Q3 2023 Colgate Palmolive Co Earnings Call
Good morning, welcome to today's Colgate Palmolive.
Speaker 1: transcript
Speaker 1: Good morning. Welcome to today's Colgate Palmolive 3rd quarter, 2023 Arning's conference call.
Third quarter, 2000, and twenty-three earnings conference call.
Speaker 1: transcript
Speaker 1: This call is being recorded and is being Simon Cast Live at www.cogepalmolep.com.
This call is being recorded and is being simulcast live at Www <unk>.
Colgate Palmolive Dot com.
Now for opening remarks, I'd like to turn this call over to Chief Investor Relations Officer and.
Speaker 1: transcript
Speaker 1: Now for opening remarks, I'd like to turn this call over to Chief Investor Relations Officer, an Executive Vice President, M&A, John Pouche.
And executive Vice President M&A, John for Shay.
Yeah.
Speaker 2: transcript
Speaker 2: Thank you, Allison. Good morning and welcome to our third quarter, 2023, earning the release conference call. This is John Posci. Today's conference call will include forward-looking statements. Actually results.
Thanks, Alison good morning, and welcome to our third quarter 2023 earnings release Conference call. This is John O'shea.
Today's conference call will include forward looking statements actual results could differ materially from these statements.
Speaker 2: transcript
Speaker 2: Please refer to the Q3 2023 earnings press.
Ladies referred to the Q3 2023 earnings press release and related prepared materials and our most recent filings with the SEC, including our 2022 annual report on Form 10-K.
Speaker 2: transcript
Speaker 2: and related prepared materials. And our most recent filings with the SEC, including our 2022 annual report on foreign 10K, and subsequent SEC filings, all available on COVID website, for a discussion of the factors that could cause actual results to differ materially from these days.
And subsequent SEC filings all available on Colgate's website for a discussion of the factors that could cause actual results to differ materially from these statements.
Speaker 2: transcript
Speaker 2: This conference call will also include a discussion of non- GAAP financial measures, including those identified in tables 4, 6, 7, 8, and 9 of the earnings press release.
This conference call will also include a discussion of non-GAAP financial measures, including those identified in tables for 678 and nine of the earnings press release.
Speaker 2: transcript
Speaker 2: That full reconciliation to the corresponding GAAP financial measures is included in the Q3 2023 earnings press release and is available on Colgate's Web.
A full reconciliation to the corresponding GAAP financial measures is included in the Q3 2023 earnings press release and is available on Colgate's website.
Speaker 2: transcript
Speaker 2: Joining me on the call this morning are Noel Wallace, Chairman, President Chief Executive Officer, and Stan Statula, Chief Financial Officer.
Joining me on the call. This morning are Noel Wallace, Chairman, President and Chief Executive Officer, and Stan for Tula, Chief Financial Officer.
No. We will provide you with some thoughts on our Q3 results and our 2023 outlook.
Speaker 2: transcript
Speaker 2: No, we'll provide you with some thoughts on our Q3 results in our 2023 outlook. And then we will open up for Q&A.
And then we will open up for Q&A.
Speaker 3: transcript
Speaker 3: No? Good morning, everyone. I want to give you my thoughts this morning on a very strong quarter of top and bottom line growth, along with our raised 2023 outlook.
No.
Good morning, everyone I wanted to give you my thoughts this morning on a very strong quarter of top and bottom line growth along with Airasia 2023 outlook.
Speaker 3: transcript
Speaker 3: As you can see in the materials we published this morning, our strategy is working and the continued execution of the strategy leads us well positioned as we look out to the future.
As you can see in the materials. We published this morning, our strategy is working and the continued execution of the strategy leaves us well positioned as we look out to the future.
Speaker 3: transcript
Speaker 3: We believe this will enable us to deliver balanced organic sales growth going forward, growing in all six divisions, all four of our cowboys, and with both volume and pricing growth.
We believe this will enable us to deliver balanced organic sales growth going forward growing in all six divisions, all four of our categories and with both volume and pricing growth.
Speaker 3: transcript
Speaker 3: Organic volume performance improved in the quarter, which we really put us on our way towards a return to volume growth.
Organic volume performance improved in the quarter, which we believe puts us on our way towards a return to volume growth.
Speaker 3: transcript
Speaker 3: And with the leverage from this balanced growth, along with the Global Productivity Initiative, focus cost containment and our funding to growth initiatives, we now have multiple points of leverage in our PNL.
And with the leverage from this balanced growth along with the global productivity initiatives focused cost containment and our funding the growth initiatives. We now have multiple points of leverage in our P&L.
Speaker 3: transcript
Speaker 3: They should enable us to deliver consistent operating profit and earnings growth going forward.
This should enable us to deliver consistent operating profit and earnings growth going forward.
Speaker 3: transcript
Speaker 3: You can see this in our Q3 results as a gross margin was up most sequentially and year on year during my sales growth and overheads were down during my sales growth and contract with new technology team of the sector.
You can see this in our Q3 results as our gross margin was up both sequentially and year on year, driven by sales growth and overheads were down driven by logistics. This leverage allowed us to deliver another quarter of double digit operating profit growth along with a 23% increase in advertising.
Speaker 3: transcript
Speaker 3: This leverage allowed us to deliver another quarter of double-digit operating profit growth, along with a 23% increase in advertising.
Some of our markets remain choppy and the headwinds like foreign exchange and higher interest rates will continue to impact us, but we are leveraging the strength of it and the global reach of our brands, while driving scale advantages to our science based innovation digital marketing revenue growth management and best in class on the ground execution.
Speaker 3: transcript
Speaker 3: Some of our markets remain choppy and the head was like foreign exchange and higher industries will continue to impact.
Speaker 3: transcript
Speaker 3: But we are leveraging the strength of the global reach of our brands while driving scale advantages to our science-based innovation, digital marketing, revenue growth management, and best in class on the ground execution.
Speaker 3: transcript
Speaker 3: Our momentum leaves us very well positioned to deliver strong results with compounding top and bottom line growth as we look to generate consistent, long-term creation value creation for all of our stakeholders. And with that, I'll...
Our momentum leaves us very well positioned to deliver strong results with compounding top and bottom line growth as we look to generate consistent long term creation value creation for all of our stakeholders.
And with that I'll turn it over to questions.
Yeah.
We will now begin the question and answer session.
Speaker 1: transcript
Speaker 1: We'll now begin the question and answer session. You ask a question you may press star then one on your touch tone tone. Who would draw your question, please press star then two.
You ask a question you May Press Star then one on your Touchtone Todd.
He went to crawl. Your question. Please press Star then two please.
Please limit yourself to one question.
Speaker 1: transcript
Speaker 1: If you have further questions, you may re-enter the question queue.
If you have further questions you may reenter the question queue.
Speaker 1: transcript
Speaker 1: Once again, if you would like to ask a question, please press star then one.
Once again, if you would.
Like to ask a question.
Please press Star then one.
Speaker 1: transcript
Speaker 1: The first question will come from Peter Grom of UBS. Please go ahead.
The first question will come from Peter Grom of UBS. Please go ahead.
Thanks, operator, and good morning, everyone I hope you're doing well so no I wanted to ask specifically I was just kind of the return to balance top line growth and kind of how you see that evolving over the next couple of quarters I mean, excluding.
Speaker 4: transcript
Speaker 4: Thanks operator, good morning everyone. I hope you're doing well. So no, I wanted to ask this physically.
Speaker 4: transcript
Speaker 4: balance top line growth and kind of how you see that evolving over the next couple of quarters. I mean, excluding H&H, you probably already would have been there in this quarter as you highlighted in the prepare remarks. So is this something that you kind of expect to achieve, call it in the near term as you kind of exit 23 or is it going to be a dynamic that you would expect to kind of play out over the next several quarters? Thanks.
Probably already would have been there this quarter as you highlighted in the prepared remarks. So is this something that you can kind of expect to achieve you know call. It in the near term as you kind of exited 23 or is it going to be a dynamic that you would expect to kind of play out over the next several quarters.
Unknown Executive: Good morning. Welcome to today's Colgate Palmolive, 3rd quarter, 2023 Arning's conference call. This call is being recorded and is being Simon Cass live at www.colgatepalmolive.com.
Yeah. Good morning, Peter Thanks, listen, we're obviously very pleased with the sequential improvement really throughout the entire P&L Oh boy.
Speaker 3: transcript
Speaker 3: Yeah, good morning, Peter. Thanks. Listen, we're obviously very pleased with the sequential improvement really throughout the entire P&L.
John Pache: Now for opening remarks, I'd like to turn this call over to Chief Investor Relations Officer, an Executive Vice President, M&A, John Pache, thank you.
Speaker 3: transcript
Speaker 3: volume improved and as you rightly pointed out if you take the Hale and Hazel business out which as we know we're working through a price increase in that market our volume inflected positive in the quarter and we've seen that pretty consistent around particularly some of our emerging markets we saw very positive volume so we're pleased with the sequential improvements
Improved and as you rightly pointed out if you take our the holiday in Haynesville business out, which as you know we're working through a price increase in that market, our volume inflected positive in the quarter and we've seen that pretty consistent around particularly some of our emerging markets, where we saw very positive volume. So we're pleased with the sequential improvements the category dynamic.
John Pache: Good morning and welcome to our 3rd quarter, 2023 Arning's release conference call. This is John Pache. Today's conference call will include forward-looking statements. Actual results could differ materially from these statements. Please refer to the Q3 2023 Arning's press release in related prepared materials and our most recent filings with the SEC, including our 2022 annual report on foreign 10K. Today and subsequent SEC filings, all available on Colgate's website for a discussion of the factors that could cause actual results to differ materially from these statements.
Speaker 3: transcript
Speaker 3: The Caligoy Dynamics are consistent with what we talked about, but they're not necessarily linear. I mean, we're seeing some puts in takes as we look around the regions and the different categories that we compete in. Obviously, taking more pricing across the pet food businesses, ag prices continue to stay high. But overall, the sequential improvement is playing out more or less as we anticipate it. And as we move forward, our intention is to continue to drive balanced organic growth in the short and the long term.
Consistent with what we've talked about but they're not necessarily linear I mean, we're seeing some puts and takes as we look around the regions in the different categories that we compete in obviously, you're taking more pricing all across the pet food business as egg prices continue to stay high but overall the sequential improvement is playing out more or less as we anticipated and as we move forward. Our intention is to continue.
To drive balanced organic growth in the short and the long term.
The next question is from Matt dry out to share of J P. Morgan. Please go ahead.
Speaker 1: transcript
Speaker 1: The next question is from Andrea Tashera of J.P. Morgan. Please go ahead.
John Pache: This conference call will also include a discussion of non-GAAP financial measures, including those identified in tables 4, 6, 7, 8, and 9 of the Arning's press release. A full reconciliation to the corresponding gap financial measures is included in the Q3 2023 Arning's press release and is available on Colgate's website.
Speaker 5: transcript
Speaker 5: Thank you, good morning. No, you mentioned the full year guidance, of course, which raised seven to eight, but it still implies a deceleration of course in the fourth quarter, and you called out in your prepared remarks, some of the puts and takes in particular anniversary, the acquisition in PATH, and then that would lead to a reduction in third party manufacturing for private label.
Thank you. Good morning, No you mentioned the full year guidance of course that was raised a seven to eight but it's too implies a deceleration of sports in the fourth quarter and you called out in your prepared remarks, some of the puts and takes in particular anniversarying the.
