Colgate-Palmolive at 2025 dbAccess: Strategic Growth Amid Challenges

On Wednesday, 04 June 2025, Colgate-Palmolive (NYSE:CL) presented at the 2025 dbAccess Global Consumer Conference, highlighting its strategic focus on growth through innovation and digital transformation. While the company faces challenges such as cautious consumer behavior and foreign exchange headwinds, it remains committed to delivering consistent financial performance.

Key Takeaways

• Colgate aims for top-line and bottom-line growth through strategic category choices and innovation.
• The company is investing heavily in digital capabilities and AI to enhance decision-making.
• Hill’s Pet Nutrition business is expanding market share and driving category pricing.
• Leadership changes aim to enhance growth, innovation, and digital transformation.
• Colgate anticipates modest improvement in the second half of the year.

Financial Results

• Colgate is managing tariff impacts through supply chain optimization and productivity improvements.
• Despite these challenges, the company maintains dollar-based earnings growth.
• Updated guidance suggests modest improvement in the second half, driven by volume and pricing acceleration.

Operational Updates

• Colgate’s strategy focuses on consistent growth, leveraging brand equities and the pet nutrition industry.
• Significant investments in innovation aim to bring science-based, superior products to market.
• The company is integrating its IT organization into the growth strategy, with a focus on AI and data analytics.

Future Outlook

• Colgate expects improved category performance in the latter half of the year, supported by its global footprint and strong market share.
• The company is actively managing its portfolio, focusing on organic growth and considering strategic M&A opportunities.
• Leadership changes, including the creation of two COO positions, are designed to drive growth and enhance digital transformation.

Hill’s Pet Nutrition

• Hill’s is performing well, with strong brand health and growing market share.
• Supply chain acquisitions have unlocked efficiencies, and the company is moving away from private label capacity.
• The acquisition of Prime 100 in Australia serves as a learning vehicle for entering the fresh pet food segment.

For a detailed understanding, readers are encouraged to refer to the full transcript below.

Full transcript - 2025 dbAccess Global Consumer Conference:

Unidentified speaker: Hey. Welcome back. Thanks, everybody, and thanks especially to the Colgate company who we’re thrilled to have back. Especially thrilled to have back Noel Wallace, chairman, president, and chief executive officer of the company. And we’re gonna use the entirety of our time for q and a.

So thank you, Noel, for joining us. Pleasure. Pleasure. Afternoon, everyone. I’m kind to get back.

Noel Wallace, Chairman, President, and Chief Executive Officer, Colgate: That’s alright.

Unidentified speaker: So We’ll just jump right in.

Noel Wallace, Chairman, President, and Chief Executive Officer, Colgate: Yeah.

Unidentified speaker: So I’m gonna start the way I’ve started a lot of these conversations was just sort of the the the environment that we’re all finding ourselves in. Very eventful start to 02/2025. Lots of different competing pressures, you know, essentially on both the consumer and really your retail partners, especially in The US. If we start there, just talk about your assessment of the consumer broadly and how recent dynamics have impacted your categories.

Noel Wallace, Chairman, President, and Chief Executive Officer, Colgate: Yeah. We we came into ’25 expecting to see a slowdown, Obviously, a lot of inflationary pricing in ’24 ’23 and ’24, strong volume growth in the back half of ’24. So sort of a we had some

Unidentified speaker: tough we’re all finding ourselves in.

Noel Wallace, Chairman, President, and Chief Executive Officer, Colgate: ’25. Very event So the full expectation thing would slow down. I mean, what’s changed that is, I think, a much more pensive consumer. And I think you’ve heard it consistently throughout the week that the consumer is is a bit uncertain and as a result, being more cautionary in their purchase patterns. And as a result, we’re seeing slow down in the categories.

If I move around the world, I mean, obviously, The US, we talked about it on the call. We had just in context for those of you who didn’t hear what I I explained, 12 categories down in February. We had about half those categories improve in March, half go the other way. And in April, everything got a little bit better. And I would say consistently, we’re seeing a little bit of slight progression in the categories that we saw from the beginning of the year, but you can just see the volatility and and the movements that we’re seeing based on on what I would consider a consumer that’s very cautious on the purchasing patterns.

As we go around the world, Europe’s still doing okay. I’ve been with the the Western Europe team. I was with our Europe Division this past week. And overall, we’re seeing, obviously, a little less pricing in the category, but we’re seeing great share growth in in in perhaps a more muted category volume starting to come back into the categories, which is nice. So overall, I would say pretty good.

Latin America, in general, pretty consistent with what I talked about on the call. Mexico has gotten a little bit better. Brazil, perhaps a little bit softer. But overall, pretty consistent, not significant moves. Asia, maybe a tale of two stories there.

