Q2 2022 Procter & Gamble Co Earnings Call
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Then what would be what we would have seen historically.
Which also speaks to the fact that we hopefully will.
Continue to see volume growth in combination with our stronger price growth in the back half.
I just want to underscore something that Andre said.
Remember.
The pricing that we've announced even though pricing has taken effect at shelf.
We didn't have a full quarter benefit from in the quarter, we just completed so.
So that simple roll forward is a help.
And the majority of the pricing that we've announced has not yet taken place.
Yes.
Alright next question will be from Jason English with Goldman Sachs.
Hey, good morning. Thanks, Thank you for slot game.
I wanted to drill a little bit deeper on the cost and price outlook.
A couple of things.
First in response to that last question I think I got the sense clearly telegraphed that pricing will continue to build.
Back half it sounds like Youre looking for at least 4% if not more price contribution or at least about $1 $5 billion or so.
Net sales contribution if we look at your cost.
Both commodities and freight and the two six I think from your margin bridge.
Applies that you've already absorbed around $1 7 billion in the front half so in other words youre expecting one.
$1 billion or less in the back half and we should therefore expect that price cost surplus to emerge.
I wanted to make sure I had all my math right on that or at least directionally.
And then second part you've clearly had to revise your commodity and freight I'll look up the last few quarters.
Remind us again, what the current commodity outlook is predicated on so that we can get a proper sense of what the upside downside risks to that thank you.
Yes.
Good morning, Jason on the <unk>.
Commodity and transportation warehousing timing.
Yes, I mean I assume your math is right I won't check it here, but we can certainly follow up as needed.
We assume in our forecast in our guidance.
<unk> prices.
Both the commodity basket and for transportation and warehousing.
We've seen.
Increases still in this last cycle as reflected in the increase in commodities and transportation and warehousing, but we're also seeing a slower rate of increase so.
So hopefully.
Meaning that we reach the peak here soon but we are building our financial forecast and our financial planning on that level. So we don't assume any easing in terms of transportation.
Transportation and warehousing or commodity cost impact for foreign exchange for that matter.
Next question will come from Robert <unk> with Evercore ISI.
Great. Thank you very much.
I was wondering if you could give us some sense of how.
You assess your revenue management skills at this point.
Clearly the results would suggest there are pretty positive.
But we'd love I'd love to understand maybe some of the changes that you've done over the last few years to improve your ability to manage in an inflationary environment. If in fact.
That is what we're headed into for a long period.
Your ability to work with different elasticities manage trade spend et cetera, both in the U S and overseas and how it may be better than it was in the past. Thank you.
Very good morning, Robert.
If I step back.
I think we're better positioned for dealing with inflationary environment or revenue management in that sense than we've ever been before starting with the portfolio that is focused on daily use categories health hygiene and cleaning that are central to the consumer versus.
Discretionary categories, which of these environments are the first ones to.
Lose focus from the consumer.
Secondly, starting with a portfolio that is 75% superior by our assessment and reflected probably in the market share results and trends that we're seeing.
We also over time have built much stronger price letters.
So we have offerings for the consumer at different price points and different cash outlays.
When you think about diapers you can get a large diaper for 15, a diaper smaller as at 30 <unk>.
Or pure diaper at 38 cents and that's generally true across all categories across all brands.
So that means the consumer has a choice within our portfolio.
So in that sense I think we are set up well from a starting point to deal with inflation and related pricing from.
From an execution standpoint, I think we also benefit from a couple of things number one the organizational redesign in focused markets and enterprise markets enables much faster and much clearer decision, making which is critical in these processes.
And also much more diligence in terms of where to take pricing country brand SKU level.
And the other element here is that from an execution standpoint.
We certainly have seen that innovation can play a significant role and the strength of our innovation pipeline and our ability to combine pricing with innovation is certainly helping us in this environment.
Last point I'd make and then John will probably have comments here as well.
We've been operating in high inflation environments around the world for many years.
Think about Turkey, Nigeria, Argentina, those are high inflation markets and environments. So we know how to deal with that obviously, we hope we don't get to that place, but generally well positioned.
For the reasons I tried to outline here.
And just a reminder of the obvious.
We're dealing with.
Commodity cost increases that affect every competitor both multinational and local.
Which changes the dynamic.
Pretty considerably.
Versus for example, pricing for foreign exchange, which has a differential impact across the competitive set.