John Pache: Joining me on the call this morning are Noel Wallace, Chairman, President and Chief Executive Officer, and Stan Fatula, Chief Financial Officer. Noel will provide you with some thoughts on our Q3 results in our 2023 outlook, and then we will open up for Q&A.
On the acquisition and Pat and then that would.
Would lead to a reduction in third party manufacturing for private label.
Speaker 5: transcript
Speaker 5: Can you break that down because it also implies I'm assuming the base business acceleration and I understand that you're lapping a lot of the pricing, but just as we think about volumes and in particular North America, there has been a sequestion improvement and you called out as well that you were expecting.
Can you break that down because it also implies that I'm, assuming the base business, a deceleration and I understand that you were lapping a lot of the pricing, but just as we think about volumes and in particularly in North America that has been a sequential improvement.
Noel Wallace: Noel, a good morning everyone. I want to give you my thoughts this morning on a very strong quarter of talk and bottom line growth, along with our raised 2023 outlook. As you can see in the materials we published this morning, our strategy is working and the continued execution of the strategy leads us well positioned as we look out to the future. We believe this will enable us to deliver balanced organic sales growth going forward, growing in all six divisions, all four of our categories, and with both volume and pricing growth.
And you called out as well that are you expecting promo and more more activations in in in and trade. So anything you can share with us in terms of the progress you've made to regain our volumes in North America as it relates to the full guidance for the fourth quarter.
Speaker 5: transcript
Speaker 5: promo and more work vacations in trade. Anything you can share with us in terms of the progress you've made to regain volumes in North America as it relates to the full guidance for the fourth quarter.
Noel Wallace: Organic volume performance improved in the quarter, which we really put us on our way towards a return to volume growth. And with the leverage from this balanced growth, along with the Global Productivity Initiative, focused cost containment and our funding the growth initiatives, we now have multiple points of leverage in our P&L. This should enable us to deliver consistent operating profit and earnings growth going forward. You can see this in our Q3 results as our growth margin was up both sequentially and year on year during my sales growth and overheads were down during my logistics.
Thank you.
Sure. Good morning, Andrew Let me, let me take the North America piece of that question first and then I'll I'll highlight more agency across the across the enterprise. So North America is on pace with exactly what we talked about in the Q2 call continued sequential improvement.
Speaker 3: transcript
Speaker 3: Here, good morning, Andrew. Let me take the North America piece of that question first, and then I'll highlight more teachers get across the enterprise. So North America is on pace with exactly what we talked about in the Q2 call, continued sequential improvement.
Speaker 3: transcript
Speaker 3: across the board and we anticipate that they will see sequential improvement in their business as we move through the fourth quarter. A lot of that was getting the promotional cadence right and we started to implement some of that promotional opportunity in the back end of the third quarter most of that will come through in the fourth quarter and we're pleased with it obviously the important part about North America is the oral care business.
Across the board and we anticipate that they will see sequential improvement in their business as we move through the fourth quarter a lot of that was getting the promotional cadence right and we started to implement some of that promotional opportunity in the back end of the third quarter most of that will come through in the fourth quarter and we're pleased with it all but the important part about North America.
Noel Wallace: This leverage allowed us to deliver another quarter of double digit operating profit growth, along with a 23% increase in advertising. Some of our markets remain choppy and the headwinds like foreign exchange and higher industries will continue to impact us. But we are leveraging the strength of the global reach of our brands while driving scale advantages to our science-based innovation, digital marketing, revenue growth management, and besting class on the ground execution. Our momentum leaves us very well positioned to deliver strong results with compounding top and bottom line growth as we look to generate consistent long-term creation value creation for all of our stakeholders, and with that I'll turn it over to questions.
Oral care business that inflected positive with a high single digit growth in oral care and positive volume growth on that business in the quarter as well and we anticipate that will continue as we move through the balance of the year. So North America overall trending as we expected we're still not pleased with some of the scanner shares, but as we said, we'll get the promotional opportunity right as we move through the.
Speaker 3: transcript
Speaker 3: that inflected positive with high single digit growth and oral care and positive volume growth on that business in the quarter as well.
Speaker 3: transcript
Speaker 3: And we anticipate that will continue as we move through the balance of the year. So North America overall trending as we expected. We're still not pleased with some of the scanners shares, but as we said, we'll get the promotional opportunity right as we move through the balance of the year.
Balance of the year and importantly, our non promoted volume, which reflects I think the strong advertising that we're putting it into the North American business is continued continues to inflect positive no strategically around the world, where we're seeing volume improve across the world now that it is based on a lot of the geographies we've seen the pricing start.
Speaker 3: transcript
Speaker 3: and importantly our non-promoted volume which reflects i think the strong advertising that we're putting into the north america business is continued continues to inflect
Speaker 3: transcript
Speaker 3: seen volume improve across the world. Now, that is based on a lot of the geographies we've seen the pricing start to subside a bit as we're not taking more pricing in some of the markets. Really pleased seeing in markets where we took pricing early, like Latin America, where we've seen a very positive inflection in volume. Volume was up 5%. And if you look at Mexico and Brazil specifically, Mexico was up mid-single digits. Brazil was up high single digits in volume. So again, I think a reflection of the strong advertising innovation and the fact that over time as pricing settles out in the market, you see the volumes come back, and that's pretty consistent. Europe , likewise, a little improvement in volume.
Unknown Executive: We'll now begin the question and answer session. You ask a question, you may press star then one on your touch-tone phone. Who would draw your question, please press star then two. Please limit yourself to one question. If you have further questions you may re-enter the question queue. Once again, if you would like to ask a question, please press star then one.
To subside a bit as we're not taking more pricing in some of the markets really pleased seen in markets, where we took pricing early like Latin America, where we've seen a very positive inflection in volume volume was up 5% and if you look at Mexico, and Brazil, specifically, Mexico was up mid single digits, Brazil was up high single digits in volume. So again I think a.
<unk> of the strong advertising innovation and the fact that over time as pricing settles out in the market and you see the volumes come back and that's pretty consistent Europe. Likewise, a little improvement in volume. So we're proceeding exactly as we expected to see volumes start to sequentially improve but it's not necessarily linear.
Peter Grom: The first question will come from Peter Grom of UBS. Please go ahead. Thanks operator. Good morning everyone. I hope you're doing well. So, no, I wanted to ask specifically on just kind of the returns you balance top-line growth and kind of how you see that evolving over the next couple of quarters. I mean, excluding H&H, you probably already would have been there in this quarter as you highlighted in the preparable marks.
Speaker 3: transcript
Speaker 3: Europe likewise a little improvement in volume. So we're seeing exactly as we expected to see volumes start to sequentially improve, but it's not necessarily linear.
Speaker 3: transcript
Speaker 3: And I want to leave that point that we'll watch that carefully as we move forward and we'll continue to implement our strategies of strong innovation across the core, adjacencies and channels, and we'll see that play out as we move forward.
And I want them to leave that point that we'll watch that carefully as we move forward and we'll continue to implement our strategies of strong innovation across the core adjacencies and channels and we'll see that play out as we can report.
Peter Grom: So is this something that you kind of expect to achieve, you know, call it in the near term as you kind of exit 23 or isn't going to be a dynamic that you would expect to kind of play out over the next couple of quarters. Thanks.
Yeah.
Our next question will come from Dara <unk> of Morgan Stanley. Please go ahead.
Speaker 1: transcript
Speaker 1: Next question will come from Dara, Masenian of Morgan Stanley . Please go ahead.
Noel Wallace: Yeah, good morning, Peter. Thanks. Listen, we're obviously very pleased with the sequential improvement really throughout the entire P&L volume improved and as you rightly pointed out, if you take the Holly and Hazel business out, which as you know, we're working through a price increase in that market. Our volume inflected positive in the quarter and we've seen that pretty consistent around, particularly some of our emerging markets where we saw very positive volume.
Good morning.
Can you guys discuss markets your performance and your key geographies and product categories. In Q3, you know how you are performing on the share front and given you've taken robust pricing. What are you seeing competitively in terms of the pricing and promotional environment and how might that play into your share performance.
Speaker 6: transcript
Speaker 6: Can you guys discuss market share performance in your key geographies and product categories in Q3, how you're performing on the share front and given you've taken robust pricing, what do you see competitively in terms of the pricing and promotional environment and how might that play into your share performance?
Yeah.
Speaker 3: transcript
Speaker 3: Sure, thanks, good morning, Derek. Sure, overall shares look good. We're up on a global basis. Let me just take toothpaste, which we track globally. Shares are up about a hundred basis points.
Sure. Thanks, Good morning, Dara sure overall shares look good we're up on a global basis, Let me just take toothpaste, which we try it globally.
Noel Wallace: So we're pleased with the sequential improvements. The Caligua Dynamics are consistent with what we talked about, but they're not necessarily linear. I mean, we're seeing some puts in takes as we look around the regions and the different categories that we compete in. Obviously, taking more pricing across the pet food business as ag prices continue to stay high. But overall, the sequential improvement is playing out more or less as we anticipate it.
Ours are up about 100 basis points, that's driven by strong performance in Europe, where we've seen a record high shares, particularly behind the strategy of pushing our higher end therapeutic brands on the premium side with Almac and merit al as well as strong innovation on the Colgate side behind whitening, So Europe delivering very strong.
Speaker 3: transcript
Speaker 3: That's driven by strong performance in Europe where we've seen record high shares particularly behind
Speaker 3: transcript
Speaker 3: strategy of pushing our higher end therapeutic brands on the premium side with L-Max and Merrittall as well as strong innovation on the cold gate side behind whitening. So Europe delivering very strong. Africa Middle East, we're up in 10 of 11 markets and market shares there so continue to show nice performance.
Noel Wallace: And as we move forward, our intention is to continue to drive balanced organic growth in the short and the long term.
Wrong Africa Middle East dropping 10 of 11 markets at market shares there should continue to show nice performance.
Andrea Tashera: The next question is from Andrea Tashera of JP Morgan. Please go ahead. Thank you.
Speaker 3: transcript
Speaker 3: Pleasingly, Latin America, where we, as you know, we have very high shares. Shares are stable. We've seen shares grow in.
Latin America, where we as you know we have very high shares shares are stable, we've seen share is growing.
Noel Wallace: Good morning. No, you mentioned the the four year guidance, of course, which raised seven to eight. But it's to implies a acceleration of course in the fourth quarter. There are new calls out in your prepared remarks, some of the puts and takes in particular, anniversary, the their position in pet. And then that would that would lead to a reduction in in third party manufacturing for private label. Can you break that down because it also implies I'm assuming the base business acceleration and I understand that you're lapping a lot of the pricing.
Speaker 3: transcript
Speaker 3: in Brazil, slightly down in Mexico, but tracking up in recent periods, so we're pleased with
And in Brazil are slightly down in Mexico, but tracking up.
In recent periods. So we're pleased with that our U S. A in the recent weeks, we started to see some of the promotional volumes come back as we very thoughtfully put promotions in the market. We're not just going to buy share back for the sake of buying it back we're going to get a much healthier category as we move forward and that's been very deliberate in how we thought about that that business there.
Speaker 3: transcript
Speaker 3: U.S. in the recent weeks, we've started to see some of the promotional volumes come back as we very thoughtfully put promotions in the market. We're not just going to buy share back for the sake of buying it back. We're going to get a much healthier category as we move forward and that's been very deliberate in how we thought about that business there.