India, a little bit of slowdown in the urban market, pickup in the rural in the rural market. China’s still kinda moving sideways, up and down, and not really seeing more more stickiness in terms of where the categories are going there. And, obviously, that’s a big concerning in terms of predictability of where China will go, but not a big business for us, but we watch it very, very closely. Africa, doing quite well, doing better than we had in we saw in the first quarter. So overall, some some pretty good signs coming out of Africa.

And did I leave anyone? And the Hill’s business, you know, in a muted category, executing extraordinarily well, growing market share in every single segment in which we compete and driving some pricing in the category as well. So overall, a mixed bag, a consumer that’s cautious. But a reminder, we compete in nondiscretionary categories. And as a result, we fully expect the categories to improve as we move through the back half of the year.

Things just need to settle down a bit. I mean, all the noise that you’re hearing in the market has created a consumer that’s gonna be more discretionary on the purchases.

Unidentified speaker: Yeah. What about from a retailer perspective? I think most of the controversy has been around The US and re in retail inventory levels. We’ve heard this week some companies that seemingly avoided destocking in the in the March are now seeing it in the June. Others have said it’s better.

Others have said it’s continued. Where do where do you stand in in The US? And then is there any other dynamics around the world to think about?

Noel Wallace, Chairman, President, and Chief Executive Officer, Colgate: Yeah. I we haven’t seen a major move on on on on trade inventory levels. You know, again, trade inventory levels are a function of a couple things. You know, I imagine they’re managing their working capital very carefully based on where their input costs are are coming from. And as a result, they’re very cautious.

And in categories where they feel they can squeeze a little bit back, they may do so. In categories where we’re seeing consumer destocking, I. E, consumers perhaps not buying, you know, three bottles of of Distick where they’re buying one, as a result, when they see the category slow down, they’ll take inventories down But overall, we haven’t seen a dramatic impact on our business. That is to say that that could happen certainly in the back half of the year based on the economic and political environment that unfolds.

Around the world, pretty consistent with that. I mean, I I would say internationally, I would I generalize, you know, given we operate into markets around the world, that we’ve seen a general improvement in the retail environments around the world. We’ve seen constructive promotion environments. We’ve seen, you know, at least the buyers very focused on growth and innovation and growth and value, and we’re delivering against that. So US, a little bit more cautious.

We’re international, perhaps closer to what I would consider normal.

Unidentified speaker: Okay. And as you net it all out globally, just in terms of your your your scorecard from a market share perspective, you mentioned Western Europe as a point of strength. That’s in in general satisfaction with market share trends.

Noel Wallace, Chairman, President, and Chief Executive Officer, Colgate: Very satisfied. I mean, when you go back to, you know, where we were in 2019 and really getting an inflection back on on the top line of the business, that’s translated into fan penetration, which is everything for us, translated into, obviously, increased market shares on our oral care business. We’ve seen a little bit of mix change. Obviously, our very high shares in Latin America, or you’ve seen the dollar improve most recently, obviously, not. But historically, over the last six to nine months, strengthened.

We’ve seen the mix effect a little bit in our market shares, but our volume shares and penetration continue to be very, very strong across the world.

Unidentified speaker: Good. And, you know, tariffs, another big topic. Less so the well, I guess, it’s most of this is the dynamic and the ever changing assortment of tariffs and kind the the moving target. I guess, remind us of sort of your your direct, indirect exposures, you know, in terms of from an importexport export perspective, and then how you’re how you’re managing through this volatility.

Noel Wallace, Chairman, President, and Chief Executive Officer, Colgate: Yeah. A lot of moving parts to tariffs, I’m sure, as all of you well know. And we were quite clear to try to get out in front of that as quickly as we could in in in the quarter earnings release, and we announced the the impact of tariffs that were implemented and of and announced as of April 24, and we’ve stayed very true to that number. We’ll see where things ultimately unfold. There’s been some puts and some takes to that, but we’re we’re holding to that.

What’s interesting is not dissimilar to what we have what happened during COVID, we’ve really taken the opportunity to continue to optimize a highly efficient global supply chain and find ways to make that supply chain more efficient. And we operate on what we call a net corporate benefit, and we look for opportunities to move production around from one site to another based on the net corporate benefit to the company, and we’ve built a lot more agility and flexibility. There are some longer term implications that we will consider and be very thoughtful of once we see real clear line of sight on where things will ultimately settle out. But right now, we’re simply trying to manage some of the uncertainties and handling that, I think, quite well. Productivity, we’ve stepped up within both the manufacturing space as well as our funding to growth initiatives.

We’re looking at more efficiencies across the p and l. So we’re doing the best job to offset that. We as you know, in our in our quarter update, we provided continued dollar based earnings growth despite the tariff, despite foreign exchange because we think we’ve got a good line of sight to predict

Unidentified speaker: of that. Yep. If we and kinda stepping stepping out or stepping back, you know, I think you talked about this at CAGNY. Your strategy has been working to deliver consistent top line and bottom line compound growth, and that’s the objectives. What what would you how would you articulate the the key building blocks of that strategy?

