Dara Mohsenian: Thanks, guys.
Mike Hsu: Okay. Thank you, Dara.
Nelson Urdaneta: Thank you, Dara.
Operator: Thank you. Your next question is coming from Lauren Lieberman from Barclays. Your line is live.
Lauren Lieberman: Great, thanks. Good morning.
Mike Hsu: Hi, Lauren.
Lauren Lieberman: Hi. I wanted to just shift focus maybe a little bit to talk a bit about the cost picture and FORCE savings. Both of those benefit from deflation, and FORCE savings in the fourth quarter were a bit lighter I think than expected or certainly that we’d modeled. So, it’s rare to see that. So, if you could just maybe provide some perspective on why that outlook moving forward and maybe how FX plays into that, if at all?
Nelson Urdaneta: Sure. So, let me start, Lauren, by saying that this phase of cost recovery and supply chain stabilization, we would think of it as largely behind us. A lot of the disruptions and the super cycle that we saw, our expectation is for that to not happen in the foreseeable future and certainly in 2024 based on what we know today. So, thinking about cost as a whole, first, our aggregate cost basket is easing in inflation, but there is no deflation, because there are several components that I’d like to unpack. We expect the ’24 cost environment to be more stable. But we will still remain at higher levels of costs mostly in-line with what we’ve seen in this super cycle these past three years. As you know, core commodities like pulp, resin, energy in dollar terms are expected to be somewhat favorable following the trends that we saw in the back half of last year.
However, if you think of other components of our cost basket like distribution, logistics, and labor inflation, that’s actually going to remain a headwind in this year, in ’24, and that’s pretty much offsetting the tailwinds that we’re seeing on the core commodities, which leaves us with currency-related inflation on imported materials, largely impacting our emerging market hyperinflationary markets, which will need to be addressed, and we’ve been addressing that over the past years and we intend to do that in the course of the year. Just as a perspective, the overall net cost headwind when you include all of the components is projected to be around 100 basis points for the year, which we see as much more manageable than what we’ve seen in the past.
We’ve got very strong productivity plans and a little need to price outside of local inflation in these hyperinflationary markets. Turning to FORCE and our productivity targets, the outlook we provided shows that we feel very good about our ability to continue generating strong productivity. You saw that we ended last year with FORCE results of around $325 million. And it’s important to highlight that over the last 20 years, FORCE has delivered a little north of $6 billion of cumulative identified productivity that has flown to the P&L. More recently, and we’ve been talking about it even at your conference in September, we’re evolving our culture towards an end-to-end integrated cost management perspective, really focused on gross productivity.
We’re building a proactive multi-year pipeline of initiatives. We see our pipeline of gross productivity out to 36 months pretty strong, and that should flow to the bottom-line, and this is reflected in the outlook we are providing today. I’m excited to talk more about our transition to gross productivity and integrated margin management at our March meeting when we talk about the future a little more.
Lauren Lieberman: Okay, great. And then, if I could just also follow up a bit on Argentina? So, I guess, a couple parts to this question. Path forward for Argentina? Whether the devaluation of the monetary assets is one-time in nature or do we need to build this in, or how do we think about that in the next kind of quarter or two of the year? And then, also overall, just kind of risk management around FX? Because this time last year there was also kind of a bit — it wasn’t hyperinflation, but a bit of a surprise to the Street in terms of the expected impact from transactional FX. So — and that’s the case again this year. So, path forward in Argentina, the devaluation on monetary assets piece, and then overall risk management on currency and transaction.
Mike Hsu: Okay. Hey, Lauren, thanks for the question. Hey, let me start with the overall on the path forward, I will say, hey, we’re staying the course, but we’re, of course, going to balance potential against the inherent volatility in the business. And so, we’re going to remain prudent. I do want to say, I’m really inspired, and we’ve got people operating in some difficult conditions in Argentina and also other markets. So, as a company, we’re really inspired by the impact our employees make in these markets and really proud to shoulder that responsibility of serving our consumers in these difficult conditions. At the same time, I will say we will not just hang around where conditions become untenable. And then, of course, you would double-click and say, what’s untenable.