Africa excuse me Asia shares continue to be strong for us in China. So we're pleased with that and likewise you as you go around the region share is pretty good in India. We've done some really good work on our core business in the last couple of months and we anticipate that's going to inflect inflect positive for our core business overall pleased with the pleased with market shares on the Hill.
Speaker 3: transcript
Speaker 3: Africa, excuse me, Asia shares continued to be strong for us in China. So we're pleased with that. And likewise, as you go around the region shares pretty good in India. We've done some really good work on our core business in the last couple months. And we anticipate that's going to inflect positive for our core business overall. Please with, please with market shares on the hills business. Likewise, very strong volume and value share growth and pet specialty and neighborhood pets, which is where we track.
Noel Wallace: But just as we think about volumes and in particularly North America, there has been a sequential improvement. And you called out as well that you were expecting from more and more work vacions in trade. So anything you can share with us in terms of the progress is made to regain a volume in North America as it relates to the full guidance for the fourth quarter. Thank you.
<unk> business, Likewise, very strong volume and value share growth in pet specialty and neighborhood pet switches, where we track.
Speaker 3: transcript
Speaker 3: We're one of the fastest growing brands in both those retail environments, so we're pleased with obviously the strategy of bringing innovation and the increased advertising support we're bringing into the business. A little softness on our home care business in the U.S. and that again, it tributes right back to the promotional cadence and we're addressing now that we move through the fourth quarter.
One of the fastest growing brands in both those retail environments. So we're pleased with obviously the strategy of bringing innovation and increased advertising support we're bringing into the business a little softness on our home care business in the U S and that that again attributes right back to the promotional cadence and we're addressing that as we move through the fourth quarter.
Noel Wallace: Good morning, Andrea. Let me take the North America piece of that question first and then I'll highlight more teachers across the across the enterprise. So North America is on pace with exactly what we talked about in the Q2 call continued sequential improvement across the board. And we anticipate that they will see sequential improvement in their business as we move through the fourth quarter. A lot of that was getting the promotional cadence right and we started to implement some of that promotional opportunity in the back end of the third quarter.
Speaker 1: transcript
Speaker 1: Our next question will come from Filippo Filorni of Citi. Please go ahead.
Our next question will come from Felipe <unk> of Citi. Please go ahead.
Hey, good morning, everyone.
Speaker 7: transcript
Speaker 7: So clearly you return to solid volume growth at Hales and solid results despite a more challenging category.
So clearly you've returned to solid volume growth at Hill's and solid results. Despite a more challenging category.
Speaker 7: transcript
Speaker 7: So, Noel, can you maybe comment about how your business is positioned compared to the category weakness that we're seeing, which seems concentrated more on the website and the trade side.
No can you maybe comment about how your business its position compared to the category weakness that we're seeing which seems concentrated more on the west side on the treat side.
Noel Wallace: Most of that will come through in the fourth quarter. And we're pleased with it. Obviously the important part about North America is the oral care business that inflected positive with high single digit growth and oral care and positive volume growth on that business in the quarter as well. And we anticipate that will continue as we move through the balance of the year. So North America overall trending as we expected. We're still not pleased with some of the scanners shares, but as we said, we'll get the promotional opportunity right as we move through the balance of the year.
Speaker 7: transcript
Speaker 7: Um, and then just thinking about Q4, how should we think about.
And then just thinking about Q4 or how should we think about the progression of volume inhales, considering you're going to lose some of that private label volumes. Both from a top line, but also from margin standpoint. Thank you.
Speaker 7: transcript
Speaker 7: progression of volume in hills considering you're going to lose some of that private label volumes both from a top line but also from a margin standpoint. Thank you.
Speaker 3: transcript
Speaker 3: Yeah, thanks, Filippo. And good morning. So again, you know, a great quarter for Hills, obviously with strong balance pricing.
Yeah, Thanks, Philippe and good morning, so again.
Great quarter for Hills, obviously with strong balanced pricing and volume growth in the quarter that that growth was quite a pervasive across the world as we saw a good growth in the U S as well as in some of our emerging markets are likewise in Canada, a category has slowed a bit as you've heard from from others.
Noel Wallace: And importantly, our non promoted volume, which reflects I think the strong advertising that we're putting into the North America business is continued continues to inflect positive. Now strategically around the world, we're seeing volume improve across the world. Now that is based on a lot of the geographies we've seen. The pricing start to subside a bit as we're not taking more pricing in some of the markets. Really pleased seen in markets where we took pricing early like Latin America, where we've seen a very positive inflection and volume volume was up 5%.
Speaker 3: transcript
Speaker 3: and volume growth in the quarter, that growth was quite pervasive across the world.
Speaker 3: transcript
Speaker 3: as we saw a good growth in the U.S. as well as in some of our emerging markets and likewise in Canada.
Speaker 3: transcript
Speaker 3: A category has slowed a bit, as you've heard from others.
Speaker 3: transcript
That said as you mentioned a combination of sustained pricing in the category over the last four or five quarters and AG prices still remaining high and so it's not to be unexpected that the volume would slow a little bit as you rightfully point out you've seen some conversion from wet into dry that lowers the volume you've seen all but she treats which is more disk.
Speaker 3: transcript
Speaker 3: and ag prices still remaining high. And so it's not to be unexpected that the volume would slow a little bit. As you rightfully point out, you've seen some conversion from wet into dry. That lowers the volume. You've seen obviously treats, which is more discretionary. And you'll recall, as we said in the Q2 call, we don't have a significant business at all in the treat segment.
Noel Wallace: And if you look at Mexico in Brazil, specifically Mexico was up mid single digits Brazil was up high single digits in volume. So again, I think a reflection of the strong advertising innovation and the fact that over time as pricing settles out in the market, you see the volumes come back and that's pretty consistent. Europe likewise a little improvement in volume. So we're seeing exactly as we expected to see volume start to sequentially improve, but it's not necessarily linear.
Question, Arie and you'll recall as we said in the Q2 call. We don't have a significant business at all in the trade segment.
Speaker 3: transcript
Speaker 3: And likewise, I would say the non-science brands continue to perform quite well, but are not immune to the continued challenges that you highlighted in the category. But as I mentioned just a moment ago, we continue to grow share. And for us, this is a share game. We only have five to six percent penetration in our largest market in the U.S.
And likewise I would say the non science brands continued to perform quite well, but we're not immune to the continued challenges that are that.
That you you highlighted in the category, but as I mentioned, just a moment ago, we continue to grow share and for US. This is a share gain we only have 5% pen five years to 6% penetration in our largest market in the U S. So we have a lot of upside still hence the reason why we continue to bring strong innovation in the market. Hence the reason why we can.
Noel Wallace: And I want to leave that point that we'll watch that carefully as we move forward and we'll continue implement our strategies of strong innovation across the core adjacent season channels and we'll see that play out as we move forward.
Speaker 3: transcript
Speaker 3: So we have a lot of upside still, hence the reason why we continue to bring strong innovation in the market, hence the reason why we continue to advertise very aggressively to drive household penetration.
Dara Mohsenian: Next question will come from Dara Mohsenian of Morgan Stanley. Please go ahead.
Continue to advertise very aggressively to drive household penetration.
Speaker 3: transcript
Speaker 3: Likewise, we see opportunities continued in the prescription diet. Our studies show that only about 5% of pet owners are using a prescription product, whereas potentially up to 80% could be using it. So that affords us an upside. We've talked about wet. Obviously, some conversion from wet into dry, but we have very low shares in the wet segment.
Likewise, we see opportunities continued in the prescription diet to our study show that only about 5% of of our pet owners are using a prescription product, whereas potentially up to 80% could be used units that affords us an upside we've talked about wet obviously Houston conversion from went into dry, but we have very low shares in the wet segment.
Noel Wallace: Can you guys discuss market share performance in your key geographies and product categories in Q3, you know, how you're performing on the share front and given you've taken robust pricing, what are you seeing competitively in terms of the pricing and promotional environment and how might that play into your share performance? Thanks. Sure. Thanks. Good morning, Dara. Sure. Overall shares look good. We're up on a global basis. Let me just take toothpaste, which we try globally.
Which has been one of the historically growing segments and we have plans as we've talked about in the past to continue to grow that so overall, we feel we're positioned well, but not immune to some of the softness that we've seen but likewise as I mentioned, we're very focused on driving share and ultra me expanding this business internationally.
Speaker 3: transcript
Speaker 3: which has been one of the historically growing segments, and we have plans, as we've talked about in the past, to continue to grow that. So, overall, we feel we're positioned well but not immune to some of the softness.
Noel Wallace: Shares are up about 100 basis points. That's driven by strong performance in Europe where we've seen a record high shares, particularly behind the strategy of pushing our higher end therapeutic brands on the premium side with L-Max and Maridol. As well as strong innovation on the Colgate side behind whitening. So Europe delivering very strong. Africa Middle East, we're up in 10 of 11 markets and market shares there. So continue to show nice performance.
Speaker 3: transcript
Speaker 3: that we've seen. But likewise, as I mentioned, we're very focused on driving share and ultimately expanding this business internationally. We'll watch the category carefully. We know our retailers are very focused on nutrition and the science segment continues to perform well.
We will watch the category carefully we know our retailers are very focused on nutrition science segment continues to perform well and that's where we're putting our our our strategies in order to continue to drive penetration.
Speaker 3: transcript
Speaker 3: And that's where we're putting our strategies in order to continue to drive penetration.
Question will come from Jason English of Goldman Sachs. Please go ahead.
Speaker 1: transcript
Speaker 1: The next question will come from Jason English of Goldman Sachs. Please go ahead.
Noel Wallace: Pleasantly Latin America where we, as you know, we have very high shares. Shares are stable. We've seen shares growing in Brazil, slightly down in Mexico but tracking up in recent periods. So we're pleased with that. U.S., in the recent weeks, we've started to see some of the promotional volumes come back as we very thoughtfully put promotions in the market. We're not just going to buy share back for the sake of buying it back.
Hey, good morning folks thanks for Slotting me in.
Speaker 8: transcript
Speaker 8: Thanks for slotting me in and let's stay there, let's stay on pet nutrition for a minute but let's pivot to maybe the bottom line.
And let's stay there I'll stand pet nutrition for a minute, but let's pivot to maybe the bottom line.
Speaker 8: transcript
Speaker 8: Looks like gross margins for that segment down to 360 bips, this quarter kind of bringing two year to down 900. Very consistent what we saw last quarter. And I get the mixed benefits of the acquisitions. I get the plant startup expense, I get the inflation. Like these are all obviously factors have been contributing to the pressure. But I'm expecting all of them to sort of subside. As you start to rotate the product out of the red collar assets, as you start to pivot some of your resources from starting out plans to attacking some of the efficiency and hopefully some of the input cost pressure subsides and price catches up.
It looks like gross margins for that segment down 360 bps this quarter kind of bringing two year to down 900, very consistent what we saw last quarter.
And I I get the mixed benefits of the acquisitions I get to the plant startup expense I get the inflation like these are all obviously factories have been contributing to the pressure.
Noel Wallace: We're going to get a much healthier categories. We move forward and that's been very deliberate and how we thought about that that business there. Africa, excuse me, Asia shares continue to be strong for us in China. So we're pleased with that. And likewise, as you go around the region shares pretty good in India. We've done some really good work on our core business in the last couple months. And we anticipate that's going to inflect like positive for our core business overall.
But I'm expecting all of them to sort of subside as you start to rotate the product out of the red color assets as you start to pivot some of your resources from starting out plans to attacking some of the efficiency and hopefully as some of the input cost pressure subsides and price catches up.