And and, you know, I’m assuming it is, but why do you feel it is so well suited or especially well suited for the current environment?

Noel Wallace, Chairman, President, and Chief Executive Officer, Colgate: Yeah. I just had some discussions early this morning on really kinda reframing, you know, some of the really transformative changes we made at the company back in 02/2019, and that was coming off a period of of of basically no growth on the top line. We were a $15,000,000,000 company. Market shares were stagnant or in decline. Innovation wasn’t performing, and we really had to get a growth mindset back into the organization.

So we put together a ’25 strategic plan that gave us a clear line of sight on the opportunities that we had to drive growth. We were much more selective and choiceful on where that growth was gonna come from, much more deliberate in the category composition of where that growth was gonna come from, and we unlocked opportunities that were very different for us in terms of our go to market. So case in point on oral care would be we really were leveraging the multiple equities we had in the world versus just Colgate. We tried to make Colgate work for everything in the world, and we found that in places like Europe, unlocking elmex and meridol were a huge growth potential. We’ve taken those into certain markets around the world.

Hello in The US, a huge growth opportunity. We very much focused on the the pet nutrition industry. We felt that was a business that we could truly win in based on the strength of our brand. We put advertising, significant innovation, improved our supply chain. That’s unlocked a lot of top line growth as well as operating margin.

And we got the organization focused on really understanding where innovation needed to go, and we uplifted our resources innovation, focused on the core businesses, the composition of our categories where we compete and we have very strong shares. The big part of that is core. And we weren’t renovating the core business nearly as frequently as we needed to, more resources in r and d. And then while we built the gross margin back in the p and l and grow at the top line, what that afforded us was the the opportunity to really build capabilities that we saw were gonna be absolutely necessary for the long term health of the company. And it was all about building durable, sustainable top line growth and capabilities that we think are going to help us grow faster in the long term despite the volatility that we see in the world.

So digital capabilities, day data capabilities, AI capabilities, science and and innovation capabilities. And the strength of the p and l and the flex that we had in the p and l afforded us the opportunity to build all those. So as the markets start to slow, we’re not having to spend additional money to catch up to those capabilities today. We have those capabilities well entrenched. We’ve got more to do to be sure, but the good news is we’ve had the ability to kinda get ahead of the of the curve, so to speak.

And as I often say internally, get back on our front foot. And we were on our back foot, and we needed to really think about the future rather than the quarter, and that’s where we built the plans against.

Unidentified speaker: Right. You mentioned flex flex the p and l. You’ve talked a lot about your ability and your intention to do just that in the face of obstacles frankly, in the face of opportunities in in both directions. I guess, what does that mean in practice? And and how do you, I guess, guard against over flexing the P and L, especially in the face of headwinds and get yourself kind of back, maybe, hopefully, not all the way back, but even a little bit back towards where you were when you started the journey in 2018?

Noel Wallace, Chairman, President, and Chief Executive Officer, Colgate: Yeah. You know what? The the the key headwind we faced back in 2018 and ’19 is we just weren’t growing the top line. And as all of you well can understand, if you’re not growing your top line, it’s very difficult to get leverage through your p and l. Mhmm.

And the sustained growth that we’ve had and, in some respects, purely in growth in the top, particularly on the organic basis, has afforded us the opportunity to make a lot of strategic choices within the middle of our p and l. Yeah. And when you make those strategic choices on how you wanna grow margin, where you want to invest, the categories you want to emphasize, the capabilities you wanna build, that’s building long term health for your business. And where we’re not reacting to how do we deliver a quarter, we’re thinking about where do we wanna be two to three years out. So we developed a 25 plan that really helped guide the organization on very specific choices that we needed to make as an organization.

You have 34,000 people working in 200 markets around the world. The biggest challenge a leader like myself has is ensuring they’re aligned behind the growth opportunities that we have. They may see a local opportunity, but we need to fully exploit the leverage and the scale that we have as an organization by going after global opportunities. And that’s what the 25 strategy did and help help us accelerate it. We’re going to California in a couple weeks to launch our 2030 strategy, and it’s a it’s a wonderful position to be in where you’re you’re not saying, okay.

Here’s a new strategy for the company. It’s taking what we know we do well, what we didn’t do well in the ’25 plan, and now building from that in terms of the capabilities that are well on their way to hopefully unlock continued predictable growth for the company.

Unidentified speaker: Are there things that you feel like you didn’t do well in ’25 strategy? What would they be, and what are you what are your early thoughts on how to course Yeah.

