Q1 2022 Kimberly-Clark Corp Earnings Call
Yeah.
[music].
Ladies and gentlemen, thank you for your patience and holding we now have your presenters in conference. Please be aware that each of your lines is in a listen only mode.
Conclusion of this morning short remarks, we will open the floor for questions at that time instructions will be given as to the procedure to follow if you would like to ask a question and it is now my pleasure to introduce today's first presenter Terran Miller.
Thank you and good morning, everyone welcome to Kimberly Clark's first quarter earnings Conference call with me today are Mike <unk>, our chairman and CEO Maria Henry our CFO and Nelson are net of our incoming CFO earlier. This morning, we issued our earnings news release and published prepared management remark.
ARX from Mike and Maria.
To summarize our first quarter results and 2022 outlook.
The documents are available in the investors section of our website.
And just a moment, Mike will share opening comments and then we'll take your questions.
During this call we may make forward looking statements. Please see the risk factors section of our latest annual report on Form 10-K , and first quarter 10-Q for further discussion of forward looking statements.
We may also refer to adjusted results and outlook.
Both exclude certain items described in this mornings news release.
<unk> has further information about these adjustments and reconciliations to comparable GAAP financial measures.
Now I'll turn it over to Mike Okay.
Okay. Thank you Karen good morning, everyone before we get to your questions I'd like to comment on our CFO transition and then I'll provide a perspective on our Q1 results first I'd like to thank Maria Henry for seven years of outstanding leadership as CFO Kimberly Clark as you saw from our news release Maria has decided to retire effective September one Maria.
All we have quite a legacy of Casey. She played a key role in design execution of our strategy.
Our strong financial stewardship has positioned us well for the future.
I am grateful for all of her contributions and very glad she'll be with us through the summer to ensure a smooth transition.
I'd also like to welcome Nelson, our incoming CFO Nelson brings strong operational and international experience the KC and I am looking forward to his leadership I'm sure you'll enjoy getting to know him as he begins his new role.
Now turning to our first quarter I am pleased that we started the year with double digit organic sales growth and strong performance in all segments are.
Our teams are executing very well during a period of continued volatility and high inflation.
<unk> strong fundamentals provide a solid basis for us to raise our sales outlook for the full year.
We're driving growth by building strong commercial capabilities and deploying them with local agility.
We're continuing to invest in our business grow our categories and deliver meaningful value to our consumers.
We're continuing to face a dynamic environment, we're being thoughtful with actions to offset macro headwinds.
Balancing price volume and market share, while we work to improve our margins over time.
2020 to Mark Casey's 150, <unk> anniversary.
Kimberly Clark was founded on the core principles of quality service and fair dealing these.
These principles still reflects who we are and what we stand for today.
Were led by our purpose of better care for a better world and we are driven to perform so we can continue to make a difference in people's lives with the categories. We create the products, we make and the consumers we serve.
Our purpose led performance driven culture fuels, our team every day to drive our growth and deliver long term shareholder value.
And with that we'd like to address your questions.
Okay.
At this time, we will open the floor for questions. If you would like to ask a question. Please press the star key followed by the one key on your Touchtone phone now questions will be taken in the order in which they are received if any time you would like to remove yourself from the question in queue. Please press star two.
We will take our first question from Kevin Grundy with Jefferies.
Thanks, Good morning, everyone Maria again, congratulations all the best and Nelson, we look forward to working with you.
I wanted to start on the guidance.
A couple more tactical question and then Mike when we start with one sort of more strategic I guess, just sort of given the uncertainty and increasing concerns around the consumer an ability to cope with the higher levels of inflation number to number one I guess are you seeing anything in your markets that gives you any pause about taking additional pricing was there any concern about that have you seen.
Any sort of trade down.
That made you potentially cautious even at this point to raise your organic sales growth outlook and then I have a couple of follow ups from Maria Thanks, Mike.
Well Kevin overall, thanks, Thanks for the question.
Two big changes since our January update I mean, one was obviously.
If you look at our results in the quarter price realization.
As our executions very effective right now and the volume is trending better I think than we initially thought so so that's one part but certainly as you saw in our release Inflations significantly worse, and so I would say those two big changes largely offset.
I do think our strong topline Kevin reflects the essential nature of our categories and the strength of our brands I mean, we have been working over the last several years to really improve our brand fundamentals with strong innovation, great commercial execution and as I mentioned in my remarks.
