Colgate-Palmolive at Evercore ISI Conference: Strategic Growth in Latin America

On Tuesday, 10 June 2025, Colgate-Palmolive (NYSE:CL) presented at the 5th Annual Evercore ISI Consumer and Retail Conference, outlining its strategic focus on growth and innovation, particularly in Latin America. The company highlighted both opportunities and challenges, including its commitment to premiumization and innovation, while addressing consumer slowdowns in key markets.

Key Takeaways

• Colgate-Palmolive is focusing on premiumization and breakthrough innovations, moving away from mere line extensions.
• The company is increasing its advertising-to-sales ratio to boost brand health and penetration.
• Latin America remains a crucial market, despite consumer slowdowns in Mexico and Brazil.
• Colgate is managing currency volatility through strategic pricing adjustments.
• The company aims for organic sales growth at the higher end of its 3-5% target.

Financial Results

• Organic sales growth reached 9.4% in the first half of the previous year, fueled by volume and pricing.
• The advertising-to-sales ratio rose from 9.1% to 13.5%, reflecting a focus on brand investment.
• Colgate is guiding for dollar-based earnings per share growth despite challenges from tariffs and foreign exchange impacts.
• Strong cash flow generation is being used to reduce debt, lower interest expenses, and repurchase stock.
• The relaunch of Colgate Total has contributed to a 1.1-point increase in market share in Latin America.

Operational Updates

• Efforts to turn around core businesses, which constitute 60% of the company, are underway alongside investments in faster-growing adjacencies.
• Premiumization strategies involve pricing Colgate Total at a 1.8 to 2.2 price index relative to the base business.
• Analytics are being used to measure advertising ROI and enhance revenue growth management.
• Market share in pharmacies has increased by 500 basis points over the last five years.
• The company is expanding its presence in the e-commerce sector and has launched Elmax to compete in the pharmacy retail environment.

Future Outlook

• Colgate aims for long-term growth in Latin America, targeting the higher end of its 3-5% corporate guidance.
• The company expects operating profit to grow faster than sales, driven by premiumization and productivity improvements.
• Hill’s business in Mexico presents growth opportunities, with a current market share of 7% in the region’s best market.
• Market share is anticipated to continue growing as conditions improve over time.

Q&A Highlights

• Recent consumer behavior in Mexico and Brazil has slowed, attributed to inflation and consumer sentiment.
• Signs of improvement in Mexico are expected to align with pricing actions and better comparisons versus the previous year.
• Colgate addresses currency volatility in Latin America by understanding transactional effects and adjusting prices.
• A shift from traditional drugstores to a retail environment in Latin American pharmacies offers market share growth opportunities.
• The consumer base remains resilient despite economic challenges.

For more detailed insights, please refer to the full transcript below.

Full transcript - 5th Annual Evercore ISI Consumer and Retail Conference:

Robert Ottenstein, Analyst: You’ve got half the audience in your small group meetings. Great. Why don’t we get started? I’m Robert Ottenstein. I do global beverages and household products with my teammates Javier Escalante and Greg Porter and JD.

We’re super excited to have Colgate with us today. From Colgate, we have John Fosher, Head of Investor Relations, Executive Vice President for M and A. And, with John Fosher is JP Zamorano, President of Latin America. So we’re going to start off big picture a little bit with John just to kind of frame the Colgate story and and update investors big picture. So John, you you joined, about nine years ago, I think at this point.

When you kinda stand back and think about, you know, two or three major changes that have happened in the company, whether it’s culture or goals, targets, whatever they may be, you know, what what what comes to mind?

John Fosher, Head of Investor Relations, Executive Vice President for M and A, Colgate: Sure. So I’ll I’ll start off and then, you know, JP has an even longer perspective. He’s been with the company about thirty five years. So I’ll I’ll ask him to sort of comment as well. I think, you know, if you think about one of the biggest changes, in my mind, it would really be in terms of how we’re approaching growth and really approaching with what, you know, we used to talk a little bit more about this, but this term gets used a little bit less now, is a growth mindset.

Right, which was really about as the category leader in many of our categories, we needed to be focused on driving category growth. Right, and the best way to gain share is to drive the category yourself. And so as part of that, going back to 2019, as we transitioned from Ian Cook to Noel Wallace as CEO, we focused on a couple of key things, which was off, we had these big core businesses that were about 60% of our business that weren’t growing, and so we saw the opportunity to really focus on turning around our big core business They’re big drivers of penetration, big drivers of market share. And so we decided to invest in those core businesses through things like Science Diet Growth Plan or what work we’ve done on Colgate Total. And that’s been a big driver of growth.