Noel Wallace, Chairman, President, and Chief Executive Officer, Colgate: Well, you know, we put a lot of of at least some of the feedback that we’ve received from our employees is, you know, a lot of change. And change is never easy for an organization, and I think cultures adapt and and and weather the change as effective as as the the people feel engaged in that change. And we’ve done a great job getting the organization to see where we want to take the company, and that change has happened. But there are areas where I think we can do better. Innovation is one.

We’ve really stepped up innovation, but I I I wholeheartedly believe that we have a lot more to do there on getting the innovation to be more insight based, getting innovation to be more premium. We still consistently around the world, despite the strength of our our business, under indexing the super premium side of the market, and that’s what’s driving a lot of the category growth. So we need to bring true science based, perceivable superior products into the market, and we’re very focused on doing that not only from a science basis, but also from an advocacy basis in terms of how we get our add our partners in in that space along with us, whether it be the profession or key opinion leaders. Okay.

Unidentified speaker: Yeah. So go back to what I I tried to ask this question. I think I I might have made it unclear. But just you’ve spent a you’ve rebuilt the middle of the p and l from an a and p perspective. I think when people hear it flex the p and l and we’re worried about top line headwinds, and that means protect protect the bottom line and flex the p and l by potentially pulling back on, you know, demand building expense, including A and P, which I think gets people nervous in the extreme.

How do you think about that? Is that a point of flex with A and P in the P and L, and how do you reassure people that you won’t over flex it?

Noel Wallace, Chairman, President, and Chief Executive Officer, Colgate: We have spent a considerable amount of time obviously building the advertising line in the email, and that has been a key driver of our top line growth. I think there are other aspects that have really helped top line, the choices, the strategy, obviously, the execution against the fundamentals. But certainly, in our business, advertising is very important. Yep. We needed to build the advertising line to build back the health of our brands.

Our brands had deteriorated particularly as we moved away from the core. And I can confidently sit sit here and say that over the last three years, the amount of advertising we put behind the business has absolutely improved the health of our businesses. So they’re in a much better place than they were five years ago. I mentioned the capabilities earlier that we had the leverage in the p and l to invest in capabilities, whether it’s at the margin line or the NVO line. Those capabilities have now made us much, much smarter of how we think about our media allocation.

So we were having a discussion with Western Europe that despite, in a certain market, they have held advertising, their ROI is up 15% on their advertising. So, arguably, you get the same impressions by spending 15% less. So we in a market like we’re operating in today where we’ve seen a slowdown in in certain categories, by all means, we’re going to be cautionary to ensure we’re driving top line growth and return for our shareholders. So, yes, advertising can be a lever in that. We would decide that lever based on the effectiveness that we have in the market and the return on the investment that we’re seeing based on the category growth aspects that we have.

So my sense is we have other aspects. The other one I would talk about lever in the p and l is the margin. Our business has great gross margins, and we’ve done a really good job in getting the gross profit back to peer leading levels. The Hill’s margin and operating margins have come back to really, really strong levels. Having high margins is great in fast growing categories.

It’s even better when the categories have slowed because you’re generating still good operating dollar leverage in the P and L. So we feel good about where we are on the constructs of the p and l. We’ll see where things unfold. But the strength of the equities and the investment that we put in, that is the single most important thing to take pricing in the market. If you wanna take pricing, your business has to be strong, and the investment that we put behind both the Colgate side of the business and the Hill’s business would indicate that.

Okay.

Unidentified speaker: You’ve also put a put a put a lot of money and effort behind commercial capabilities. You know, some of that some of that surrounds, you know, A and P as we talked about, but you’ve also talked a lot about investments in data analytics and and AI as an enabler of the business, whether enabler of revenue growth management or enabler of across a lot of your your execution. How would you describe that journey? You know, how advanced do you feel, like, you you are relative to competition, and how much more opportunity or need do you see, you know, on the, I guess, on the technology front?

Noel Wallace, Chairman, President, and Chief Executive Officer, Colgate: Yeah. One of the the more significant changes we made going into the ’25 strategy is we we made our IT organization part of the growth strategy. Mhmm. They were a call center before. We’re obviously at the forefront of SAP.

We’ve we’ve got a great tech stacks across the company and enterprise systems to to use via our partnership with SAP, but we weren’t using technology as a growth facilitator for the organization. So what we’ve done is we’ve evolved them into an important part of the growth pillars of our our organization by ensuring that we’re developing tech stacks that make our people smarter and faster at the decisions they make. So SAP, we’re going to s four. That will be one system around the world. We’re now going to structure all of our data around the world so we can now use AI on top of that data architecture that we have.

That’s going to unlock significant learning and much faster execution. We’ve invested in capabilities, digital capabilities with our internally as with our part with with our media partners. We’ve gone to programmatic buying across the board. We’ve really moved the organization digitally as assessed by external partners on how we’re doing. We’ve moved up to, I would say, in the top tier.