So it's not an easy job, but its an easier job.
Then we've managed as Andre said successfully in many geographies in the recent past.
Next question will come from the line of Kevin Grundy with Jefferies.
Yes.
Great. Thanks, good morning, everyone.
I wanted to pivot and ask about M&A on a couple of different fronts. Please just number one the openness to larger scale M&A at this point I think there was clearly a period in recent years post the portfolio rationalization, where the company was since we are very focused on turning around the portfolio or larger scale M&A one.
Not really on the table. So is the organization in a better place as the board open to larger scale deals at this point and if so maybe you could put some guardrails around that and then Relatedly Andre you touched on some of the smaller tuck in deals in prestige beauty, which had been picked up here, maybe just spend a moment there define the approach in prestige.
<unk> beauty, given past missteps and the decision to exit some of the larger brands that were once in the portfolio. There I think that'd be helpful. Thank you for that.
Hey, Kevin This is John .
A couple of points on.
Large M&A.
The first very very important point.
As we like our current portfolio.
We have confidence that we can create value.
With that portfolio.
And frankly, all parts of it are working.
Andre mentioned that we're growing market share in nine out of 10 of those categories.
And importantly that market share growth is not taking business is creating business in large part affair.
Affecting the overall growth of the market. So we're in a very healthy situation with a very healthy portfolio that is underpinned with a clear set of priorities and a very effective tightly integrated set of strategies.
And we're adding.
We're strengthening our.
Our strategic execution why I'll focus on four areas one is supply the <unk>.
Second is.
Digital confidence across the value chain, the third is employee value.
In the fourth of sustainability.
We like that hand overall.
Second point.
Our algorithm.
Going slightly ahead of the market with EPS up mid to high singles.
Assumes.
100% organic growth.
So again, we don't need <unk>.
Large M&A.
To deliver against that and we certainly havent utilized large M&A in the last four or five year period, when we've been delivering very regularly on that expectation.
A couple of other points and then I'll get to beauty.
And then <unk> may have some comments on beauty as well.
We have said many times that there that we intend to win in these 10 categories that we've selected.
And that acquisition would be apart.
The way that we may choose to fill out categories.
In order to win.
And we've talked about two categories in particular.
That would be a particular focus areas one is skin care and the other is personal health care.
So all of that remains.
As true.
The last point I would make which is I realize not very helpful to the audience at hand, but as a matter of policy.
We don't comment further than what I just have an <unk>.
The acquisition or divestiture.
On beauty.
Want to clarify what I think has been a little bit of a misunderstanding.
When we made the portfolio decisions as to what we were going to move out on beauty and what we're going to stay in.
We did not make price tier decisions, we did not exit premium beauty.
We made category decisions.
We exited several categories that were more discretionary that were not daily use and where our performance.
Lower role in driving brand choice.
So for example, we.
We maintained our most premium.
Beauty offering S K too.
So this notion that we're we've got out of a price here and now we're getting back in is.
It is not the way to think about it.
We got out of categories and we're strengthening in those categories.
And these <unk>.
<unk> that we have purchased as Andre said earlier play in the premium portion of the beauty categories, which are the fastest growing from a market standpoint to date.
And obviously give us ample opportunity to create value given our margin structure.
Andre anything to add I think to add.
Okay.
Your next question comes from the line of Andrea Teixeira with Jpmorgan.
Thanks, and good morning. This is actually code you wanted Brian great here.
In terms of service levels can you. Please comment on your ability to fulfill just given the impacts of employee absenteeism.
<unk> has improved from the peak of <unk> worldwide. Thank you for that.
Yes.
Good morning.
Our ability to <unk>.
Supply.
It's relatively stable.
As stable actually if you look at our on shelf availability for example in the U S.
Last quarter, we reported that was around 94% was still running at about 94%.
Which is not where.
Where we want to be which will be more in the 90, 899% range, but.
But good relative to peer group and good given again the overall challenges the industry is seeing the retail environment is seeing.
And that is true around the world our supply chain people, who deserve all the credit here continued to do an absolutely amazing job.
Making sure that our retail partners have the products available that our consumers want to buy.
And there are no major outages given the flexibility we've created within the supply chain.
Even in China, as we saw regional Lockdowns.
We were able to shift production into alternative sites and thereby maintain supplier. So.