Speaker 8: transcript
Speaker 8: but we haven't yet seen progress yet. What is a reasonable expectation for us as we try to level set our own expectations? When should we start to see the benefits of all those dynamics come to fruition? And how much recovery should we be expecting?
But we haven't yet seen progress yet.
What is a reasonable expectation for us as we try to level set our own expectations. When should we start to see the benefits of all those dynamics come to fruition.
Noel Wallace: Pleased with, pleased with market shares on the hills business. Likewise, very strong volume and value share growth and pet specialty and neighborhood pets, which is where we track. We're one of the fastest growing brands in both those retail environments. So we're pleased with obviously the strategy of bringing innovation and increased advertising support. We're bringing into the business a little softness on our home care business in the US. And that again, it tributes right back to the promotional cadence. And we're addressing now that we move through the fourth quarter.
And how much recoveries should we be expecting.
Oh well. Thanks for the question you know again no sequentially things are moving in the right direction and that's exactly what we talked about in previous calls and obviously operating profit and EBIT continues to inflect, where we want it we continue to support the business with a disproportionate amount of our total increase in advertising as we talk.
Speaker 3: transcript
Speaker 3: Well, thanks for the question. You know, again, sequentially things are moving in the right direction. And that's exactly what we talked about in previous calls. And obviously, operating profit and EBIT continues to inflect where we want it. We continue to support the business with the disproportionate amount of our total increase in advertising as we talked about. That is, again, strategic based on the low penetration in the real headroom that we continue to see in the category for us.
Unknown Executive: Our next question will come from the leap of the learning of city. Please go ahead.
About that is again strategic based on the low penetration in the real headroom that we continue to see in the category for us as we see AG prices have somewhat flattened out and that's good news for us out given a lot of the pricing that we've taken we anticipate that that will start to inflect more positive in our gross margins as we move forward as you.
Leah Tongue: Hey, good morning, everyone. So clearly you return to solid volume growth at hills and solid results, despite a more challenging category. So no, can you maybe comment about how your business is position compared to the category weakness that we're seeing, which seems concentrated more on the website and the three side. And then just thinking about Q4, how should we think about the progression of volume in hills considering you're going to lose some of that private label volumes both from a top line, but also from margin standpoint. Thank you. Yeah, thanks for leaping.
Speaker 3: transcript
Speaker 3: As we see ag prices have somewhat flattened out, and that's good news for us, given a lot of the pricing that we've taken, we anticipate that that will start to inflect more positive in our gross margins as we move forward. As you rightfully pointed out, we have a significant amount of cost that's still moving through the P&L on getting our new facilities ramped up. The new WET facility will start to ramp up here in the fourth quarter.
Rightfully pointed out we have a significant amount of costs are still moving through in the P&L on getting our new facilities ramped up the new wet facility will start to ramp up here in the fourth quarter. So we'll have some costs associated with that but ultimately over the longer term those costs will subside at.
Speaker 3: transcript
Speaker 3: So we'll have some costs associated with that, but ultimately, over the longer term, those costs will subside. And we feel good about where we are with the new red collar plants, getting those integrated in. So overall, with pricing continuing to flow through, with ag prices holding.
And we feel good about where we are with the new red colored plants getting those integrated in so overall with pricing continuing to flow through with egg prices holding.
Noel Wallace: Good morning. So again, you know, a great quarter for hills, obviously with strong balance pricing and volume growth in the quarter. That growth was quite pervasive across the world as we saw a good growth in the US as well as in some of our emerging markets and likewise in Canada. A category has slowed a bit as you've heard from others. That says you mentioned a combination of sustained pricing in the category over the last of four or five quarters.
Speaker 3: transcript
Speaker 3: And continuing to drive premiumization in the category, we feel good about the long-term trajectory of operating margins in this business.
And are continuing to drive premium position in the category, we feel good about the long term trajectory of operating margins in this business.
Next question will come from Olivia Tong of Raymond James. Please go ahead.
Speaker 1: transcript
Speaker 1: Next question will come from a Lydia Tong of Raymond James. Please go ahead.
Thank you and good morning.
Speaker 9: transcript
Speaker 9: Thanks good morning. We're gonna ask you a little bit more about North America, given that a couple of things, first, the pricing accelerated on a two-year stack, if you could talk about, you know, the drivers of that, I assume promotion is a big piece of that. You mentioned advertising was up 25% in North America, was that the highest amongst the divisions? And just if you could talk a little bit more about how you think about the ROI and the timing of the impact of that higher advertising. Thank you.
You're a little bit more about North America.
Given that a couple of things first the pricing accelerated on a two year stack if you could talk about.
Noel Wallace: And ag prices still remaining high. And so it's not to be unexpected that the volume would slow a little bit as you rightfully point out, you've seen some conversion from wet into dry. That lowers the volume. You've seen obviously treats, which is more discretionary. And you'll recall, as we said in the Q2 call, we don't have a significant business at all in the tree segment. And likewise, I would say the non science brands continue to perform quite well, but are not immune to the continued challenges that you highlighted in the category.
The drivers of that I think most of that's a big piece of that and you mentioned advertising was up 25% in North America was that the highest amongst the divisions and.
Just if you could talk a little bit more about how you think about the ROI and the timing of the impact of.
That higher advertising. Thank you.
Yeah, Thanks, and good morning Olivia.
Speaker 3: transcript
Speaker 3: Yeah, thanks, and good morning, Livio. Again, as I mentioned earlier, we're pleased with the progress. Again, this is a very deliberate strategic execution of how we're trying to get the health of our brands and the health of our P&L in a better place.
And as I mentioned earlier, we're pleased with the progress again. This is a very deliberate strategic execution of how we're trying to get the health of our brands and the health of our P&L in a better place and as I mentioned in the second quarter call. We may pull back a little bit too far off some of the promotional cadence, but we're adjusting that but just.
Noel Wallace: But as I mentioned just a moment ago, we continue to grow share. And for us, this is a share game. We only have 5% pen, 5% to 6% penetration in our largest market in the US. So we have a lot of upside still, hence the reason why we continue to bring strong innovation in the market, hence the reason why we continue to advertise very aggressively to drive household penetration. Likewise, we see opportunities continued in the prescription diet, our studies show that only about 5% of pet owners are using a prescription product, whereas potentially up to 80% could be using it.
Speaker 3: transcript
Speaker 3: And as I mentioned in the second quarter call, we may have pulled back a little bit too far on some of the promotional cadence, but we're adjusting that, but adjusting it very prudently, where we see the ROI and where we believe we can drive sustained volume and share opportunity moving forward.
Isn't it very prudently, where we see the ROI and where we believe we can drive sustained volume and share opportunity moving forward. The 25% increase was not the highest as I. Just mentioned Hill's continues to receive a disproportionate amount of the advertising increase but North America again, given the the vibrancy of that market in the long term strategic.
Speaker 3: transcript
Speaker 3: The 25% increase was not the highest, as I just mentioned, Hills continues to receive a disproportionate amount of the advertising increase, but North America, again, given the vibrancy of that market and the long-term strategic importance of that market, we will continue to invest for the long term.
So of that market, we will continue to invest for the long term great progress on the operating margins as you saw them move through that P&L that is a reflection again I think have a much more prudent approach to pricing in the market and our promotional cadence and we feel good about the sequential growth that we saw in the quarter and the sequential growth that will continue to see.
Noel Wallace: So that affords us an upside. We've talked about wet, obviously some conversion from wet into dry, but we have very low shares in the wet segment, which has been one of the historically growing segments, and we have plans as we've talked about in the past to continue to grow that. So overall, we feel we're positioned well, but not immune to some of the softness that we've seen. But likewise, as I mentioned, we're very focused on driving share and ultimately expanding this business internationally. We'll watch the category carefully. We know our retailers are very focused on nutrition and the science segment continues to perform well, and that's where we're putting our strategies in order to continue to drive penetration.
Speaker 3: transcript
Speaker 3: transcript
Speaker 3: And we feel good about the sequential growth that we saw in the quarter and the sequential growth that will continue to see in the fourth quarter.
In the fourth quarter.
Yeah.
The next question will come from Bryan Spillane of Bank of America. Please go ahead.
Speaker 1: transcript
Speaker 1: The next question will come from Brian Spalane, of Bank of America. Please go ahead. Thanks, operator.
Thanks, operator, good morning, everyone.
Speaker 8: transcript
Speaker 8: Add question on ad spend. I think your to date now we're running at a rate that's about a little over 12% as a percentage of sales. And so.
I had a question on on an AD spend I think year to date now were over 12%.
We're running at a rate that's about a little over 12% as a percentage of sales and so you know.
Speaker 10: transcript
Speaker 10: you know given the increase uh... that will end the year at it is a good base to think of in terms of at spend going forward or would you consider you know uh... taking up further so just trying to get a sense now if if we've kind of rebased or if it's a new base in terms of of at
Jason English: Question will come from Jason English of Goldman Sachs. Please go ahead.
Given the increase that will end the year at is this a good base to think of in terms of AD spend going forward or would you consider you know.
Noel Wallace: Hey, morning folks. Thanks for letting me in. And let's stay there. Let's stay on Pat Nutrition for a minute. But let's pivot to maybe the bottom line. Looks like gross margins for that segment down 360 bips this quarter kind of bring two year to down 900. Very consistent. We saw last quarter. And I get the mixed benefits of the acquisitions. I get the plant startup expense. I get the inflation. Like these are all obviously factors have been contributing to the pressure.
Taking up further so just just trying to get a sense now if we've kind of rebased or if this is a new base in terms of ad spend.
Yeah, Thanks, Brian listen, it's not as much as a percent of sales, it's really about how we're getting what return on investment we're getting for that and clearly you've seen that play.
Speaker 3: transcript
Speaker 3: Yeah, thanks Brian . Listen, it's not as much as the percent of sales. It's really about how we're getting what we turn on investment we're getting for that. And clearly you've seen that play through the P&L on the strong organic in the business, the continued growth on market shares.
Play through the P&L on the strong organic in the business the continued growth on market shares.
Noel Wallace: But I'm expecting all of them to sort of subside as you start to rotate the product out of the red collar assets. As you start to pivot some of your resources from starting out plans to attacking some of the efficiency. And hopefully as some of the input cost pressure subsides and price catches up. But we haven't yet seen progress. Yeah. What is a reasonable expectation for us as we try to level set our own expectations. When should we start to see the benefits of all those dynamics come to fruition. And and how much recovery should we be expecting?
Speaker 3: transcript
Speaker 3: around the world, particularly in those strategic categories that were pushing more more deliberately with the advertising. So it's really about an ROI and as we see that played back through the P&L, which we clearly are.
The world, particularly in and no strategic categories that were pushing more more deliberately with the advertising. So it's really about an ROI and is as we see that play it back through the P&L, which we clearly are will continue to invest so we're really focused now I'll say I'm, making sure we continue to optimize that investment.
Speaker 3: transcript
Speaker 3: will continue to invest. So we're really focused now, I'll say on making sure we continue to optimize that investment. We put a lot more focus on programmatic buying, a lot more focus on personalization and getting content right. You heard E talk about.
Put a lot more focus on programmatic buying a lot more focus on personalization and getting content right you heard <unk> talk about.
Speaker 3: transcript
Speaker 3: when we were down in Florida with regards to the importance of advertising, creative, and content development, so putting a lot more focus to get better ROI for what we're delivering. So not necessarily a percent, but overall, we're getting the performance to the P&L and to our businesses on the ground.