More work to do, but we’re certainly making great advancements. We’re moving too much personalized marketing back to the ROI nature of how we think about our media spending. And AI now is just a truly exciting aspect for us. We’ve talked about it back in CAGNY. We’ve been investing in it for a couple years, and we think we’re we’re very much at the forefront of this.

The biggest excitement for me is making our people more effective. And, yes, you know, everyone wants to see where is the cost savings, where is the cost savings and efficiency. The real efficiency to be gained in the short term is making our people a lot smarter and faster at what they do, letting our people build their own agents to manage their work and do it more effectively. And the creativity that we’re seeing coming from our organization in this space is daunting. I mean, they’re finding much better ways to run their businesses, to get insights out of their business quicker and make decisions, and I think that’s personally the biggest unlock we’re gonna see in the next year.

No question we’ll find business cases to drive productivity in the R and D space, which we’re working on, with digital twins in the manufacturing space, which we’ll work on. A lot of excitement there. Mhmm. But the power of making someone a lot more effective in their day to day is going to be, I think, the the the most exciting piece to watch.

Unidentified speaker: How how pervasive is that, like, across the organization, across the thousands of people who work for Colgate? Is it early innings, or is it are you at the point where you feel like you’ve amassed

Noel Wallace, Chairman, President, and Chief Executive Officer, Colgate: skill We made a big strategic bet two years ago on this. We have trained every single one of our s and c employees in the company

Unidentified speaker: Mhmm.

Noel Wallace, Chairman, President, and Chief Executive Officer, Colgate: On AI. We now have 3,000 people in the company that we would consider subject matter experts on AI. So they’re they’re building use cases for the organization to share best practices across three, four thousand people around the world. And this is where the real unlock is, that we got ahead of it early back to, you know, building flexibility in the p and l, so we’re not having to play catch up. Yep.

We played catch up in the digital transformation back in 02/2019. Right. We were behind. Yep. And we realized that we were gonna have to bring outside expertise and to really help catapult us into a better position.

That was a lot of work, but we got there. AI would be we’ve learned from that. We got ahead of it very, very quickly. We’re very thoughtful on on what where we think we’re gonna get the best return on our investment. A lot of shiny objects out there, but we’re very pragmatic on how we wanna think about the spend.

Unidentified speaker: Okay. If we move back to the the business in the current environment, and we just kind of move kind of beyond 2Q into the second half, your outlook is predicated on improvement in the back half relative to relative to the first half. How much of that improvement is to come from category improvement? How much of that is to come from drivers that you are in control of? And do you feel on track?

Noel Wallace, Chairman, President, and Chief Executive Officer, Colgate: Yeah. The listen. The updated guidance we provided, certainly, if you run the math, there’s some improvement there. Mhmm. Is it significant improvement?

No. It’s not in the categories. The categories don’t have to significantly improve in order for us to achieve that. They need to at least modestly improve versus where they were Yep. In a very disruptive first quarter.

So we feel good about particularly given our global footprint and the fact that the international business seems to be a little bit more vibrant than we’ve seen particularly in The US market. Mhmm. That combined with strong market share, strong innovation, great RGM, we feel pretty good that we’re gonna be able to get a combination of volume and pricing acceleration as we move through the back half of the year. My feeling is where I sit today, we’ve we’ve we’ve got a pretty good line of sight of that. But things are very volatile in the world right now as everyone knows, and we’ll we’ll watch it very carefully, but we’re we’re pretty confident.

Unidentified speaker: Are there any key advertising campaigns or key innovations that are especially important in achieving that out that out outcome?

Noel Wallace, Chairman, President, and Chief Executive Officer, Colgate: Yeah. We’ve we’ve taken a major global relaunch of Colgate Total back to the premiumization. We’ve taken significant pricing on that business and early days as market shares are holding and growing across, in general, across the board, so we’re very excited about that. The Hill’s business has launched an entirely new equity campaign in 80 countries around the world. The early signs on that are outstanding.

We’ve got a great innovation pipeline coming behind that. So across some of our fabric care and personal care businesses, the Sanix business in Europe, we’ve got some great relaunches on that business that are doing very, very well. So overall, innovation doing well, but the single biggest opportunity we have is still mix opportunity and driving premiumization, and we’ll be very focused on leveraging our portfolio systematically around the world in that regard.

Unidentified speaker: May maybe you mentioned strength in Europe. There your business has exhibited strength in Europe, and it’s seemingly exhibiting strength in Europe for longer than some other companies. To what do you attribute the success? You know, how sustainable do you see it, and are there learnings that you can take from Europe to other other other markets?