We're really proud of our local agility so.
I would say overall.
We're cautiously optimistic certainly recognize at the price levels, we're putting into the market.
We'll create stress on the consumer and so our approaches.
We're going to be very thoughtful about balancing growth margin and share and will be very responsive and agile to their needs in the marketplace, but right now I'd say the pricing environment has been largely constructive.
And.
I think we're on track with what we thought the pricing would do.
Got it thanks, if I can just to play that back so you're.
Is it the expectation.
The incremental pricing will largely offset the incremental cost pressure you guys are at a lower point within within your earnings guidance, where it is not going to entirely.
The additional input costs that youre coping with yes, well just as a principle I would say generally I would expect our teams to offset.
Input cost inflation with pricing over time, it may not occur within the year, but overtime and so thats. Our general principle, obviously, we'll also deploy cost savings and productivity against that against that problem as well, but again, that's kind of our overall principle, we have taken further action.
We announced.
Our suite of actions at the beginning of the year and then we've taken further actions since we've talked last January .
And again I think our teams have been very responsive to whats happening in the marketplace.
Okay I'll pass it on and hop back in the queue. Thank you very much for the time.
Thanks, Kevin.
We will take our next question from Lauren Lieberman with Barclays.
Morning, Lauren great. Thanks, Ken Good morning.
Thank you jumped out at me in the results.
Mix and the degree to which makes us continuing to contribute to top line. So I'm guessing if it's tied to as we've mentioned might be execution, but as youre thinking about how commercial execution may or may not evolve from here just thinking about merchandising on the shelf what elements of your products.
We are emphasizing store versus other.
To deal with to try to support and volume as you move to the gere.
Would you be thinking about how mix may evolve.
As the inflationary pressures Mount on the consumer.
Yeah. Thanks, Lauren Yeah, we're very encouraged with the mixed performance and again I think it dovetails or outcome.
Outcome of our underlying strategy, which is to elevate our categories and expand our markets and I think you might observe we've been we've been driving mix for a few years now.
And the core underlying thought is we still think there is a lot of opportunity for premium amortization in our categories recognized I think the circumstances. This one environment.
It requires some slight adjustments, but the long term opportunity I think Allison talked about at the Cagny conference.
<unk>, which is the largest type of market in the world right now still remains our largest market.
The value per baby is less than half of what it is in developed markets like the United States and so we still think pre amortization is an opportunity that is what's driving our growth we were up high single digits and China for another quarter.
Continue to grow there and continuing to improve mix and so so that's a core idea for us. It's also what's driving our momentum in North America double digit growth in diapers and across personal care all personal care categories in the U S. We're continuing to drive innovation on the Premier Man.
But also we brought a lot of improvements to our value tiers as well in North America and around the rest of the world. So again, we're we're.
Elevating our categories remains a core part of the strategy, we're not going to be niche premium, though and so we want to be able to serve all consumers and so we're balancing our investments and our investments in innovation across the value tiers.
Okay great.
Thank you so much really appreciate it and I'll get back in the queue there.
Alright, Thanks Laurence.
We'll take our next question from Chris Carey with Wells Fargo Securities.
Morning, Chris.
Hey, good morning.
Im.
I just wanted to follow up on the question.
Round pricing your expectation and how things have evolved.
So the four to six.
Percent organic sales growth.
Now includes volumes, which are negative which was the call before implies pricing probably at least a couple of hundred basis points higher than where you were before I am seeing pricing in the U S. Right now in the high single digit range.
Can you, perhaps help us understand how much pricing, you're expecting and how that has changed relative to prior expectations and maybe give us a sense of your <unk>.
Pricing expectations in the U S versus internationally.
For example, with international pricing going to be a strong into the U S.
And then just connected to that on Kevin's question around elasticity.
I did notice.
In the prepared remarks, some comments around pricing impacting volume in some markets I think previously elasticities were a bit more conceptual and I'm. Just wondering if now you're actually starting to see some of that volume impact play out.
Okay, Yeah, Chris maybe I'll start and maybe Maria will provide some additional color too, but overall I'll just give you a sense of.
Our pricing execution overall is on track volumes have been solid I would say trending a little bit better than we initially thought.
But as I mentioned earlier, we're going to be very.
We're going to be very alert and monitoring our price gaps carefully.