Continued great work by our supply organization relatively stable situation will continue to monitor closely because this is not over so great success now with no guarantee for the future, but we certainly feel well positioned.
Alright next question will be from the line of Chris Carey with Wells Fargo Securities.
Hi, Good morning, So one quick follow up on on SK too.
Are you seeing that slowdown is temporary some normalization in demand.
Or do you think the brand is.
It's reaching some ceiling on growth and hence you've made these additional moves and then.
<unk> question just on pricing in baby.
Making the category has really accelerated it doesn't seem like it was that long ago.
Category, we're seeing higher promotional activity to drive volumes can you just expand on the step change there.
The drivers of the move on pricing and prioritization why it's the right move.
And then.
Maybe any broader.
Thoughts on that.
<unk> been some discussion around.
Little bit of a mini baby boom and I Wonder if you have any thoughts there. Thanks so much.
Alright, good morning.
On SK too certainly no ceiling for the brand in terms of growth.
The brand continues to carry enormous equity with existing users enormous appeal to new users specifically in the in.
In the Asia space.
So we continue to be very encouraged by both the current strength of the brand, but also by the future pipeline at the initiatives that are to come but the brand is operating in channels that are most impacted by the pandemic that has an impact on our business. It has an impact on total consumption.
And lastly, I mentioned this in the earlier question.
We don't believe that heavy discounting is the right strategy in the short term to overcome some of these challenges. So we're focusing on building the equity building product efficacy.
And running our business model to return to stronger growth here in the future.
On the baby category, you're right price mix when you look at the U S. But also globally is increasing which is encouraging for two reasons encouraging number one baby care is one of the hardest hit categories from a commodity impact. So it's good to see that the pricing that was taken is flowing through to the P&L.
To help with productivity offset some of that commodity pressure and we see the pricing and baby flowing through really globally.
So that's a core driver in every player in the industry as John mentioned before.
To find a way to offset these cost pressures that are very significant in this category.
More encouraging to me is.
Our portfolio the desire of the consumer to move up to higher premium offerings, because they truly provide better value for the consumer.
When you think about the U S. For example, most of the growth if not the absolute majority of the growth comes from tier one our smallest proposition comes from cruise is 360, which is a very unique proposition in the pants form four.
<unk> babies comes from Pampers pure and comes from the <unk>, which is the best wedding product, which we re entered the category created significant growth in the category and build a 9% share position.
The portfolio strategy, we're executing the innovation, we're bringing us is rewarded by the consumer with trade up and that is a significant contributor to price mix and hopefully and I think sustainable given.
The true benefits, we are seeing the consume appreciate.
Just a couple of additional points on SK II.
Hopefully.
Make it clearer and bring it to life, what's what's actually happening here.
If you dramatically simplified the SK II business, you would simplify it historically.
Into two primary channels, one is travel retail and the other is department store.
And in both.
Those channels, it's typically been a council product, meaning theres some theres a knowledgeable person in the store to help you understand the benefits of the products on which elements are right for you.
With Covid.
Travel retail.
Largely.
<unk>.
In many parts.
Of Asia.
And ability.
Counselors.
To go to work for the multitude of reasons, we're all familiar with.
Including some regulatory prohibitions.
If you look at Japan.
Have that dynamic plus you have what was a major source of business, which was Chinese travelers going to Japan to department stores to buy product to bring back to their friends and family.
Not happening.
So when you ask why is SK to currently soft those are the reasons.
And as Andre indicated has nothing to do with the equity or strength of the brand.
We've converted and I really applaud the team for doing a fair amount of that purchase.
Those.
Channels to more local channels that support long distance consumption.
But still the impact us has been significant.
Sure.
Okay.
Alright next question will come from Wendy Nicholson with Citi.
Hi, I wanted to just go back and talk about the M&A strategy for a minute just with regard to.
Yes.
Smaller brands that you've just recently announced acquiring but maybe looking back and can you give us kind of a little bit of an update on some of the smaller brands you've bought historically, whether it's first aid beauty, whether it's native or this is al just to sort of tell.
Tell us how.
How have they done.
Has it been worth the effort how fully integrated RNA, because again back to the earlier discussion about M&A I think.
The question I would have is.
These are small companies that obviously are growing rapidly now but.
Is it worth the hassle is it worth the effort is it worth the money to bring them into the P&G fold Kenny really ever move the needle so just sort of.
Updating us on maybe your track record with regard to the prior small acquisitions you've made thanks.