Noel Wallace, Chairman, President, and Chief Executive Officer, Colgate: Yeah. First, we’ve got a great team. Anne Sophie is here who runs our Western Europe organization and doing some terrific work with her her her team. But across the board, it’s a consistent deployment of a strategy. And I come back, and I I realize this sounds somewhat elementary to some of you, but if you’re not consistently utilizing the resources you have on the ground against the key growth choices that you’ve made, you’ll get inefficiency and disparity in terms of execution.

We know what we’re trying to accomplish. We know the premium opportunities we have in the categories, and we’re consistently going after those. The pricing that we’ve been able to achieve in Europe versus a decade of negative pricing Mhmm. Clearly indicates what’s possible. Yep.

We have really stepped up our innovation and renovation strategies to get more pricing in the category. And that’s not only helping category growth, for our retailers but helping, obviously, our market share growth. Our oral care market share is at a record level. And, again, I talked about flexing the portfolio a lot more in Europe, our elmex and meridol brands driving significant growth, Colgate brands growing as well. And when you have the two working in combination, you can do a lot of special things with the trade to drive more category health longer term.

So we feel the pricing mechanisms and discipline that we have in place, but it’s all anchored against a consistent strategy that we’re trying to execute around the world.

Unidentified speaker: Okay. At at CAGNY, Prabha highlighted India as a key market opportunity, which obviously is a is operated by an independent company in India. But just how do you frame the the the outlook there for your business, both near term and long term? And and, you know, where does India, you know, rank in terms of the growth drivers of the company over the next oh, in the 2020, ’30 strategy that you’re putting together?

Noel Wallace, Chairman, President, and Chief Executive Officer, Colgate: Yeah. Depending on what you read, India will produce probably the biggest contribution to the middle class society in the world over the next decade. And middle class is everything to our businesses. That drives premiumization. That drives penetration in the categories.

That drives per capita consumption. Yep. And so we long term, we’re very bold on India. We’ve got a fantastic business there. Obviously, we’ve seen some slowdown in the urban markets as of as of late, but the rural market seems to be performing well.

You’ve obviously met Prabha. We have an outstanding team on the ground that’s very digitally forward thinking about where the future is going in that market in terms of both our distribution mechanisms as well as our marketing mechanisms, and we think executing very, very well. We’ve seen a little bit of slowdown, as I mentioned, in the urban. But long term, a huge middle class opportunity. We’re well positioned to go after that, and I think we’ve got some very clear strategies in place on the ground to deliver on it.

We’re gonna see it’s gonna move up and down for sure sideways. But long term, how we think about that business, it’s it’s a it’s a top priority for us. Okay.

Unidentified speaker: You you mentioned you talked kind of in in implicitly, you’ve talked a lot about oral care. You’ve you’ve you’ve mentioned a couple of times Hill’s favorably. Maybe kind of focus there. How would you assess current momentum in Hill’s? You know, the pet category more broadly has slowed.

Hill’s has, to my eye, kept kept pace ahead of that category, but it’s not you know, it’s it’s facing similar dynamics. So your your summation of of Hill’s performance today, and maybe an update as to how you’re how where you are in the migration away from private label in that business.

Noel Wallace, Chairman, President, and Chief Executive Officer, Colgate: Yeah. My overall assessment is excellent. I mean, the business is performing tremendously well up and down the p and l. You see all the the KPIs moving in the right direction. But I think most importantly is the brand health is as strong as we’ve ever seen it, and I think that’s a reflection of the advertising investment, our continued strong participation with the veterinary community and partnering with them on driving nutritional positive nutritional outcomes for pet owners.

And that partnership is obviously elevating the brand and its resonance with consumers. The segments why the the category slowed in the first quarter, Hill’s grew in every single segment that we compete, grew market share. And I don’t think there’s another major global player out there that did that. And, again, science still is highly relevant to the category. Our prescription diet business, which is obviously providing therapeutic benefit to to pet owners in terms of sick pets, is driving a lot of that growth.

That is wonderful for the brand and the equity long term. The supply chain acquisitions that we made, that has unlocked significant amount of inefficiency. You’ve seen, obviously, the operating leverage and margins improved dramatically in that p and l. While the category has slowed, Hill’s is still low brand awareness and low brand penetration. So we still think there’s a lot of growth.

The segments that we’re focused on and emerging segments in the market, we under index in all of them, so we see real growth opportunities there. And the innovation pipeline is terrific. Big market is The US. We will remain very focused on that market, but, obviously, international continues to afford us nice growth opportunities in time. We’re gonna be selective.

That brand has a very regimented approach to how it goes to market. It’s not a traditional mass market brand. We sell in very select distribution channels, and we build the brand from the profession up similar to what we do with elmex here in Europe. And that model has worked very effectively in driving premiumization, pricing, and loyalty to the brand.

