is to keep developing value added products so you can charge more for them aka higher prices
4/ With high ROCE comes the problem of deploying it well. Once options in 2/ and 3/ are used CPGs proceed to investing in developing new products or buying them outright. This is tricky
5/ Management decisions shape all above options. Yet many times we focus too much on the numbers and not on the people taking these decisions
6/ So coming back to 1/ it’s good to know what built into stock prices to form a more sharper opinion of your thesis and knowing what to track. Many times just having clarity brings conviction (fin)