I'd say, we've implemented multiple rounds of pricing given kind of what's happened in the first quarter that is additional pricing.
Higher than we originally planned as kind of a.
A key basis for why we're taking up our sales outlook.
Overall in the marketplace, obviously trade discussions have been constructive we have seen movement in other brands and in some cases private label.
But there is there is a little stickiness in some submarkets as well, particularly in western Europe and parts of Latin America. So I.
I think that's why we're going to monitor the situation closely and try to balance continuing to balance our performance and growth with.
And our share performance, but overall, we feel good about where we are on pricing and we feel good about our portfolio and the fact that we're strong in both the value and the premium then we will be able to pivot and meet the consumer where they need us to be.
Yeah, and I would just add that if you.
Look at the outlook.
Outlook for input costs, which did escalate and our outlook for the year.
As you know from our prepared comments and news release, we did increase the number in terms of the inflation, we expect for the year a good portion of that.
Comes outside of the United States, and so along with the intent to cover inflation with pricing.
You should expect that.
A lot of the incremental pricing that we're putting into the market comes outside of the U S.
And if I could just ask one follow up there on the incremental inflation that you're seeing what are the specific basket.
For cost items that are moving outside of the U S to cause these incremental pricing. Thanks, so much sure.
At the midpoint of our new guidance versus where we were in January were up about $300 million in terms of.
Okay.
Input cost inflation this year that increase is across all of our baskets.
As you know with the significant volatility in oil and energy.
That is clearly one of the drivers that well over half of the increase that we're seeing.
Since January .
And the impact.
Particularly on the energy side waits to Western Europe U K and there we have.
A sizable tissue business, which is a large consumer of <unk>.
Energy, So that's kind of how the inflation basket with al and why.
More weighted to markets outside of the U S.
Okay. Thanks, so much.
Thanks, Chris.
We'll take our next question from Steve powers with Deutsche Bank.
Morning, Steve.
Good morning, good morning, and congrats to Maria and welcome to <unk> as well from me.
Yes.
Picking up on the $3 75 in guidance.
That incremental $375 million at the mid point headwind from from higher inflation.
It seems to be.
Substantially higher quantitatively than the.
And then the uptick in revenue that you are calling for so just in the components of your guidance. It just reads net negative.
But obviously you've maintained the full year range. So I'm trying to just trying to figure out if there is something else to get better in your outlook versus the start of the year or short now talking about the lower end of the range as opposed to the higher end. Prior just some help there would be helpful.
Sure. There are clearly there clearly is a range and coming into the year, we talked about the <unk>.
Factors that could affect where we land in that range and commodities have commodity.
Inflation expectations, clearly has increased we talked about incremental pricing.
They are so how all of that plays out as we go through the year.
We will we'll have to see in terms of our expectations on the other lines of the P&L.
Held our outlook for our.
Force cost savings.
Our other manufacturing costs are looking to be a bit better.
We had talked about in January the pressure, we were seeing from the surge in omicron, Fortunately that has resolved itself.
Fairly quickly.
And Erika.
And it's helped us get our supply chain.
Into a better place than than what what we suspected back in January so that's a positive on that side of the house and in the first quarter.
Our G&A spending or between the line spending when you when you net out all of the puts and takes.
With a bit favorable backing out currency and other things and so in this environment, it's tough and so we're going to very closely.
Monitor are between the line spend.
For the year and how all those factors come together.
It keeps us within the range of guidance that we set back back in January exactly where we'll land theres still a lot of volatility in new the pieces. So that we'll have to see there.
Stephen I would agree with you that somebody through 75% is a big number and so but again I think we're pleased with the team.
I would say again as Maria mentioned volume has been an important component for us and we plan the year with an estimate around elasticities still remains to be seen how things flow from there, but I think given our first quarter, let's say volumes are trending.
Favorable to some of the things that we had originally planned.
Yeah.
Yes, very good okay.
And.
Okay.
That incremental 370.
Yes.
Or is it just.
Against.
Flow through.
It was that I missed.
Sumit.
Any color there Paul.
Richard.
It hit us in the first quarter, we saw.
A meaningful spike in commodity cost pricing, particularly in the month of March.
<unk> global events.
Unfolded.
So.
I believe.
Okay.
Morning.
Okay.
Hum.
Okay.
Okay.
Yes.
Okay.
Okay.
Yes.