And when we were down in Florida.
Stan Fatula: Well, thanks for the question. You know, again, sequentially things are moving in the right direction. And that's exactly what we talked about in previous calls and obviously operating profit and even continues to inflect where we want it. We continue to support the business with the disproportionate amount of our total increase in advertising as we talked about. That is again strategic based on the low penetration in the real headroom that we continue to see in the category for us.
With regards to the importance of advertising creative and content development, you're putting a lot more focus to get better ROI for what we're delivering so not necessarily a percent, but overall, we're getting the performance through the P&L into through our businesses on the ground.
Our next question will come from Steve powers of Deutsche Bank. Please go ahead.
Speaker 1: transcript
Speaker 1: Our next question will come from Steve's powers of Duet 2 Bang. Please go ahead.
Stan Fatula: As we see, prices have somewhat flattened out. And that's good news for us, given a lot of the pricing that we've taken. We anticipate that that will start to inflect more positive and our gross margins as we move forward. As you rightfully pointed out, we have a significant amount of costs are still moving through the PNL on getting our new facilities ramped up. The new wet facility will start to ramp up here in the fourth quarter.
Okay, great. Thank you and good morning.
Speaker 4: transcript
Speaker 4: Hey, great. Thank you. Good morning. Um, maybe two questions I could. One is to fall up and round out the volume.
Maybe two questions if I could I wanted to follow up on Roundup of volume conversation you talked about line.
Speaker 11: transcript
Speaker 11: We talked about Lina's site, two improvements in North America and in Asia Pacific. The other area of softness in the quarter was Europe . Just love some perspectives on sort of your path to divine improvement in that region.
Your line of sight to improvements in North America, and in Asia Pacific The other the other area of softness in the quarter was Europe I'm, just love some perspective on sort of your.
Your path to the volume improvement in that region.
Stan Fatula: So we'll have some costs associated with that, but ultimately over the longer term, those costs will subside. And we feel good about where we are with the new red color plans, getting those integrated in. So overall, with pricing continuing to flow through with ag prices holding and continuing to drive premiumization in the category, we feel good about the long term trajectory of operating margins in this business.
Speaker 11: transcript
Speaker 11: And then we're probably stepping back, I guess this builds a little bit on the question, Brian was just asking, but you have just tremendous success this year in driving underlying margin improvement, which has allowed the AMP reinvestment that we've seen here today. I guess as you are scenario modeling and starting the plan for the year ahead, how do you have your way to put some take.
And then more broadly stepping back I guess it does a little bit on the question Bryan was just asking but you you've had.
Tremendous success this year in driving underlying.
Margin improvement, which has allowed the A&P A&P reinvestment that we've seen year to date I guess as you as your scenario modeling and starting to plan for the year ahead.
How do you have you weigh the puts and takes.
Lydia Tongue: Next question will come from a Lydia Tongue of Raymond James. Please go ahead. Thanks.
Speaker 11: transcript
Speaker 11: you know, on margins as you look ahead. And what's your level of confidence you can continue drives that underlying margin improvement to enable the investment should the ROI.
On on on margins.
As you look ahead and you know what's your level of confidence you can continue to drive that underlying margin improvement two to enable the investment should be ROI exist.
Noel Wallace: Good morning. I'm going to ask you a little bit more about North America, given that a couple of things. First, the pricing accelerated on a two-year stack. If you could talk about the drivers of that, I assume promotion is a big piece of that. You mentioned advertising was up 25% in North America. Was that the highest amongst the divisions? And just if you could talk a little bit more about how you think about the ROI and the timing of the impact of that higher advertising.
Speaker 3: transcript
Speaker 3: Yeah, good morning Steve, thanks. So let me talk again on a little bit on volume.
Yeah. Good morning. Thanks, So let me talk again, a little bit on volumes.
Speaker 3: transcript
Speaker 3: Globally, as you've heard from others, you know, volumes in the categories tend to be down around two to three percent. This is a function obviously of the aggressive pricing that you've seen sequentially over the last three or four quarters. So that continues to improve.
Globally as you've heard from others, you know volumes in the categories tend to be down around 2% to 3%. This is a function obviously of the aggressive pricing that you've seen sequentially over the last three or four quarters. So that continues to improve and in my view that will continue to improve as pricing.
Speaker 3: transcript
Speaker 3: And in my view, that will continue to improve as pricing moderates over the next couple quarters. And we laughed some of the aggressive pricing that we've had certainly within our PNL, but from a category standpoint.
Moderates over the next couple of quarters end and we lap some of the aggressive pricing that we've had certainly within our P&L, but from a category standpoint, there's going to be obviously, a shift for more pricing driven organic growth to more volume driven organic growth and it's very difficult to actually predict exactly at the pace, that's going to happen by geography, because we've taken pricing competitor.
Noel Wallace: Thank you. Yeah, thanks. Thank you. Again, as I mentioned earlier, we're pleased with the progress. Again, this is a very deliberate strategic execution of how we're trying to get the health of our brands. And the health of our PNL in a better place.
Speaker 3: transcript
Speaker 3: There's going to be obviously a shift for more pricing driven organic growth to more volume driven organic growth. And it's very difficult to actually predict exactly at the pace that's going to happen by geography because we've taken pricing, competitors taking pricing at different points in the year. So over time sequentially though, we see volume returning to a more normalized level and we see pricing returning to a more normalized level. And that's more or less how it's playing out, difficult to predict from geography to geography or from quarter to quarter.
Bryan Spillane: And as I mentioned in the second quarter call, we may have pulled back a little bit too far on some of the promotional cadence, but we're adjusting that, but adjusting it very prudently where we see the ROI and where we believe we can drive sustained volume and share opportunity moving forward. The 25% increase was about the highest. As I just mentioned, Hills continues to receive a disproportionate amount of the advertising increase.
Taking pricing at different points in the year. So over time sequentially, though we see volume returning to a more normalized level and we see pricing returning to a more normalized level and that's more or less how it's playing out and difficult to predict from from geography to geography or from quarter to quarter.
Bryan Spillane: But North America, again, given the vibrancy of that market and the long-term strategic importance of that market, we will continue to invest for the long term. Great progress on the operating margins, as you saw, move through that PNL. That is a reflection, again, I think of a much more prudent approach to pricing in the market and our promotional cadence. And we feel good about the sequential growth that we saw in the quarter and the sequential growth that will continue to see in the fourth quarter.
Speaker 3: transcript
Speaker 3: On the margin, obviously a lot of focus, as you know, across the business, we've got a lot of levers in the P&L now to drive operating margins and gross margins. Why don't I let Stan talk to a little bit about that. He's been very focused on driving now across most of our region.
On the margin obviously, a lot of focus as you know across the business. We've got a lot of levers in the P&L now to drive operating margins and gross margins why don't I, let Stan talked to a little bit about that he's been very focused on driving that across most of our regions.
Speaker 12: transcript
Speaker 12: Thanks, all. Steve, it's a good question on the driving margin. So if you take a look at what we've been able to do with the income statement this year, the top to bottom, the flexibility and the strength on all the different lines have given us a lot more opportunity to drive margin.
So Steve it's a good question on the driving margin. So if you take a look at what we've been able to do with the income statement. This year the top to bottom.
Flexibility and the strength on all the different lines have given us a lot more opportunity to drive margin and it gives us flexibility and that allows us to react to market conditions and anticipate more importantly, invest in those areas of the business that can deliver value. When we look at all of those collectively we think that leaves us well positioned.
Unknown Executive: The next question will come from Bryan Spillane, a Bank of America. Please go ahead. Thanks, operator. Good morning, everyone.
Speaker 12: transcript
Speaker 12: And it gives us flexibility and that allows us to react to market conditions and anticipate, and more importantly, invest in those areas of the business that can deliver value. When we look at all those collectively, we think that leaves us well-positioned for expanding margin over time.
Bryan Spillane: Add a question on, on, on ad spend. I think at year to date, now we're over 12% you know, we're running at a rate that's about a little over 12% as a percentage of sales. And so, you know, given the increase that will end the year at, is this a good base to think of in terms of ad spend going forward, or would you consider, you know, taking up further. So just just trying to get a sense now as if we've kind of rebased or if this is a new base in terms of, of ad spend.
For expanding margin overtime, and why we're not going to give guidance for 'twenty. Four here today, we think that we are exiting the quarter with a stronger business model here than we entered the year.
Speaker 12: transcript
Speaker 12: And while we're not going to give guidance for 24 here today, you know, we think that we are exiting the quarter with a stronger business model here than we entered the year.
Our next question today will come from Lauren Lieberman of Barclays. Please go ahead.
Speaker 1: transcript
Speaker 1: The question today will come from Lauren Lieberman of Barclays. Please go ahead. Great. Thanks.
Noel Wallace: Yeah, thanks, Bryan. Listen, it's not as much as the percent to sales. It's really about how we're getting what we turn on investment, we're getting for that. And clearly you've seen that play through the P and L on the strong organic in the business. The continued growth on market shares around the world, particularly in those strategic categories that we're pushing more, more deliberately with the advertising. So it's really about an ROI.
Great. Thanks, good morning, so in the release or in the prepared remarks, you talked about some of the improvement in oral care acute piece, specifically in North America, but I was wondering if I could talk about home and personal care is the advertising spend like you said up 25%. This quarter just curious about how that is maybe being allocated across the different.
Speaker 13: transcript
Speaker 13: So in the release or in the prepare remarks you talked about some of the improvement in oral care to paste specifically in North America. But I was wondering if we could talk a bit about home and personal care.
Speaker 13: transcript
Speaker 13: the advertising spend, like you said, that's 25% this quarter, just curious about how that is maybe being allocated.
Speaker 13: transcript
Speaker 13: across the different divisions within North America. You know, how you're thinking about kind of innovation in home and personal care. I know Noel, you'd mentioned some of our promotional cadence dynamics improving for home care in the fourth quarter, but I was just curious at effort.
Divisions within North America, and you know, how youre thinking about kind of innovation and home and personal care I know know you'd mentioned some of our promotional cadence dynamics improving for home care in the fourth quarter, but I was just curious that effort beyond that to kind of get that those businesses you know more on the right track.
Noel Wallace: And as we see that play back through the P and L, which we clearly are, will continue to invest. So we're really focused now. I'll say on making sure we continue to optimize that investment. We put a lot more focus on programmatic buying, a lot more focus on personalization and getting content right. You heard E talk about it when we were down in in Florida, with regards to the importance of advertising, creative and content development.
Noel Wallace: So putting a lot more focus to get better ROI for what we're delivering. So not necessarily a percent, but overall we getting the performance to the P and L and through, through our businesses on the ground.
Speaker 13: transcript
Speaker 13: Beyond that, to kind of get those businesses, you know, more on the right track. Thanks.
Speaker 3: transcript
Speaker 3: to her hey Lauren good morning. So overall you know the bulk of our North America business is is oral care and it receives the bulk of that advertising increase but pleasingly we are supporting our home care and our personal care businesses which is important.
Sure, Hey, Lora and good morning.
So overall you know the bulk of our North America business is it is oral care and it received the bulk of that advertising increase but pleasingly, we are supporting our home care and our personal care businesses, which is important and clearly as we get the promotional cadence back on those businesses, particularly here in the fourth quarter, we anticipate will.
Speaker 3: transcript
Speaker 3: And clearly, as we get the promotional cadence back on those businesses, particularly here in the fourth quarter, we anticipate we'll see an improvement in shares.
