Colgate-Palmolive Company (NYSE:CL) Q2 2023 Earnings Call Transcript

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Yes, it was. But the good news is, we’ve adjusted the P&L, we’ve strengthened it and we can adjust moving forward as we see the opportunities provide themselves. So while we’re delivering both sales and profit growth along with increases in brand support in the middle of the P&L, it’s clearly a healthier way to drive the business. If I look at the Hill’s business, we’re still seeing high levels of cost inflation, as you’ve heard us talk about in the first quarter and gross margins are still down year-over-year. So we’ve taken additional pricing to get the right margin structure for this business for the long-term. Much of the Hill’s volume decline in the quarter was in emerging markets as much of the time is due to go-to-market changes or shipments that we had.

The good news is the EMEA or our Europe business, and particularly there we were strong, U.S. volumes were only down slightly in the quarter against a very difficult comparison with pricing as you saw up in the teens. But we’re focused on getting Hill’s back to volume growth the right way. This is a business that responds very well to science driven innovation and strong advertising. We want to make sure that it’s well funded and through the gross margin expansion that you’ve seen. And Hill’s saw the biggest advertising increases in brand building in this quarter and will continue to fuel that investment. So I understand the importance of gaining volume growth, as you asked. We know we’re all focused on that and as you are. But as I said, we want to do that in a way that sets us up structurally for long-term profitable growth.

That means a good visibility towards restoring our gross margin to previous levels through revenue growth management and productivity that we’ve been talking about, well-funded advertising and the ability to drive operating leverage with the strong innovation that we’re bringing to the market and healthier brands. So with a lot of great work by Colgate people, we have gross margin, overheads and logistics trending positively. We just finished the first half where we increased advertising by 17%. We have put additional pricing in place. We have strong innovation across all the divisions and categories. And we have second half volume comps that are easier by about 500 basis points. So we feel we’re very well positioned. So with that, let me turn it over to the other questions.

Operator: Our next question will come from Filippo Falorni of Citi. Please go ahead.

Filippo Falorni: Hey. Good morning. Good morning, everyone. Just a follow-up on the prior question, Noel. You mentioned the need to take incremental pricing. Can you give us a little bit more color which category, country combination are you taking more pricing? What has been the response so far, and generally, like the magnitude relative to the prior price increases? Thank you.

Noel Wallace: Sure. Let me just come back to a quick finish on Dara’s point. He asked about market shares. Dara, so our market share — global market shares are up on toothpaste around the world. Strong growth obviously in Europe, a little softness in North America, as you’ve seen in the scanner data. And we’re obviously addressing that as we go into the back half. Latin America shares look good. Asia shares look good. Africa shares look really, really strong. We’re up or flat in all the 11 markets where we read shares there. So overall, oral toothpaste shares are pretty good. Filippo, on your question with regarding the pricing, certainly in some of the higher inflationary markets, we will probably still see pricing in the back half of the year.

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