But is there a way.
Great.
Got it.
Okay.
Well.
Okay.
I think the first quarter, it was probably three or four points organic for us.
So we're primarily.
I think.
Last year's winner.
Well, we're still going to be cycling, maybe a month or two of that in this quarter as well.
To see recognize that but so.
Yes, but that did have an impact.
Okay. Thank you very much.
Thanks, Steve.
We'll take our next question from Jason English with Goldman Sachs. Good morning, Jason.
Hey, good morning folks thanks for Slotting me.
Let me Echo the sentiment congrats scenario well earned I think we've had the pleasure of working together for now well over a decade and you will be missed and Nelson welcome on board looking forward to get familiar.
Digging into the business a couple of questions.
I guess, let's first talk about <unk>, we haven't seen a negative volume number in your personal care <unk> business in quite some time.
And I also want to make the point, so I'm not sure it's station like anything, but there's obviously some sensitivity around what types of those markets. So can you unpack what drove it this quarter and then perhaps elaborate on how youre seeing the concerned behavior in emerging markets change in each of your core markets its inflation pressure mounts.
Yes, Jason.
Jason maybe I'll start here.
Overall, I think we're very pleased with our DNA growth overall personal care growth continued to be very strong behind what I mentioned earlier under Lauren's question strong innovation.
Really strong local execution organic was up 11 in the quarter.
High single digit on price low single digit on mix and then yes, as you mentioned, a 1% volume decline overall.
I'd say, it's kind of mixed across markets and maybe the one area that I pointed out in Latin America for us a little softer on volume and a little softer on share the big driver of that as adjacent as you're well aware with our previous discussions we're prioritizing margin recovery, but we want to be balanced and holistic about it and so we're trying to ban.
<unk> margin recovery organic growth and share and I would say, we're probably faster on pricing.
And a number of our key markets, including Latin America.
And so that's probably had an impact on both volume and share in our shares.
We're still overall up and over 50% of our what we call cohorts or market category combination. So we feel good about that it's a little less than what we've been doing the last couple of years, which is about two thirds, alright, and so we'd like to be in that two thirds range, but recognize that's a high bar.
That said, we also recognize when we're moving quickly on price that we're going to have some ebbs and flows on market shares in local markets.
Yes that makes sense. Thank you pivoting to the professional business.
Volume still relief.
We recovered if we look at pre Covid for this quarter and <unk> 22 versus where we were.
I think your volumes are still down 17, 18% after the pre COVID-19 levels.
So two questions what needs to happen like what are the conditions that would get you back to bright there.
We're far enough in that I think it's probably prudent for all is to say, you're probably not getting back to bright is there some sort of right sizing type initiatives you need to take within the organization to account for the now lower volume base.
Overall, Jason.
Sure.
Encouraged by the professional demand improving organic was up six in the quarter and to your point not back to where it was but mid single digit growth in North America and high single digit in the rest of the world.
Washroom demands recovering was up 30% in the quarter and now back to 90% of your of our pre the pandemic levels. I think we do know enough and I agree with you that I don't think its going to go back to where it was I think our team is making.
The right plans to.
The size of the business appropriately and recognize that this is the reality of where we are and so we need to when you go from there and so they've got a margin recovery plan in a cost plan and are diligently working on that obviously, a key component of that margin recovery plan is price, which we've executed very very well and we're encouraged with our start.
Point out.
We do expect better volume performance I mean, we have great capability, we have great innovation in the market. This year. We have this what we're calling an icon of better dispenser that our end users are very excited about and that's driving our growth. So our shares in the segment, especially North America are up the team's performing well, but youre right I think we have to.
Recognize that probably that business is going to be a little different size than it was pre pandemic and we're going to be ready for that.
Yes, thanks, and congrats on a good start to the year I'll pass it on.
We'll take our next question from Andrea Teixeira with Jpmorgan Chase.
Good morning, Good morning, how are you.
First congrats to Maria and welcome Nelson looking forward to work with you as well.
So first a clarification.
If you remove the comments about SG&A.
The force savings and give him the higher cost pressures and from my comments earlier.
Are you taking from one marketing spending now says the consumer, particularly in the U S has been stronger than anticipated.
And on the pricing commentary that I think it was incremental to what you had a plan which categories are you get are.
Are you, hoping to get additional pricing from planned before and the timing of it.