See an improvement in shares now again, we had a lot of unprofitable share historically, where we were chasing share in buying share and we have deliberately as we see great health across our P&L to the geographies across the world. We have the opportunity to rightsize that in the U S and get the shares much more profitable and get much more sustainable.
Speaker 3: transcript
Speaker 3: Now, again, we had a lot of unprofitable share historically.
Steve Powers: Our next question will come from Steve's powers of Deutsche Bank. Please go ahead. Hey, great. Thank you. Good morning.
Speaker 3: transcript
Speaker 3: where we were chasing share and buying share and we have deliberately as we see.
Speaker 3: transcript
Speaker 3: Great health across our P&L, the geographies across the world. We have the opportunity to right size that in the US and get the shares much more profitable and get much more sustainable share growth moving forward. And the intention is to continue to support all those businesses.
Steve Powers: Maybe two questions I could. One is to follow up and round out the volume conversation. We talked about line of sight to improvements in North America and in Asia Pacific, the other area of softness in the quarter was Europe. Just love some perspective on sort of your path to the volume improvement in that region.
Share growth moving forward and the intention is to continue to support all of those businesses are in the U S. As we move forward. The other one is our skin health business in the U S is getting a good levels of advertising that continues to perform well if you take our skin health business outside of China that grew double digits in the quarter for us. So we continue.
Speaker 3: transcript
Speaker 3: in the U.S. as we move forward. The other one is our skin health business in the U.S. is getting a good level of advertising that continues to form well. If you take our skin health business outside of China.
Steve Powers: And then we're probably stepping back. I guess this builds a little bit on the question Brian was asking, but you've had just tremendous success this year in driving underlying margin improvement, which is allowed. The AMP AMP reinvestment that we've seen here today, I guess as you as your scenario modeling and starting to plan for the year ahead, how do you have you way to put some takes. You know on on on margins as you as you look ahead and what's your level of confidence, you can continue to drive that underlying margin improvement to to enable the investment should the ROI exist.
Speaker 12: transcript
Speaker 12: that grew double digits in the quarter four. So we continue to see a nice growth on that business and we'll continue to support that in the US market as well.
To see a nice growth on that business and we will continue to support that in the U S market as well.
Our next question will come from Chris Carey of Wells Fargo Securities. Please go ahead.
Speaker 1: transcript
Speaker 1: Next question will come from Chris Kerry of Wells Fargo Securities. Please go ahead.
Yeah.
Hi, good morning, everyone.
Speaker 14: transcript
Speaker 14: I couldn't help but notice the commentary around.
I guess I couldn't help I couldn't help but notice that.
Commentary around that.
Speaker 14: transcript
Speaker 14: the currency impact carrying into 2024.
The currency impact carrying into 2024.
At the same time Noel you were quite clear in your remarks today that cause.
Speaker 14: transcript
Speaker 14: At the same time, Noel, you are quite clear in your remarks today that Koby has multiple levers to continue profit growth.
Noel Wallace: Yeah, good morning Steve. Thanks. So let me talk again on a little bit on volumes globally as you've heard from others, you know, volumes in the categories tend to be down around two to three percent. This is a function obviously of the aggressive pricing that you've seen sequentially over the last three or four quarters. So that continues to improve. And in my view, that will continue to improve as pricing moderates over the next couple quarters.
He has multiple levers to continue profit growth.
Speaker 14: transcript
Speaker 14: You know, this year you're going to be doing high-level digit earnings. It would appear on low single digit currency impact. You might think put up the best productivity number on a basis point impact that we've seen in almost 10 years, despite raw materials which...
This year, you're going to be doing high single digit earnings it would appear on low single digit currency impact.
They put up the best productivity number on a basis point impact that we've seen in almost 10 years, despite raw materials, which remained stubbornly high.
Speaker 14: transcript
Speaker 14: Remain stubbornly high. Well, I know this conversion another cost as well, but...
No those conversion and other costs in there as well but.
Noel Wallace: And we laughed some of the aggressive pricing that we've had certainly within our panel, but from a category standpoint, there's going to be obviously a shift for more pricing driven organic growth to more volume driven organic growth. And it's very difficult to actually predict exactly if the pace that's going to happen by geography because we've taken pricing. Compenders taking pricing at different points in the year. So over time sequentially, though, we see volume returning to a more normalized level.
Speaker 14: transcript
Speaker 14: Just as you think about next year, and I know you're not giving guidance today, but does your ability to still deliver high single-digit earnings this year despite the currency headwind give you confidence on next year, especially because some of these drivers like, you know, pricing, perhaps strong productivity and other levers at your disposal remain available to you going into next year? So thanks for any perspective on that.
Just as you think about next year and I know, you're not giving guidance today, but is your ability to still deliver high single digit earnings this year, despite the currency headwind.
Give you confidence on on next year, especially because some of these drivers.
You know pricing, perhaps strong productivity.
And other levers at your disposal remain available to you going into next year. So thanks for your second part of that.
Noel Wallace: And we see pricing returning to a more normalized level. And that's more or less how it's playing out difficult to predict from from geography to geography from quarter to quarter on the margin. And obviously, a lot of focus, as you know, across the business, we've got a lot of levers in the PNL now to drive operating margins and gross margins.
Speaker 12: transcript
Speaker 12: Yeah Chris, thanks. Listen, I'm not going to get into 2024, start predicting where things will evolve, but clearly for an exchange to move more negative in the quarter for us. And you've seen that, obviously, the dollar strengthening is we moving into the fourth quarter, but it stand rightfully pointed out.
Yeah, Chris Thanks, listen I'm, not going to get into 2024 start predicting where where things will evolve, but clearly foreign exchange move more negative in the quarter for us and you've seen that obviously the dollar strengthening as we move into the fourth quarter, but as Stan rightfully pointed out.
Speaker 12: transcript
Speaker 12: I think the important aspect here is that the levers within our P&L are better than they've been in quite some time. We have different aspects playing to our advantage now. Obviously, we're getting the pricing executed in the market. We're starting to see volume flow through over the longer term. That will improve efficiencies in our plants.
The important aspect here is that the levers within our P&L are better than they've been in quite some time, we have different aspects playing to our advantage now obviously, we're getting the pricing executed in the market, we're starting to see volume flow through over the longer term that will improve efficiencies in our plants as we've gotten our forecast.
Stan Fatula: Why don't I let Stan talk to a little bit about that? He's been very focused on driving now across most of our regions.
Stan Fatula: Thanks. So it's a good question on the driving margin. So if you take a look at what we've been able to do with the income statement this year, the top to bottom, the flexibility and the strength on all the different lines have given us a lot more opportunity to drive margin.
Speaker 3: transcript
Speaker 3: As we've gotten our forecast accuracy improved in the plants that allows us to to obviously run more of our funding to growth, which obviously came through very strong. We have the productivity moving through the PNL, so we're really trying to pull on all levers to give us.
Cushing improved in the plants that allows us to to obviously run more of our funding the growth, which obviously came through very strong we have the productivity moving through the P&L. So we're really trying to pull on our all levers to give us as much flexibility as possible foreign exchange has obviously had a big unknown as we move forward, but you've seen us.
Stan Fatula: And it gives us flexibility and that allows us to react to market conditions and anticipate and more importantly, invest in those areas of the business that can deliver value. When we look at all those collectively, we think that leaves us well physician for expanding margin over time. And while we're not going to give guidance for 24 here today, you know, we think that we are exiting the quarter with a stronger business model here than we entered the year.
Speaker 12: transcript
Speaker 12: as much flexibility as possible. Foreign exchange is obviously a big unknown as we move forward.
Speaker 12: transcript
Speaker 12: But you've seen us historically be able to price against this. We obviously have some inflationary...
Historically be able to price against US, we obviously have some inflationary pricing in the P&L in the third quarter based on where we see the Argentine.
Speaker 12: transcript
Speaker 12: pricing in the P&L in the third quarter based on where we see the Argentine
Speaker 12: transcript
Speaker 12: Paiso go where we we see part of the Nigeria for an exchange has been an issue as well and likewise in Turkey, but over time the important part is to flexibility through RPSC Challenging Jet on the
Peso go where we see a part of the.
Nigeria Foreign exchange has been an issue as well and likewise in Turkey, but over time. The important part is to crush to drive flexibility through our P&L. So we can adjust to market circumstances in the most efficient and prudent way.
Lauren Lieberman: The question today will come from Lauren Lieberman of Barclays. Please go ahead. Great. Thanks. Good morning. So in the release or in the prepared remarks, you talked about some of the improvement in oral care to paste specifically in North America. But I was wondering if we could talk a bit about home and personal care. You know, the advertising spend, like you said, that's 25% this quarter. Just curious about how that is maybe being allocated across the different divisions within North America.
Lauren Lieberman: You know, how you're thinking about kind of innovation in home and personal care. I know, Noel, you'd mentioned some of our promotional cadence dynamics improving for home care in the fourth quarter, but I was just curious at efforts beyond that to kind of get those businesses, you know, more on the right track. Thanks. Sure. Hey, Lauren. Good morning. So overall, you know, the bulk of our North America business is is is oral care and it receives the bulk of that advertising increase.
Speaker 12: transcript
Speaker 12: so we can adjust to market circumstances in the most efficient and prudent way.
Next question today is from Mark Astrachan Stifel. Please go ahead.
Speaker 1: transcript
Speaker 1: Next question today is from Mark Ashkercan of Stiefel. Please go ahead.
Speaker 15: transcript
Speaker 15: Yeah, thanks. And morning, everybody. So yesterday, a competitor of yours sort of in certain categories, talked about refocusing the business on product superiority. Obviously, a large US competitor has
Yeah, Thanks, and good morning, everybody, so yesterday a competitor.
You're sort of in certain categories talked about refocusing the business on product superiority, obviously, a large U S competitor has.
Successfully pivoted the business towards that strategy with success in recent years, just curious how you think about where would assess the portion of your.
Speaker 15: transcript
Speaker 15: successfully pivoted the business towards that strategy with success and recent years. I'm curious how you think about or would assess the portion of your
Portfolio and innovation that meets the criteria have you adjusted R&D as a focus the spending towards these product areas.
Speaker 15: transcript
Speaker 15: and innovation that meets the criteria, have you adjusted R&D as a focus, the spending towards these product areas?
Lauren Lieberman: But pleasingly, we are supporting our home care and our personal care businesses, which is important. And clearly as we get the promotional cadence back on those businesses, particularly here in the fourth quarter, we anticipate we'll see an improvement in shares. Now again, we had a lot of unprofitable share historically, where we were chasing share and buying share and we have deliberately as we see great health across our P and L, the geographies across the world, we have the opportunity to right size that in the US and get the shares much more profitable and get much more sustainable share growth moving forward.
It's sort of a second question it might be related might not be.
Speaker 15: transcript
Speaker 15: As sort of a second question, it might be related, it might not be the issue you bring up with the H&H business in China. Maybe I'm naive in assuming that some of it could potentially relate to this where you're taking prices up and not necessarily innovating. If that's wrong, obviously talk to that, but just kind of talk generally about what's going on there and how much is price, how much is other stuff. Thank you.
The issue you bring up with each in each business in China, maybe I'm naive in assuming that that some of it could potentially relate to this where you're taking prices up but not necessarily innovating.
If that's wrong, obviously talk to that but just kind of talk generally about what's going on there and how much was price how much is other stuff. Thank you.