Yes, very good.
So.
When we have these discussion on is there value in integrating these small tuck in acquisitions will obviously asking the exact same question.
The.
Track record within beauty is actually very good when you look at first aid beauty.
And native as good examples we've been able to.
These brands in build on their existing.
Sales basis.
<unk> distribution.
<unk> innovation and marketing support across channels and significantly grow both the net sales and value base.
So the beauty organizations the ability to take these small brands maintain their character and user base and apply our strengths to grow them.
Is actually very promising and thats the underlying hypothesis and reason why we believe these three acquisitions will create significant value for beauty as well.
Our approach of bringing these brands in is also unique in the sense that.
The beauty organization is really taking time to bring the existing organization into the P&G ecosystem have them operate more independently than we've done in the past to ensure that the character of the brand and the key strength of the brand are maintained and then we carefully build on top so high confidence based on previous experience.
Would be my summary.
Let me just add a couple of things here one day.
Our.
Beauty business historically has been built this way.
So.
We acquired for.
For example old Spice, we acquired <unk>.
Pantene and head and shoulders were tiny.
We're talking less than $100 million in sales and other two of the largest shampoos and the world.
That doesn't give us any guarantee.
But certainly as Andrea was indicating a strong track record to build from.
That's 0.1 0.2.
Relative to the company's ability to handle M&A and by the way and spending time on this I'm not suggesting that the emphasis our focus has shifted in that direction by any stretch of imagination.
Yes.
The Best example, that I can point to because we've had the longest track record with it is the Merck OTC acquisition.
Different category, but so far an incredibly successful.
Acquisition, our OTC business grew at 20% in the quarter that we just completed and is doing so very profitably.
Having said all of that.
<unk>.
Probably more than any other person and I don't mean to personalize. This.
I've got more blood on my back.
From cleaning up lots of small brands.
I spent four years of my life doing it.
We are going to be very disciplined.
And.
We will get an early read on whether we think things are going to work according to plan or not.
And if not we'll pivot.
Our next question will come from the line of Nik Modi with RBC.
Yes, thanks, good morning, everyone.
Housekeeping follow up and then a broader question on the follow up.
Andre is there any way you can provide any quantification on the out of stock impact on organic.
Revenue growth this quarter and then the broader question I guess this would be for you. John is just when you think about the consumer segmentation strategy at P&G, you think about the Gen Z consumer do you think that you have the core brands.
Yes.
Broad enough to reach that consumer do you feel like you need to launch new brands.
Some of these acquisitions that we've been discussing.
During this call to really cater to those particular consumers. Thank you.
Nick on the first part of the question I can't really give you a number it is impossible to estimate I can give you anecdotal evidence of what we're seeing.
When you think about <unk> for example.
$299.
Toothbrush.
Very premium item and obviously were impacted by the chip shortage, just as everybody else.
And we the demand the consumer demand for that product. Despite the price point is significantly higher than anything we can deliver.
That's probably on the extreme end because for chips Theres limited alternative.
<unk> is available.
But there is some impact it's just not possible to give you a meaningful number at this point.
But directionally.
Which is what leads you to your question.
There is.
No doubt.
At present.
That demand is stronger than supply.
Andrew is absolutely right I don't know how to quantify it either.
As we.
Yes.
Address some of the opportunities and that's how I view it within the supply community.
There should be upside.
Beyond kind of our.
Our internal forecasts and what you might expect that's assuming of course that demand continues at current levels.
Yes.
Sure.
Relative to Gen Z consumers and new.
Proffered several avenues.
To reach and delight those consumers I think all are on the table.
There's another group of consumers.
Now we are working to expand our coverage two of them were frankly, underdeveloped and thats the multicultural consumer in the U S. As an example.
The good news is these are the same consumers.
Multicultural consumer the Gen Z population is multicultural by definition.
So in terms of having a.
The size of prize here that merits consideration of all the choices you mentioned, it's significant and we're all over it.
Next question will come from the line of Peter Grom with UBS.
Hey, good morning, everyone. So I was hoping to dive into the updated commodity outlook a bit I know there are a lot of moving pieces here and Andrea you mentioned chemicals and diesel are moving higher but you're also saying that youre not really seeing relief across the other bucket. So just would be curious what are you seeing in commodities like pulp and resin which seemed.