We also attacked what we called faster growth adjacencies, so segments of our categories that were growing faster that we weren’t really taking advantage of. So you can think of segments like whitening, or some of the indications we have on the prescription diet business for Hill’s. And then finally, faster growth channels and markets. And so we made a big push on e commerce. We made a big push in terms of pharmacies, particularly in Latin America that JP can talk about.

And so it was a really more active view of growth. Now as part of this, we needed to fund that growth, and so we took a look at the income statement, and we’ve always had a, maybe a maniacal focus on driving gross margin,

JP Zamorano, President of Latin America, Colgate: but

John Fosher, Head of Investor Relations, Executive Vice President for M and A, Colgate: we really kept at that. We’ve been able to get gross margin back up towards peak levels, and that has allowed us to invest back in advertising, and that’s really been one of the biggest changes, is a very consistent commitment to using advertising to drive brand health, to drive brand penetration, and so that’s really turned into, you know, we’ve taken the advertising to sales ratio from 9.1% up to 13.5%. We’re supporting more of our brands in more geographies, and I think that’s helped us to, again, drive brand health and drive brand penetration, and it’s allowed us to deliver very strong organic sales growth. And then the key, I think from a bottom line perspective, is getting back to consistent, compounded, dollar based earnings per share growth. We went through a period, and a lot of this had to do with foreign exchange, where we weren’t delivering that dollar based earnings per share growth.

And now if you look at 2025, and you look at our guidance for this year that we talked about in the first quarter call, despite some incremental impact from tariffs, despite some weaker consumer, despite some negative FX, we’re still guiding to dollar based earnings per share growth, which we think is important as we think about delivering strong TSR for our shareholders. So JP, anything you would add?

JP Zamorano, President of Latin America, Colgate: Yeah. I think I will add that in addition to what you mentioned, we were pretty disciplined on identifying what were the capabilities that will ensure that we continue to deliver the results we are delivering today, but more important that we will be successful in the future. So areas like innovation, areas like data and analytics, areas as, you know, like digital, We really were very focused on them and and significantly upgrade the capabilities we had in the company. And another one, which obviously is super important, is how we evolve the culture of the company to be guided against the environment that we were facing today. So we maintain some of the values.

The best example is is the carrying value that will always stay there, But we also start saying, okay. We need to take more risk. We need to be more courageous, and we need to be able to drive a stronger performance in in certain areas of the company.

Robert Ottenstein, Analyst: Great. Great. So so so, John, two mantras of the company, consistent growth and flexibility in in the middle of the p and l. This year, 2025, you’ve mentioned and everybody has noticed a little bit tougher than people thought, six months or so ago. So maybe if you could start talking about where the demand pressures are, where it’s a little bit weaker than you may have thought it would be, if there are additional cost pressures, and then how you know, what are the levers that you’re using?

You know, how are you, you know, looking at that flexibility in the middle of the p and l to overcome some of those challenges?

John Fosher, Head of Investor Relations, Executive Vice President for M and A, Colgate: Sure. So, you know, we put together really strong organic sales growth in the first half of last year. I mean, through all of last year, but particularly in the first half where we delivered about 9.4% organic. And while there was definite benefit from Argentina there, the underlying strength was really good. We were getting volume growth.

We were getting pricing growth. And you know the key, this is consumer staples. You’re only gonna grow so fast for so long. The key in that situation is okay, understanding what’s our sustainable long term growth rate. And so we knew really through the back half of 2024 that 2025 was going to be a tougher year.

And we planned for that. And that’s when we started talking about having more flexibility in the P and L because we saw organic sales growth and therefore probably also net sales growth because we could see where currency was heading in the back half of the year. We knew it was going be a tougher year. So we started talking about flexibility in the P and L to give shareholders confidence again that we’re focused on delivering that dollar based EPS growth. And the flexibility, you know, you mentioned the middle of the P and L.

It’s not just the middle. We got, we have to think about using all the levers in the P and L. The best way to drive leverage and bottom line growth is through the top line. Right, so we remain committed to investing to drive top line growth as JP talked about, you know, through our capabilities, through the advertising, you know, brand health and penetration. You know, we saw relatively benign raw material environment and that’s kind of turned out to be the case, but we’re delivering really strong funding to growth off of another record year in 2024.