Speaker 12: transcript
Speaker 12: Yeah, thanks Mark. You know, let me come back to the core of our strategy, which was innovating across our core, indigestion, and channels, and all of it is underpinned by science-based innovation.
Yeah, Thanks, Mark let me come back to the.
The core of our strategy, which was you know innovating across our core and Adjacencies and channels and all of it is underpinned by science based innovation and that has always distinguished our portfolio historically and we have absolutely dialed that up in terms of how we focus our R&D efforts across the organization.
Lauren Lieberman: And the intention is to continue to support all those businesses in the US as we move forward. The other one is our skin health business in the US is getting a good levels of advertising. That continues to form well. If you take our skin health business outside of China, that grew double digits in the quarter floor. So we continue to see a nice growth on that business and we'll continue to support that in the US market as well.
Speaker 12: transcript
Speaker 12: And that is always distinguished our portfolio historically and we have absolutely dialed that up in terms of how we focus our R&D efforts across the earth.
<unk> are good examples of that is obviously the growth that we've had in the whitening segment, we have it in our view some of the best application efficacy based products in the category.
Speaker 12: transcript
Speaker 12: Good examples of that is obviously the growth that we've had in the whitening segment. We have, in our view, some of the best efficacy-based products in the category.
Chris Carey: Next question will come from Chris Kerry of Wells Fargo Securities. Please go ahead. Hi. Good morning, everyone. I couldn't help but notice the commentary around the currency impact carrying into 2024. At the same time, Noel, you are quite clear in your remarks today that Colby has multiple levers to continue profit growth. You know, this year, you're going to be doing a high civil digit earnings. It would appear on low single digit currency impact.
Speaker 12: transcript
Speaker 12: We're very pleased with the growth that we've seen in whitening at the premium side with our peroxide base We've obviously moved into pens which is incremental consumption opportunity and an opportunity to drive regimen and a Premimization we've moved into our chair distinct strategy, which is Anchoring science-based whitening through the profession as well. So science continues to play very Importantly into our growth strategy and you've seen that play out in oral care Certainly seeing it play out in our pet nutrition business
We're very pleased with the growth that we've seen in widening at the premium side with our proxy based we've obviously moved into patterns, which is incremental consumption opportunity and the opportunity to drive regiment and a premium of Jason we moved into our chair distinct strategy, which is anchorage.
Anchoring science based whitening through the profession as well so science continues to play very importantly to our growth strategy and you've seen that play out in oral care certainly seen it play out in our in our pet nutrition business as well as a very recently and and skin health and likewise, though as we look at some of the unit.
Speaker 12: transcript
Speaker 12: as well as very recently in skin health.
Speaker 12: transcript
Speaker 12: And likewise, as we look at some of the innovations coming on in our home care business.
Chris Carey: I think put up the best productivity number on the basis point impact that we've seen in almost 10 years despite raw materials, which remain stubbornly high. Well, I know there's conversion in other costs in there as well, but just as you think about next year, and I know you're not giving guidance today, but this is your ability to still deliver high single digit earnings this year despite the currency headwind gives you confidence on next year, especially because some of these drivers like pricing, perhaps strong productivity and other levers that your disposal remain available to you going into next year. So thanks for any perspective on that. Yeah, Chris. Thanks.
<unk> is coming on in our home care business.
Speaker 12: transcript
Speaker 12: We've seen some great innovation on concentrates, some great innovation on tablets in Europe . So we continue to use science as a way to drive differentiation and certainly drive innovation.
We've seen some some great innovation on concentration great innovation on on tablets in Europe.
So we continue to use science as a way to drive differentiation and certainly drive our premium position specifically on the on the Hollywood Hazel business as I mentioned in the second quarter, we took pricing although it has taken longer to actually get executed in the market given the multiple levels.
Speaker 12: transcript
Speaker 12: our premiumization. Specifically, I'm on the Holly and Hazel business, as I mentioned in the second quarter, we took pricing that has taken longer to actually get executed in the market, given the multiple levels.
Speaker 12: transcript
Speaker 12: of our go-to-market strategy on the Holly and Hazel business.
Our go to market strategy on the Holly in Haynesville business.
Speaker 12: transcript
Speaker 12: and obviously you see the slow down in the category in China which is
And obviously, you've seen a slowdown in the category in China, which is it.
Speaker 12: transcript
Speaker 12: is also the come on top of that. But the good news is we exited the third quarter. We saw the Holly and Hazel business start to inflect positively and we continue to see that as we speak. So we're not completely out of where we wanted to be, but everything is moving in the right direction. Conversely, the innovation behind Holly and Hazel is very strong. Once we have that pricing executed, we'll come in with a good first half plan of innovation. And that will be science-based innovation, as I mentioned. And the developing design bluntThick lets light it up.
<unk> is also come on top of that but the good news is we exited the third quarter. We saw the holiday in Haynesville business start to inflect positively and we continue to see that as we speak so we're not completely out of where we want it to be but everything is moving in the right direction. Conversely, the innovation behind Holly in Haynesville.
Noel Wallace: Listen, I'm not going to get into 2024, start predicting where things will evolve, but clearly for an exchange to move more negative in the quarter force. And you've seen that. Obviously, the dollar strengthening is we move into the fourth quarter, but it's stand rightfully pointed out. I think the important aspect here is that the levers within our PNL are better than they've been in quite some time. We have different aspects planned to our advantage now.
It was very strong once we have that pricing executed will come in with a good first half play out of innovation and that will be science based innovation as I mentioned are.
Noel Wallace: Obviously, we're getting the pricing executed in the market. We're starting to see volume flow through over the longer term that will improve efficiencies in our plants. As we've run more of our funding the growth, which obviously came through very strong. We have the productivity moving through the PNL. So we're really trying to pull on all levers to give us as much flexibility as possible. For an exchange is obviously a big unknown as we move forward, but you've seen us historically be able to price against this.
Speaker 12: transcript
Speaker 12: The parallel to that is obviously the great success we've had in China with the Colgate business
The parallel to that is obviously the great success, we've had in China with the Colgate business. The Colgate business continues to perform very very well growing share.
Speaker 12: transcript
Speaker 12: Colgate Business continues to perform very, very well growing share in e-commerce, the fastest growing channels, and that is driven behind premium innovation with real science-based structures to that.
e-commerce, the fastest growing channels and that has driven behind premium innovation with real science based structures to that.
Next question will come from Rob Aten sign of Evercore. Please go ahead.
Speaker 1: transcript
Speaker 1: Next question will come from Rob Odin's sign of Evercore. Please go ahead.
Great. Thank you very much I'm wondering if we can drill in on the U S and maybe talk a little bit about what's going on in the non tracked channels.
Speaker 6: transcript
Speaker 6: Great, thank you very much. I'm wondering if we can drill in on the U.S.
Noel Wallace: We obviously have some inflationary pricing in the PNL in the third quarter based on where we see the Argentine peso go, where we see part of the Nigeria for an exchange has been an issue as well and likewise in Turkey. But over time, the important part is for us to drive flexibility through our PNL so we can adjust to market circumstances in the most efficient and prudent way.
Speaker 6: transcript
Speaker 6: and maybe talk a little bit about what's going on in the non-track channels. You know, kind of.
You know kind of which channels are leading the growth and why do you can you do you expect that to continue in the future, having you know a pretty big gap between the scanner results and the non tracked and then if you could put that also in the context of how you see the U S.
Speaker 6: transcript
Speaker 6: which channels are leading the growth and why do you expect that to continue in the future having a pretty big gap between the scanner results and the non-track?
Speaker 6: transcript
Speaker 6: And then if you could put that also in the context of how you see the U.S. consumer and the health of the U.S. consumer developing over the next couple of quarters and any, you know, pivots that you may do or adjustments to, you know, potentially a weakening consumer outlook.
Mark Astrachan: Next question today is from Mark Astrachan of Stiefel. Please go ahead. Yeah, thanks, and morning everybody. So yesterday, a competitor of yours, sort of in certain categories, talked about refocusing the business on products of purity. Obviously, a large US competitor has successfully pivoted the business towards that strategy with success and everything years. Carey, it's how you think about or would assess the portion of your portfolio and innovation that meets the criteria.
Consumer and the health of the U S consumer developing over the next couple of quarters and any pivots that you may do or.
Or adjustments to potentially a weakening consumer outlook. Thank you.
Yeah, Hey, good morning, Robyn Thanks.
Clearly in the results and you've seen the scanner data, which continued to be soft and as I mentioned, we're addressing that more more sharply in the fourth quarter. Our non tracked business continues to perform exceptionally well and that has been a strategy that we've talked about for quite some time those are some of the faster growing Chan.
Speaker 12: transcript
Speaker 12: Clearly in the results, and you've seen the scanner data, which continued to be soft, and as I mentioned, we're addressing that more.
Speaker 12: transcript
Speaker 12: more sharply in the fourth quarter, our non-track business continues to perform exceptionally well. And that has been a strategy that we've talked about for quite some time. Those are some of the faster growing channels.
Mark Astrachan: Have you adjusted R&D as a focus, the standing towards these product areas? And, you know, as sort of a second question, it might be related, it might not be, you know, the issues you bring up with the H&H business in China. Maybe I'm not even assuming that some of it could potentially relate to this where you're taking prices up and not necessarily innovating if that's wrong. Obviously, talk to that, but just kind of talk generally about what's going on there and how much is price, how much is other stuff. Thank you. Yeah, thanks, Mark.
<unk>.
Speaker 3: transcript
Speaker 12: We continue to invest in those channels. We continue to grow share in those channels. And overall, that's certainly leading to a broader-based, healthier business for us moving forward. You talk club, you talk some of the discount channels, you talk some of the commerce channels as well. So overall, we think we're well-positioned in the U.S. to continue to leverage where the growth is coming from. The consumer continues to be resilient. I would say the promotional.
We continued to invest in those channels will continue to grow share in those channels and overall, that's certainly leading to a broader base healthier business for us moving forward you've talked club you talked to some of the discount channels you talked to some of the e-commerce channels as well. So overall, we think we're well positioned in the U S to continue.
<unk> to leverage where the growth is coming from the consumer continues to be resilient I would say the promotional.
Speaker 12: transcript
Speaker 12: environment is constructive right now. We've seen, you know, a little bit of pick up in some categories, but overall still below pre COVID-19 levels.
Environment is constructive right now we've seen you know a little bit of pick up in some categories, but overall still below pre COVID-19 levels.
Noel Wallace: You know, let me come back to the core of our strategy, which was innovating across our core, intergencies and channels, and all of it is underpinned by science-based innovation. And that has always distinguished our portfolio historically, and we have absolutely dialed that up in terms of how we focus R&D efforts across the organization. Good examples of that is obviously the growth that we've had in the whitening segment. We have, in our view, some of the best efficacy-based products in the category.
Speaker 3: transcript
Speaker 3: And as we continue to be, as I said, very thoughtfully prudent on how we elevate our cadence of promotions moving forward, we feel good about our ability to continue to drive non-track. Now, I'll remind you that non-track are about 14% of the total company sales. And so while very important force in the US and the team there, under Jesper's leadership, is laser focused on addressing that, we're going to get that back to a healthier share as we move forward.
And as we as we continue to be as I said very thoughtfully prudent on how we elevate our cadence of promotions moving forward, we feel good about our ability to continue to drive non track now I'll remind you the non tracked or about 14% of the total company sales and so while important very important for us in the U S and the team there under.