Unidentified speaker: Right. So leaning in and playing offense. And the where are you exactly in the migration away from private label capacity, which plan is to convert to Hill’s? And how do you frame the the the margin unlock that that that follows?

Noel Wallace, Chairman, President, and Chief Executive Officer, Colgate: We’re kinda reaching the tail end of it. We’ll have we talked about a slightly more significant impact in the second quarter than we had in the first quarter, but I would anticipate by the beginning of the fourth quarter, we will be fully out of private label. We make basically no margin on private label. So while it’s absorbing some overheads, we have found ways to potentially mitigate that overhead absorption in other areas. And so we will have an accretive aspect of the margin and using that manufacturing capacity to build, obviously, much more profitable growth.

But the biggest unlock, I think, is is the network optimization in our in our supply chain. Mhmm. And where we were limited in ’23 and ’24 due to supply chain constraints, While there’s a short term impact, obviously, on your in your top line, the longer term impact is you’re not able to put the portfolio assortment into the trade, and you’re not able to provide innovation on a very consistent basis. That is behind us now. That supply chain is unlocking real efficiencies, thinking about how to continue to optimize productivity as it moves through there while also bringing a lot more innovation and funding the growth into the business.

And I think I’d mentioned we couldn’t run any of our funding to growth projects in ’23 and and into the first part of twenty four because we were at capacity. Yep. And when you’re not running when you’re running at 90% utilization, you just have no time to shut those lines down to do anything. Now we’re able to be much more thoughtful how we think about the long term aspects of of the category.

Unidentified speaker: Got it. Earlier this year, you announced the acquisition of a a fresh pet food business out of Australia as essentially, as I understand, more of as an experimental a learning vehicle. Granted, it’s only been a few months, but how is your how is your thinking evolved, if at all, around that business? What are what are your what are your plans and aspirations for it?

Noel Wallace, Chairman, President, and Chief Executive Officer, Colgate: Yeah. Great brand, Prime one hundred. No secret that, you know, we’ve been looking to enter the Fresh segment for quite some time. We’ve obviously seen a lot of interesting trends, but the the barrier to entry for us was we had to find a brand that represented the same criteria that we have for Hill’s, which is premium, which is significant nutritional value to the vet and a value that they see in the product itself and, obviously, a nutritional value to the cons to the to the pet owner. And Prime 100 fit all of those.

Growing business, profitable business, obviously, very strong underpinning from their profession in Australia, and an incredibly great quality in terms of of recipe and manufacturing. So that’s gonna be a great learning for us in Australia, and that’s our plan is to stay focused on that, and we’ll see where it goes. The business is performing very well in Australia, above our expectations. Good. So we feel very good about it, but it’s a learning.

It’s gonna take some time. It’s a different category with a different go to market, and, ultimately, we’ll see how we think about that longer term. But right now, we’re focused on Australia.

Unidentified speaker: Okay. I mean, in general, despite kind of a, you know, difficult, you know, around you, it seems like the business is is firing on many of the right cylinders. I won’t say all because I know you could do better. But has that has that changed your appetite for m and a, you know, kind of building on on the Prime 100 example, to to bolster capabilities as as your as your thinking at all changed in terms of what role M and A plays with regard to portfolio reshaping?

Noel Wallace, Chairman, President, and Chief Executive Officer, Colgate: Yeah. Listen. Be totally honest with you. M and A is really hard. Very, very hard.

And I think what what’s nice about our current business environment is that our 2030 strategy is not contingent on any m and a. It’s completely organic growth within the business and the opportunity spaces that we see. So by definition, we’re not chasing m and a to fill a gap. If we see strategic m and a that complements just like Prime 100, that’s a beautiful thing, and that we can drive efficiency and learning into our own business that we think long term is right, assuming the valuations are right. And I think valuations certainly have come a little bit more in check with where they were historically.

But we don’t need a major m and a investment in order to change the trajectory of our company. That being said, if we see some strategic bolt ons that we we would we would certainly consider that.

Unidentified speaker: Okay. Last week, you announced a series of leadership changes. I think they’re scheduled to take effect in a couple weeks. Really, essentially, creating two COO positions and a chief growth officer among those other shifts. But, I guess, maybe some summarize the change.

And, really, I guess, what drove the change, and how will the new structure better serve the company?

Noel Wallace, Chairman, President, and Chief Executive Officer, Colgate: Yeah. And what’s been, I think, so characteristic of our company is our ability to attract and develop talent within the organization. And this was an excellent opportunity to bring in a very proven leader from the outside who’s demonstrated in an arguably a very challenging category, food Mhmm. To drive growth and new thinking into into the business. And so bringing Shane into the business is a great add on.