To be trending marginally lower at least versus where we were back in September and October and then maybe building on that just on the phasing of gross margin in the second half building on steam and Jason's questions earlier, maybe I'm reading too much into it but your response seems to imply that.
<unk> gross margin will be under pressure, but an improvement sequentially as pricing bill.
Productivity ramps and cost pressures are in the basin and based on where things stand now that you could return to gross margin expansion in <unk> I know a lot can change over the next six months, but we benefit based on where we are today or are there other impacts I'm not really thinking that could impact that trajectory. Thanks.
Yes to begin with the commodity guidance.
Within our guidance, we see <unk>.
44% increase across all commodity classes, so it could take.
Our total basket average it is up 44%.
Chemicals up the highest no more than 60% residence.
Up almost 60% pulp.
Pulp up more than 30% et cetera. So it continues down the line all of these numbers in that same range.
And we see some.
Reduction in resin prices for example, or in pulp prices from a temporary peak.
But when we look at Q2 pricing relative to a year ago resin.
Last quarter or quarter same quarter last year was $54 136.
When you look about pulp.
Up more than 30% so.
There is fluctuation in the short term, but the increases year over year.
Continue to be.
Continue to be very material.
From a gross margin standpoint, I leave it.
At what I've said before we will see sequential progress in the gross margin driven by productivity.
Reising and commodity costs coming into the base.
I will not go beyond that in terms of giving a forecast is too many moving pieces at this point in time.
So I'll leave it at that but we'll reiterate we expect sequential progress.
And next we'll go to Mark Astrachan with Stifel.
Okay, Thanks, and good morning, everyone.
Wanted to ask you about the state of the consumer through the implied back half guidance. So you can get more pricing volume comparisons are easy.
You raise sales guidance, but basically to the level that you had achieved in the first half of the fiscal year. So.
I wanted to ask what are the assumptions or what are your views of volumes and.
And just the general consumer outlook.
Your two key markets.
U S and.
China, and maybe just unpack it one of the fears I think folks have is you're going to start lapping stimulus in the U S. Lower income consumers seems a little weak or does that factor into your thinking there, especially as pricing goes up and then in China.
Theres, obviously been Lockdowns Theres Olympics that any sort of consideration of while in terms of your thinking about volume trends there maybe a switch from <unk>.
Traditional retail to offline alright to online as well thank you.
I'll start by saying the consumer continues to favor our brands.
Our categories again daily use essential needs of the consumer in health hygiene and cleaning.
And the efficacy of our products and brands really helps us.
With the priority that we can provide to.
Trade the consumer up within our portfolio and as we take pricing, we see a lower reaction from the consumer in terms of price elasticity.
And then what we would have seen in the past to give you some concrete data in the U S.
We see on those brands, where we've taken pricing in September and October .
Which are normally highly price elastic.
We've seen price elasticity in the range of 20% to 30% lower than what we would've expected based on historic data.
So we take comfort in the strength of our brands the broad based growth of the portfolio globally. The broad based growth of the portfolio.
<unk>.
Across categories and the short term reaction of the consumer as we take pricing.
Our ability to combine that pricing with innovation, which actually then stimulates the consumers to trade up and everything that we've seen.
We.
I assume I think we hope that as some of the stimulus payments.
Phase out.
Labour rate participation will increase and hopefully one.
Level of income will be replaced by another.
To be seen but everything that we see at the moment.
The combination of our categories being essential and relative consumer strength give us confidence for the volume growth also in the second half.
The only thing I would say on China.
The element that will help us here is hopefully with cobot easing and the regional Lockdowns.
Disappearing.
Should be a positive driver of growth in China, but too early to confirm obviously.
And our next question will come from the line of Bill Chappell with Suntrust.
Thanks, Good morning, Thanks for taking my question.
Just on.
On the metric of of 75% superiority of your portfolio.
Obviously, it's helped you commenced.
Immensely over the past few years.
In terms of kind of gaining market share what have you, but I think we've been at 75% for about three if not for years now. So just is that kind of the ceiling would be one question has the pandemic really slowed down your R&D pipeline kind of with trying just to fill those.
The supply chain not wanting to rollout as many new products or.
Just any color around that is this as good as it gets or can we expect that to move to a higher number over the next few years as you kind of.
Re ramp up R&D. Thanks, so much.
I think the numerical stability of 75% might be misleading here.
Because it is not static at all.