Noel Wallace: We're very pleased with the growth that we've seen in whitening at the premium side with our peroxide-based. We've obviously moved into pens, which is an incremental consumption opportunity and an opportunity to drive regiment and a premiumization. We've moved into our chair distinct strategy, which is anchoring science-based whitening through the profession as well. Science continues to play very importantly into our growth strategy. You've seen that play out in oral care, certainly seen it play out in our pet nutrition business, as well as very recently in skin health.
Jennifer's leadership is laser focused on addressing that we're going to get that back to a healthier share as we move forward.
Our last question today is a follow up from Bryan Spillane of Bank of America. Please go ahead hi.
Speaker 10: transcript
Speaker 10: Our last question today is a follow up from Brian Spalane, a Bank of America. Please go ahead. Hi, thanks again, operator. Hey, Stan, just a question around inflation. I know in the press release or the preparatory remarks you talked about, I guess the press release talked about still several hundred million dollars of inflation expected for this year. Can you just give us some context of
Thanks again operator.
Hey, Dan just a question around inflation I know in the press release or the prepared remarks, you talked about I guess the press release talked about still several hundred million dollars of inflation expected for for this year can you just give us some context of.
Speaker 10: transcript
Speaker 10: Is it the same moderating, like as we're exiting the year, just how we should be thinking about the trend on inflation? And I know you've called out.
Is it the same moderating like we're exiting the year just how we should be thinking about the trend on inflation I know you called out.
Noel Wallace: Likewise, as we look at some of the innovations coming in our home care business, we've seen some great innovation on concentrates, some great innovation on tablets in Europe. So we continue to use sciences a way to drive differentiation and certainly drive our premiumization. Specifically, on the Holly and Hazel business, as I mentioned in the second quarter, we took pricing that has taken longer to actually get executed in the market, given the multiple levels of our go-to-market strategy on the Holly and Hazel business.
Speaker 10: transcript
Speaker 10: inflation in pat so just trying to get a sense of whether or not it's you know how it's trending is a training better or worse than kind of where we were coming at it
Inflation in pet so.
Just trying to get a sense of whether or not it's you know how it is trending as a training better or worse than kind of where we were coming out of <unk>.
[noise].
Yeah sure Brian So as we said our view on raw materials in total remains consistent with prior quarters, and we still do see several hundred million dollars of gross cost inflation in raw materials for 2023.
Speaker 14: transcript
Speaker 14: Yeah, shortbrien. So as we said, our view on raw materials in total remains consistent with prior quarters. And we still do see several hundred million of gross cost inflation raw materials for 2023. But while the overall totals in line, there have been some shifts underneath that. First, agriculture has noties. In some cases, it's actually gone up. That affects primarily our hills.
Although the overall totals and line there have been some shifts underneath the first agriculture has not eased in some cases has actually gone up that affects primarily our hill's business.
Noel Wallace: And obviously, you've seen the slowdown in the category in China, which is also come on top of that. But the good news is we exited the third quarter. We saw the Holly and Hazel business start to inflect positively, and we continue to see that as we speak. So we're not completely out of where we wanted to be, but everything is moving in the right direction. Conversely, the innovation behind Holly and Hazel is very strong.
Offsetting that some commodities such as resins and oils have actually softened a bit but when we look at total that basket is roughly still in line and while it hasn't gotten worse it hasn't gotten a lot better. The one we continue to watch carefully is obviously energy with all the volatility in that market and then also just keep in mind.
Speaker 14: transcript
All of our raw materials are not a pure commodities, but specialty flavors fragrances those tend to have less volatility, but I think if you pull back our teams have done a great job driving productivity to mitigate some of that inflation and you saw in our funding. The growth. You know this is a really helped us balance the margin.
Noel Wallace: Once we have that pricing executed, we'll come in with the good first half plan of innovation. And that will be science-based innovation, as I mentioned. The parallel to that is obviously the great success we've had in China with the Colgate business. The Colgate business continues to perform very, very well-growing share in e-commerce, the fastest growing channels, and that is driven behind premium innovation with real science-based structures to that.
Speaker 14: transcript
Speaker 14: But I think if you pull back, our teams have done a great job driving productivity to mitigate some of that inflation. And you saw and are funding the growth, this has really helped us balance the margin. You combine that with RGM and it's resulted in that margin expansion. So if I got to pull that back, well that's been relatively steady and total, the piece is moving around underneath.
You combine that with our G. M. Indus resulted in that margin expansion. So if I got to pull that back while that's been relatively steady in total the pieces moving around underneath that has our gross profit in total for the company has gone up 140 basis points year to year, and that's a combination of that pricing and Archie M. S.
Speaker 14: transcript
Speaker 14: That has our gross profit in total for the company has gone up 140 basis points year to year and that's a combination of pricing and RGM has been able to more than compensate for the raw materials going through. So as we look at that, heading into the last quarter, we haven't actually seen a lot of change in the commodity basket, so we expect that to continue through the end of the year.
Rob Ottenstein: Next question, we'll come from Rob Ottenstein of Evercore. Please go ahead. Great, thank you very much.
Noel Wallace: I'm wondering if we can drill in on the US and maybe talk a little bit about what's going on in the non-track channels. Which channels are leading the growth and why do you expect that to continue in the future having a pretty big gap between the scanner results and the non-track? And then if you could put that also in the context of how you see the US consumer and the health of the US consumer developing over the next couple of quarters and any pivots that you may do or adjustments to potentially a weakening consumer outlook.
Been able to more than compensate for the raw materials are going through so as we look at that you know heading into the last quarter, we havent actually seen a lot of change in the commodity basket. So we expect that to continue through the end of the year.
Speaker 12: transcript
Speaker 12: Yeah, Brian , I just reiterate, again, that 140, you add another 50 basis points for private label. And if you add logistics in there, which others include and cost a good.
Yeah, Brian I'd, just reiterate again that 140, you add another 50 basis points for private label and if you are if you have logistics sitting there, which others include in cost of goods.
Speaker 12: transcript
Speaker 12: that is roughly another 130 so north of 300 basis points of margin improvement in the quarter and that's terrific in terms of how we saw things ultimately playing out and as we see hopefully a more benign cost environment over the the medium term and our ability to hold pricing and continue to innovate at the high end we feel pretty good about the continued ability to sustain high margins and the categories in which we compete.
That's in a roughly another 130, so north of 300 basis points of margin improvement in the quarter and that's terrific in terms of how we saw things that ultimately played out and as we see a hopefully a more benign cost environment over the medium term and our ability to hold pricing and continue to innovate.
The high end, we feel pretty good about the.
Noel Wallace: Thank you. Yeah, good morning, Rob. Thanks. Clearly in the results and you've seen the scanner data which continued to be soft. And as I mentioned, we're addressing that more sharply in the fourth quarter. Our non-track business continues to perform exceptionally well. And that has been a strategy that we've talked about for quite some time. Those are some of the faster growing channels. We continue to invest in those channels. We continue to grow share in those channels.
The continued ability to sustain our high margins and the categories in which we compete.
So thanks, everyone for joining the call today, let me just close out by saying we really appreciate your interest in the company. We hope you agree that we have the strategies and the plans in place to deliver consistent compounded profitable growth to drive value for all of our shareholders and I would be remiss not to thank all the Colgate Palmolive folk around.
Speaker 3: transcript
Speaker 3: So thanks everyone for joining the call today. Let me just close out by saying we really appreciate your interest in the company. We hope you agree that we have the strategies and the plans in place to deliver consistent, compounded, profitable growth, drive value for all of our shareholders. And I would be remiss not to thank all the Kogate from all of the folk around the world who have delivered a very strong quarter force in the third quarter of 2023. So thanks everyone, we'll talk to you in January .
The world, who have delivered a very strong quarter for us in the third quarter of 2023. So thanks, everyone. We'll talk to you in January.
Noel Wallace: And overall, that's certainly leading to a broader based healthier business force moving forth. You talk club, you talk some of the discount channels, you talk some of the commerce channels as well. So overall, we think we're well positioned in the US to continue to leverage where the growth is coming from. The consumer continues to be resilient. I would say the promotional environment is constructive right now. We've seen a little bit of pickup in some categories, but overall still below pre-COVID levels.
Conference has now concluded.
Speaker 1: transcript
Speaker 1: Conference has now concluded. Thank you for attending today's call. You may now disconnect.
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Yeah.
Noel Wallace: And as we continue to be, as I said, very thoughtfully prudent on how we elevate our cadence of promotions moving forward. We feel good about our ability to continue to drive non-track. Now I'll remind you that non-track are about 14% of the total company sales. And so, while very important force in the US and the team there, under Jesper's leadership is laser focused on addressing that, we're going to get that back to a healthier share as we move forward.
Yeah.
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Bryan Spillane: Our last question today is a follow up from Brian Spillane of Bank of America. Please go ahead. Hi, thanks again, operator. Hey, Stan, just a question around inflation. I know in the press release or the prepared remarks you talked about, I guess press release talked about still several several hundred million dollars of inflation expected for for this year. Can you just give us some context of is it the same moderating like as we're exiting the year, just how we should be thinking about the trend on inflation.
Bryan Spillane: I know you've called out inflation in pet. So just trying to get a sense of whether or not it's, you know, how it's trending is a training better or worse than kind of where we were coming out of two of you. Yeah, sure, Brian. So, as we said, our view on raw materials in total remains consistent with prior quarters, and we still do see several hundred million of gross cost inflation raw materials for 2023.
Bryan Spillane: But while the overall totals in line, there have been some shifts underneath that first agriculture has not even in some cases actually gone up that affects primarily our hills. Dr. Thomas Offsetting that, some commodities such as resins and oils have actually softened a bit, but when we look in total, that basket is roughly still in line and while it hasn't gotten worse, it hasn't gotten a lot better. The one we continue to watch carefully is obviously energy with all the volatility in that market.
Bryan Spillane: And then also just keep in mind, some of our raw materials are not pure commodities, but specialty flavors, fragrances. Those tend to have less volatility, but I think if you pull back our teams have done a great job driving productivity to mitigate some of that inflation and you saw and are funding the growth, you know, this is a really helped us balance the margin. You combine that with our GM and it's resulted in that margin expansion.
Bryan Spillane: So if I got to pull that back while that's been relatively steady in total, the piece is moving around underneath. That has our gross profit in total for the company has gone up 140 basis points year to year and that's a combination of pricing and our GM has been able to more than compensate for the raw materials going through. So as we look at that, you know, heading into the last quarter, we haven't actually seen a lot of change in the commodity basket.
Bryan Spillane: So we expect that to continue through the end of the year. Yeah, Brian, I just reiterate again that 140 you add another 50 basis points for private label. And if you, if you have logistics in there, which others include and cost the goods. That is roughly another 130 so north of 300 basis points of margin improvement in the quarter and that's terrific in terms of how we saw things ultimately playing out.
Bryan Spillane: And as we see, hopefully a more benign cost environment over the medium term and our ability to hold pricing and continue to innovate at the high end, we feel pretty good about the continued ability to sustain high margins in the categories in which we compete.
Noel Wallace: So thanks everyone for joining the call today. Let me just close out by saying we really appreciate your interest in the company. We hope you agreed that we have the strategies and the plans in place to deliver consistent, compounded, profitable growth, drive value for all of our shareholders. And I would be remiss not to thank all the co-gate from all of folk around the world who delivered a very strong quarter force in quarter 2023.
Unknown Executive: So thanks everyone will talk to you in January.
Unknown Executive: Conference has now concluded. Thank you for attending today's call. You may now disconnect.
Unknown Executive: Thank you.