And just a follow up to mikes commentary about China, I mean impressive high single digit performance there for another quarter or so.
How are you training in April given the Lockdowns and what we hear about ecommerce also being impacted there.
And what is your expectation for the category. Thank you.
Alright, I'll I'll go ahead and start on the on the cost side as I mentioned.
Our outlook remains the same for the force cost savings.
$300 million to $350 million four for the year.
A little bit more color on the first quarter, we did see very strong savings in our productivity.
Programs and our pipeline of opportunities remains quite healthy on the cost savings side.
And so we've got confidence in that force cost savings range.
We do expect that the savings will ramp through the year as you know our savings don't come in a straight line.
They can tend to be.
Yes.
A bit bumpy as we go through the year based on which projects and programs, we're implementing and able to execute.
In the in the quarter.
What we saw is that the distribution cost increases were a meaningful headwind to our force cost savings number so.
As I've discussed before the $50 million of savings is that is a net number.
As all of the positives from the actions that our teams are taking to drive productivity across the supply chain.
But you have to clear a positive number there.
There is significant headwinds on the distribution side that that are putting pressure on the net force cost savings number, but I'd wrap it up by saying that.
Good delivery in the quarter pipeline of opportunities remains strong.
Between the lines comment that I made thank you for the question because it's important to clarify.
We're not reducing brand support.
Our advertising plans for the year continue to be strong and and we intend to continue to support our brands outside of advertising. When you look broadly at other our SG&A spend.
We will continue to be very disciplined on other spending and look to balance.
The profit delivery given the current conditions that we're facing in particular with the escalation.
Input cost inflation by advertising.
It remains very very healthy, yes, Andrew maybe I'll just piggyback on that what we're really saying is that we remain committed to delivering balanced and sustainable growth and so our priorities are to accelerate growth and also recover the margins, but right now I would tell you. Our brands are strong our categories are healthy and we're going to continue to invest to build our categories our brands in.
Our markets.
So as I mentioned earlier, we're taking a very holistic approach to balance to mitigate the inflationary pressure, we're going to balance.
Price volume and share.
I think.
Second part of your question I think we've taken price and.
Recognize that our price realization has to increase we've done that in a numerous number of ways either through pack counts.
List price and also promotion reductions.
Don't know that I would say its uniform across markets, we're relying on our markets to be agile and to respond to what the local situation requires but in general as you can.
You can observe overall the overall pricing has gone up in some markets our promotions have come down in some markets and that's been a way to deliver price.
And in some markets, it's gone a little bit up North America.
I would say has gone up slightly because we were suppressed on the promotion front for a couple of years.
Our promotional depth is still lower than it was three years ago overall, but again, it's just an artifact of kind of what are you comparing against so but overall I think Maria's point is the main one which is we.
We believe in balanced and sustainable growth and growing our brands and so we're going to continue to support the brands in the appropriate way.
And then the last point I think you asked on China, I think I'm not ready to comment on April yet.
We're only ready to comment on this quarter I will tell you that we have been affected by some of the Covid lockdowns.
As everyone else is and but we will update you on that on our next call.
And one last clarification, sorry to a fine point on the pricing and increasing.
Organic so should we interpret.
You are saying mostly that.
Actually you were more cautious on.
Basically the elasticity the volume decline remember being.
We're very strong volume decline that was embedded in the initial guide and now you having the same kind of thought about pricing, but slightly better now because it's being taking.
Everyone is taking additional pricing your competitor announced and another one in feminine care.
The day before yesterday, so it's a mix of both of them, mostly because elasticities have been coming in better than anticipated is that the way to interpret.
Well I'd say volume has been a little bit better overall, I think we're still working through and calibrating what the relative to the elasticity I would say the overall volume in the first quarter came in a little bit better than plan.
I still think we're waiting to see what the full impact of elasticity is although.
I do think the history is.
And if I go back to our last price.
Set of pricing us a few years ago.
I think volumes did come in better than predicted in <unk>.
Some cases and in other cases, it's pretty much on plan. So so we're still working through it but again I think that the net of it is our guidance increase is certainly that we're seeing.
We expect more pricing in the marketplace, and then volumes a little bit better than we originally planned.
Perfect. Thank you so much on the question on thanks again.
We will take our next question from Peter Grom with UBS.
Good morning, Peter.
Hey, Hey, good morning, everyone Hope you all are doing well so.