Once we reach in a category call it 80% 90% of superiority.
We reset the benchmark.
To ensure that we look to the next frontier in terms of where the consumer would go what really is relevant here for the consumer. So one example on single unit dose.
Example, we've changed the benchmark from competitive single unit dose offering two.
To actually test with our tight pots are strong enough to incent consumers to trade up from liquid detergent to single unit dose. That's the new measure when you change that measure of the percentage Inc. A decreases which is implied and is the intent. So the strategy of Super Ot is really <unk>.
Speaker 1: which is implied and is the intent. So the strategy of super-RT is really dynamic and if we were ever to reach 99%, we would have done something wrong because we would have not looked at the external environment and as it evolves.
Amick.
And if we were ever to reach 99%, we would have done something wrong, because we would have not looked at the external environment and as it evolves.
John anything you want to add here.
Speaker 2: Just the point of Bill's question on innovation.
Just the point of Bill's question on innovation.
Speaker 2: We've called out many times our supply organization.
We've called out many times our supply organization.
Speaker 2: Our innovation organization deserves tremendous credit.
Our innovation organization deserves tremendous credit.
Speaker 2: You don't contribute disproportionately to market growth across our breadth of categories and as a result.
You don't contribute disproportionately to market growth across our breadth of categories and as a result.
Speaker 2: gross share past three, six and twelve months, nine out of ten categories without an incredible
Grow share past three six and 12 months of 910 categories without an incredible.
Speaker 2: innovation, capability, and effort.
Innovation came.
Capability at effort.
Speaker 2: And one of the first things we did is we were meeting every morning, literally daily when COVID started.
And one of the first things. We did is we we're meeting every morning literally daily when Covid started.
Speaker 2: was to figure out what were the health protocols.
Was to figure out what where the health protocols.
Speaker 2: that would allow us to get our R&D colleagues back in the office working together, collaborating, innovating, creating superior offerings as quickly as possible.
That would allow us to get our R&D colleagues back in the office working together collaborating innovating, creating superior offerings as quickly as possible.
Speaker 2: And they've, it's, there are certainly challenges, but they've done a tremendous job of keeping this pipeline intact. And I've.
And they have.
Sure.
Certainly challenges, but they've done a tremendous job of keep.
Keeping this pipeline intact and I have.
Speaker 3: never felt better about our innovation capability and our ability, as Andre describes, to keep raising the bar on superiority.
Never felt better.
About our innovation capability and our ability as Andre described to keep raising the bar.
On superiority.
Our next question will come from the line of Chris pitcher with Redburn.
Speaker 4: Thank you very much for the question. Just going back to China, could you say in this environment you're seeing increased local competition rather than just a softer market and especially in reference to say skin, hair and fabric? And if so, whether this competition is more promotional led as you may have suggested or whether you're seeing an improvement in local product quality and functionality and in the context of China looking to build its own domestic.
Okay. Thank you very much for the question just coming back to China could.
Could you say in this environment Youre seeing increased local competition, rather than just a softer market and especially in reference to say skin hair and fabric and if so whether this competition is more promotional light as you may have suggested or whether you are seeing an improvement in local product quality and functionality.
In the context of China looking to build its own domestic production capabilities can you just confirm what percentage of your sales are made in the mainland.
Speaker 4: production capabilities, can you just confirm what percentage of your sales are made in the mainland? Thanks.
Speaker 2: Almost all of our products that are consumed in China are made in China.
Almost all of our products that are consumed in China are made in China.
Speaker 2: Local competition is strong and continues to get stronger, which is a good thing. It's a constructive force in the market. It leads to market growth and expansion. It leads to positive consumer experiences with a category or a segment.
Local competition is strong and continues to get stronger which is a good thing. It's a constructive force in the market. It leads to market growth and expansion that leads to positive consumer experiences with a category or a segment.
Speaker 2: And it's something that we welcome. I don't have specific numbers for you in terms of progress of local versus international offerings.
And it's something that we welcome I don't have specific numbers for you.
In terms of progress of of local versus international offerings.
Speaker 2: But that's current status. And I know it's not why you asked your question, but there have been understandably a fair number of questions on China. I would just draw your view, as Andrei said earlier, importantly.
But thats currently current status and I know, it's not why you asked your question, but there have been understandably a fair number of questions on China I would just draw your view as Andre said earlier importantly.