Historically, if I went back ten years ago, we have not been successful bringing people in from the outside. In the last six years, we’ve brought in probably close to 200 people from the outside. This fresh thinking has really been well accepted within our organization, and people recognize that there are a lot of great ways to drive growth in the business and drive productivity, and we can learn from the outside. And that, I think, that speaks to the humility of our organization. So Shane’s gonna bring in a great thinking.

The Americas combination is great in my view because, one, they’re inextricably linked from a supply chain standpoint. Two, there’s a huge Hispanic influence in The U. S. Where we have very, very strong businesses. And being able to leverage Latin America more effectively in that regard, we think, will unlock possibilities.

Latin America has great resources in the space of innovation, digital and online. Those resources can be shared and best practices transferred a lot more expediently across the organization, so we think there’s gonna be a lot more efficiency there. Getting Pano’s focused on another part of the business, particularly Asia, we see a significant amount of growth, much more more of his time in that area, and he’s a well versed Colgate person who knows particularly developing markets extremely well. It’s gonna give us a lot more focus on that. Bringing John in, John Haslam was our president of the Hill’s business, a great strategic mind.

He has seen omnichannel develop at a much more rapid pace in the pet nutrition business than in the classic Colgate business. That’s the future of CPG, in my view, is how do you you interrupt the the the very disruptive consumer journey today with an omnichannel strategy and dealing with retailers who want to be omnichannel. Mhmm. We’ve done that the best with Hill’s. Bringing his strategic mind into the the chief growth officer will allow us to continue to elevate the capabilities.

And Stan, our CFO twenty years out of IBM, he’s as tech savvy as they come, and getting him to focus on, obviously, using our IT infrastructure to really drive growth and unlock it will be exciting. And we’ve got Prabha for, at least through October, and what’s exciting is now we have a senior executive leader really focused on some transformative things that I believe are gonna be necessary for our 2030 strategy and accelerating those specific areas with a single-minded focus on getting to execution and and deliverability across the p and

Unidentified speaker: l. Great. Stan’s a great example of someone that came from the outside and thrived.

Noel Wallace, Chairman, President, and Chief Executive Officer, Colgate: Yeah. Exactly. I’m doing six weeks out.

Unidentified speaker: If I’m not mistaken, you can correct me if I am. It looks like the management of skincare will move to Panos. Does assuming there’s no resegmentation that comes with this this org change, does that mean that skincare moves back under the European segment, or have we figured that out yet?

Noel Wallace, Chairman, President, and Chief Executive Officer, Colgate: No. You know, the skincare business is is so spread around the world that we wanna ensure that we get great execution. We brought in someone from the outside about two years ago to really rethink the strategy.

Unidentified speaker: Mhmm.

Noel Wallace, Chairman, President, and Chief Executive Officer, Colgate: Where do we wanna play that we can play in and and and be effective in? That strategy is well in place now. Panos is gonna go out and execute that strategy. He does that extraordinarily well in getting his face time on the sales fundamentals required to open up new doors and and distribution, getting promo improved. That’s the kind of stuff that we need to do.

We’ve got a great pipeline of new products, and we’ve got a great strategy that we we can execute. That business has obviously been severely disrupted by the China business Yep. Particularly with Filorga. But our US business, which is where we will predominantly focus, continues to operate quite well.

Unidentified speaker: Okay. And from a segmenting purpose, reporting per perspective

Noel Wallace, Chairman, President, and Chief Executive Officer, Colgate: Today, we’re

Unidentified speaker: No change.

Noel Wallace, Chairman, President, and Chief Executive Officer, Colgate: No change. Okay. Today, no change.

Unidentified speaker: In the one or two minutes we have left, I guess, just how would you sum up? And how would you, you know, yeah, how would you sum up? I guess, what would you tell investors that you keep most top of mind as they think about Colgate as an investment opportunity over the next several years?

Noel Wallace, Chairman, President, and Chief Executive Officer, Colgate: Yeah. The history of our company has been on durability and predictability, and I think we’ve spent a lot of time internally in the organization getting the culture to understand the importance of of a growth mindset and the accountability that comes with that and getting the organization to understand that, yes, that great organic growth needs to translate to dollar based earnings growth for our shareholders. And we’ve spent a lot of time getting them to understand the mechanisms of what does that and why we’re why we need to get the balance of pricing and volume, the premiumization in the categories, and why we’re focused on making very deliberate choices on our investments around the world. We’ve got a great balance sheet. Our return on capital is best in class in the industry.

We will continue to obviously leverage our capital very, very carefully in the context of thinking about our shareholders in that regard. But overall, it’s making sure that the income statement works. We’re driving great innovation to drive the top line and brand penetration, which is happening, and leveraging our balance sheet as we see as we see necessary.

Unidentified speaker: Perfect. Right on time. Thank you, Noel. Thank you, everybody. Thank you, Colgate.

Noel Wallace, Chairman, President, and Chief Executive Officer, Colgate: Thanks, everyone.

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