I kind of wanted to follow up on that last point just around elasticities.
Can you just I was hoping you could you just remind us what the assumptions are embedded in your guidance is it based on historical elasticity.
Should that not occur, which seems to kind of be the case more broadly today would that be upside or does it kind of assume what youre seeing in the market today holds.
Yes.
I'll make a quick comment before Mike Mike jumps in.
I would say is that our assumptions around the elasticities have been informed.
By historical.
Performance over a long period of time and particularly looking.
Hi.
What happened during more challenging parts of the cycle. So that was that was an informed.
Bye.
Not an equal too so it's not mathematical we apply judgment based on.
What we're seeing today, and and where we stand today in each of the markets.
Competitively with where that consumer is and the consumer dynamics in each of those markets. So.
I would say we apply judgment.
But it certainly informed by what's happened historically that Mike you probably have some comments I don't think ive.
Much more to add to that.
Okay. That's helpful. And then I guess, just turning to margins and I appreciate all the color on it and depletion in pricing in the release and prepared remarks, but I was just kind of hoping to drill down on just the phasing because they are just a few comments on stood out I think specifically you said in the near term these commodity costs will offset the top line growth.
Later, you kind of mentioned improved financial delivery sequential leasing how should we think about the phasing of gross margins through the balance of the year. We're kind of just the balance of the commodity pressures that you've kind of outlined and then.
Based on kind of where things stand today on when should we kind of expect a return to margin expansion.
Yes.
I'll start.
Let me.
First comment on phasing.
You know, where we came out in the in the first quarter, where I would point you to is the second half of the year, which is where we are expecting improvement in terms of.
My IR folks are looking at me by in terms of the second quarter.
That the commodity situation.
Situation that we're facing unmet I mentioned that commodity costs were escalating through the quarter with with March prices being being very high.
And.
A number of our commodities are continuing to escalate so I think.
Looking looking to the next quarter I think we're going to still have.
Quite a bit of commodity pressure, therefore payments normalized so how that will all play out we'll have to see but I would point you to the second half of the year.
On margin improvement, we intend to build momentum as we go through the year when pricing is more in line with the inflation and as you know we've had we took pricing in the first quarter. So that hasn't really played out yet in the P&L, but but as that does that.
That will certainly help our margins our force cost savings.
Bill as we go through through the year.
Maybe not in a straight line, but I would expect the second half to.
To be stronger.
That the run rate that we saw in the in the first quarter and so a number of moving pieces I don't think were prepared to tell you when we get back to that 2019 levels on on margins, but we absolutely.
Expect improvement this year.
Let me piggyback on that Peter because I think part of that is we definitely expect strong progress on price realization.
You're seeing it.
I'm confident we'll be able to restore our margins and eventually expand them. Okay. I think the big factor <unk> is we can't predict exactly when it's because the core assumption is what happens with inflation and so the reality is I expect reversion in the commodities, it's going to happen. We all know it well if you've been following this company for a long time I think most of our long term investors have seen.
Revert every time right, but the reality is in the near term inflations well beyond any historical levels I mean, just over between 'twenty, one and 'twenty two.
If you do the math.
Midpoint of our guidance, we're going to take on $2 7 billion.
Of additional inflation and that's a fortune 100 point drag on the operating margin.
I will tell you we will make progress restoring margins, we expect pricing to largely offset inflation may not all be in the year, but our teams are moving fast and making progress.
And again as I started commodities are going to revert and then when they refer that's going to accelerate our timeline of recovery, but again, it's hard to say when that is because we expected it to decline a little bit or at least we predicted a level. The beginning of the year and obviously, we took up that that.
Inflation number by 375 at the midpoint.
Three months later, so again and again there was not a war and our plan for.
As we put together our outlook and begin a year and that's <unk>.
We affected.
The energy markets.
Yeah.
Thank you for that and Maria Congratulations and wish you the best of luck moving forward. Thank you.
We will take our next question from Wendy Nicholson with Citigroup.
Hi, good morning, good morning, Wendy.
My first question has to do with private label because you're one of the few companies. We cover that does do some private label manufacturing. So can you remind us number one just ballpark what percentage of your volume is for private label.
And then second just sort of.
If there's any outlook you have I know I know that you said in the past that you only do private label, what is sort of to the benefit of your brands and strategic relationships, but can you give us a sense whether any of the big retailers you work with are coming to you, saying, Hey, we want to put more power behind private label given the pricing environment.