Speaker 2: At any point in time, at any quarter, we're going to have challenges.
At any point in time in any quarter, we're going to have challenges.
Speaker 2: Those challenges so far haven't led to major business loss. They've led to growth slow down in some cases, which we fully offset in other parts of the world. It's a pretty incredible feat.
Those challenges so far haven't led to major business loss.
<unk> led to growth slowdown in some cases, which we fully offset in other parts of the world, It's a pretty incredible feet sorry.
Speaker 2: Sorry for the self-congratulatory tone, but I'm really congratulating the broad organization.
Sorry for the self congratulatory tone.
But I am really congratulated and the broad organization.
Speaker 2: to have flat growth in a quarter in your second largest market and deliver over 6% top line growth, it really speaks to the strength of the portfolio, the strength of the strategy which I'll come back to at the very end of this call.
To have flat growth in a quarter and your second largest market and deliver over 6%.
Top line growth it really speaks to the strength.
Of the portfolio the strength of the strategy.
I'll come back to us at the very end of this call.
Yes.
And your last question will come from the line of Combing, Oklahoma with credit Suisse.
Speaker 5: And your last question will come from the line of Camille Gajarwala with Credit Suisse.
Thank you everybody good morning.
Two questions one following up on Mark's question about the state of the consumer obviously is healthy at the moment.
Speaker 2: Two questions, one following up on Mark's question about the state of the consumer. Obviously, it's healthy at the moment. Your view is that it continues to stay healthy, but can you talk a little bit about any guardrails you may have in place in case that changes quickly, in case the impact of inflation really starts to turn on the impact of the consumer? Obviously, there's stimulus, child tax credits, these sorts of things, and then secondly,
It continues to stay healthy.
But can you talk a little bit about any guardrails you may have in place in case that that changes quickly in case the impact of inflation really starts to turn on.
Impacts the consumer obviously their stimulus child tax credits these sorts of things.
Then secondly.
Speaker 6: Can you provide a little more detail on what pricing is going to look like outside of the United States versus domestically, specifically so that as we start to see the data coming through in the coming months, we have a good understanding of what we're seeing here and how it may compare to what's happening elsewhere.
Can you provide a little more detail on what pricing is going to look like outside of the United States versus domestically.
Specifically, so that as we start to see the data coming through in the coming months.
Good understanding.
What we're seeing here and how it may compare to what's happening elsewhere. Thank you.
Yes.
Speaker 1: Yeah, I'll start. I'm sure John has a few points to add. On the consumer state, I think in terms of guardrails, what I tell you is that the strongest guardrails and mitigations we have are the strength of the portfolio.
I'll start I'm sure John .
Has a few points to add on the consumer state I think in terms of God rates.
What I would tell you the strongest guardrail and mitigation, we have the strength of the portfolio.
Speaker 1: We're innovating across price tiers. We are building pricing out in a way that price tiers remain accessible for the consumer, key cash outlays remain accessible. And so within the portfolio that we have, depending on the strength of the consumer, they will find an offering that matches their affordability level, their cash outlay level and still give them a superior performance.
We're innovating across price tiers.
Building pricing out in a way that price tiers remain accessible for the consumer key cash outpace remain accessible.
And so within the portfolio that we have depending on the strength of the consumer.
They will find an offering that matches they are affordability level, they're cash outlay level and still give them a superior performance.
Speaker 1: versus the competitive peer set. Important to note that superiority does not mean that we're trying to trade up the consumer or trying to innovate only at the top end of the portfolio. Superiority is defined as superiority at each price tier of the competing.
Versus the competitive PSS.
Important to note that superiority does not mean that we're trying to trade up the consumer or trying to innovate only at the top end of the portfolio superiority is defined as <unk> at each price tier of the competing in.
Speaker 1: So the price letter remains intact and we innovate across and that's probably the best protection we can offer at this point in an inflationary environment.
So the price letter remains intact, and we innovate across and that's probably the best protection. We can offer at this point in an inflationary environment.
Speaker 1: The pricing we take outside the US is very similar to what you see in the US, broad range across categories and about mid singles is what I would tell you.
The pricing we take outside the U S is very similar to what you see in the U S broad range across categories.
And abroad mid singles is what I would tell you. In addition to that we're taking pricing for significant FX deterioration in some markets, mainly Turkey to mentioned.
Speaker 1: In addition to that, we're taking pricing for significant effects to variation in some markets, mainly Turkey to mention, to recover short-term margins.
To recover short term margin there.
Speaker 1: But broadly, I would guide you to mid singles around the world on 60-70% of the portfolio, similar to what...
But broadly I would guide you to mid singles around the World on 60, 70% of the portfolio.
Similar to what we have done.
Speaker 2: So I just have a couple closing comments, one on pricing. Remember, pricing is an inherent part of our business model.
So I just have a couple of closing comments, one on pricing and remember pricing as an inherent part of our business model.
Speaker 2: as an innovation-centered company.
As an innovation centered company.
Company.
Speaker 2: We aim to create products that address better everyday consumer needs and problems.
Aimed to create products that.
Address better everyday consumer needs and problems.
Speaker 2: and can typically command some pricing while increasing the overall value proposition to consumers with those more efficacious offerings.
And can typically.
Command, some pricing, while increasing the overall value proposition to consumers with those more applications offerings pricing.
Speaker 2: Pricing has been a positive component of our top line for 42 out of the last 45 quarters in 2017 out of the last 18 years.
Pricing has been a positive component of our topline for 42 over the last 45 quarters and 17 out of the last 18 years.
Speaker 2: So while the level of pricing we're talking about here, to be fair, is typically a different level, this is not a dynamic that we're unfamiliar with. And as Andre said earlier, we certainly have significant historical and recent.
So while the level of pricing, we're talking about here to be fair.
Is typically at a different level. This is not a dynamic that we're familiar with and as Andre said earlier, we certainly have significant historical and recent.
Speaker 2: experience in developing markets. None of that's a guarantee, but this is not new territory. Last thing I want to leave you with.
Experience in.
Developing markets none of that is a guarantee but this is not new territory.
Last thing I want to leave you with.
Sure.
There will be bumps in the road.
Speaker 2: There will be cases where we take pricing and we either encounter the consumer reaction that some of you are rightly looking to. or a competitor is asking for more attention.
There will be cases, where we take pricing and we either.
Counter the consumer reaction that some of you are rightly looking too.
Or a competitive reaction.
Speaker 2: There is no doubt in my mind that there will be bumps in this road, but so far it's going very well.
There is no doubt in my mind that there will be bumps.
Bumps in the road.
But so far it's going very well.
Related to that there has never been more volatility.
Speaker 2: that we're having to manage across the geopolitical spectrum, the regulatory spectrum, the health spectrum, the supply spectrum, the labor spectrum.
That we're having to manage across the geopolitical spectrum regulatory spectrum the <unk> spectrum.
Our supply spectrum, the labor spectrum.
Speaker 2: So I guarantee you, as we said in the last quarter discussion,
So I guarantee you.
As we said in.
In the last quarter discussion.
Speaker 2: that we will encounter sources of volatility and degrees of volatility that sitting here today we can't imagine.
That we will encounter a sources of volatility in degrees of volatility that sitting here today, we can't imagine.
Speaker 2: That's been true each day, week, and month of the last two years.
That's been true.
Each day week and month of the last two years.
Speaker 2: And so when you look at any one variable or one scenario, it's...
And so when you look at any one variable or one scenario.
Difficult to find relevance.
Speaker 2: My encouragement is to reflect back to
My encouragement as to.
Reflect back to.
Speaker 2: strategy, portfolio, ability to execute.
Strategy portfolio ability to execute.
Speaker 2: to identify those companies that will get through this the best.
So identify those companies that will get through this the best.
Speaker 2: albeit with bumps on the road. And I think we've demonstrated, thus far, incredible strength of portfolio, of strategy, of execution, and we're committed to keep that going.
Albeit with bumps on the road and I think we've demonstrated thus far incredible strength of portfolio strategy of execution and we're committed to keep that going.
Speaker 1: We're here the balance of the day. John is, Andre is, and don't hesitate to contact us. Thanks everyone. That concludes the call.
We're here the balance of the day, John as Andreas.
And don't hesitate to contact us.
Thanks, everyone that concludes the call for today, Thank you for joining us.
Have a great day.
And ladies and gentlemen that concludes today's conference. Thank you for your participation you may now disconnect have a great day.
Speaker 2: And ladies and gentlemen, that concludes today's conference. Thank you for your participation. You may now disconnect. Have a great day.
Okay.
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Okay.
[music].
Speaker 7: ancient chinese you