The thing you can offer just in terms of.
Where you're situated and whether you think private label is going to grow as a piece of your business kind of over the next six to 12 months.
Yes, overall I'd say when private label is not core to our overall growth strategy and so it's a relatively small part of our business and we do it selectively as you mentioned.
Whether it's for a strategic account or strategic proposition, but again.
Our capacity is expensive to build and so we want to focus in general on the brands unless there is a very good strategic rationale for it.
I will say private labeled did grow a bit more in the quarter and that's a change from prior quarters.
I think.
It was up or even in about six of our eight categories that we track and that's that's a change from the recent quarters.
And while we're paying attention to that we're really focused on improving and making sure that we have the right value proposition on our products and that's why.
Even at the same time, Wendy that we are making taking price increases. We are also working hard to improve the product quality and the features and benefits of our brands as well so.
Yes.
It's less than five clarify all of our sales.
Less than 5%, Okay and can you just clarify the strength that you saw in the quarter.
Again, even if it's small was it in the U S or in Western Europe .
I would say I was commenting mostly in North America I think in North America up eight categories. We track it was even or up in about six of them. So okay.
Fabulous and then just one more follow up to an earlier question about China.
Your strength high single digit growth in diapers since I'm curious, obviously terrific and great to see and.
A departure from what we've heard from other companies have been struggling in China now.
Not just with the supply chain, but but.
Lots of different things and so my question is is it.
Just a market share.
Relative outperformance for you do you think theres anything different in terms of how you are distributed or are you promoting exceptionally.
A lot or any anything different that's enabling you to do well in China, maybe with some other companies are struggling mark yes.
I don't think its a distribution channel thing and I don't think its definitely not promotion because.
We're trying to be disciplined about pricing.
Here's the thing I will say when it's really what Alison talked about at Cagny, which is.
There is a lot of opportunity and a lot of our markets premium wise, our category and I know that.
It's a little bit different.
Because given the conditions right now with pricing and inflation, what's happening to the consumer but over the long term as I mentioned earlier, the China the value per baby sold is less than half of what it is.
In the U S or other developed markets and so theres still remains.
Significant opportunity for us to premium is our categories.
So mix for US has been an important driver we've doubled our super premium mix just over the past 12 months and so.
So thats part of it and then the other part of it is share and we're really proud that we took share leadership in China in the diaper category.
They almost two years ago, and we continue to expand that and so we're really proud of the work of our team and we're excited about that.
I recognize there are some trends that are that are not favorable.
You are well aware births were down, but we still think there's an opportunity on value.
Perfect. Thanks, so much for the color.
Thanks Wendy.
We will take our next question from Lauren Lieberman with Barclays.
Hi, good morning. Thanks.
Brian back to them.
Just wanted to talk quickly about consumer tissue.
At Cagny in in your comments I think it was in Rockies comments, there was some discussion of just.
Efforts behind the scenes to execute the same playbook.
That you've done so successfully now in personal care in interest you in terms of elevating the category. It may be a tough time, given just the cost inflation.
Imaging volatility at the moment, but anything you could share on strategies in that business I would be curious as to at the time.
Yes, yes. Thank you Lord Yes, I think Thats right I mean again elevate the categories.
I think we have an opportunity elevate all of our categories and and I think that will apply I think it's.
Our teams have been busy working that across the globe on tissue I think some of that's been drowned out because especially like in North America. The high volatility over the last couple of years related to Covid for reference I think that that that category was up 28% in 2020, and then down 20 last year and so there's been a lot.
Volatility that said.
We still believe there is a lot of opportunity to elevate the category through better clean, let's say on the tissue side I think we have add some momentum on kleenex and broadening out the usage.
And so that's something we remain excited about and we're working hard on I, just think theres been a little more volatility in the tissue categories in North America, because I would say the extreme volatility in demand in other markets like Latin America.
And in Western Europe , the pricing dynamics.
I would say a little more pressurized.
Okay, great. Thanks, so much okay. Thanks Loren.
Thank you and MS. Terran Miller Im showing there are no more questions at this time.
Oh, great. Thank you so thank you for joining.
On our conference call and we look forward to talking to you soon thanks.
This concludes today's presentation. Thank you for your participation you may now disconnect.
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