You know, we wanna use the other levers in the P and L. We went into the budget process this year. Stan worked with the division presidents to come in with a more aggressive approach as we look at tackling inflation in our overheads. And then, you know, we’re generating strong cash flow to pay down debt, lower interest, buy back stock. You know, we work to get the tax rate down.

So that’s a lot of different levers in the P and L before we get to the advertising, right? And as I mentioned, we’ve done a lot of work building that advertising to sales ratio up. We wanna keep it. We’d like to keep it going up if we can, but we know we need to do that in the context of delivering appropriate returns for our shareholders. And so it may fluctuate here and there.

When we have the opportunity, and JP can talk about this, you know, there’s lots of ways for us to, you know, not just maintain the advertising, but improve the effectiveness of our advertising. That’s another key factor. Do you maybe wanna talk about that?

JP Zamorano, President of Latin America, Colgate: Yeah. I think that a super important point is how well we have developed the analytics in the company. And, obviously, today we have much better coverage of tools to measure the return on investment of the advertising that we do in each one of the markets. We use marketing mix modeling, and therefore, we can look into where we have efficient investment and where are areas of opportunity for us to improve over time. And on the same line, which also helps the health of the P and L, today, we have much better analytics on revenue growth management.

We have very good understanding of what areas of the business we can take higher risk, what areas of the of the business we need to be super careful and therefore drive the the top line of the company.

Robert Ottenstein, Analyst: Great. Great. So, John, two other things that you focused on is the opportunity to premiumize the business as well as do more impactful innovation and presumably those two are tied together. Maybe if you could talk about kind of the key innovations for ’25, when they will hit the market, so you know, half, half, so we can get a sense of timing, and then an early look if possible in terms of the ’26 pipeline.

John Fosher, Head of Investor Relations, Executive Vice President for M and A, Colgate: Not gonna get an early look on the ’26 pipeline. I I appreciate you asking. So as we look at this again, would go back to, you know, if you look at where we were putting our resources into play, if you go back seven years ago, ten years ago, what have you. You know, if focused less on driving the category and maybe more on driving market share, which is kind of where I think we were going back to that growth mindset question. You know, you’re probably looking at more things like line extensions.

Right? And we had too many of our resources devoted towards line extensions and we weren’t really focused on driving the incrementality that we needed to truly grow the category and grow our business. So over the last several years, we have shifted our resources on innovation to more breakthrough transformational or horizon two, horizon three innovation. Right? And these may be smaller businesses that we need to incubate and build up over time.

And I think we have gotten better at sizing up these opportunities using the capabilities that JP talked about in terms of understanding, okay, how do we come up with more of these ideas? How do we come up with them more quickly? And then how do we have the patience and the resources to say we’re gonna take this small business which may not be that big or that incremental in the shorter term and really build that up over time. So I think that’s a big mindset shift that we have had over the last several years to build more on that innovation. We brought in more external talent to do that.

We’re bringing in even more external talent to do that going forward. So again, think it’s a real investment behind bringing the people, the processes in place. We have created different incentive structures for our businesses where they are basically compensated. More of their bonus is tied into the benefit of innovation and the incrementality of that innovation in their business. And that’s really driving some of the behavior and cultural changes that JP talked about.

Anything you would add? No.

JP Zamorano, President of Latin America, Colgate: I would say and and we have tried also to to take advantage in some areas of global platforms, and a good example of that is is called Guitarra where we, you know, develop a a relaunch proposition that is based on our global concept, our global technology, our global, in a way, go to market, which obviously we we can do really well.

Robert Ottenstein, Analyst: Great. Well, that’s that’s a good segue into my next question, which, you know, hopefully kind of ties this a bit together, John, is, can you just talk a little bit about the rationale of bringing in Shane Grant into the company from the outside? What were the key accomplishments at Danone? What what had he done at Danone that was attractive? That’s part one.

And then part two, why does it make sense to put Latin America and North America together under under one person?

John Fosher, Head of Investor Relations, Executive Vice President for M and A, Colgate: Well, I mean, I’ll let JP talk about that because JP has run both North America and Latin America, and I think he’ll, you know, provide good insight from that standpoint. Look. We have increased the number of people we brought in from the outside over the past ten years or so. Particularly when you look at some of the capabilities that we’ve talked about in terms of digital, data and analytics, AI, innovation. So I think we have gotten more comfortable bringing people in from the outside.

JP mentioned culture, and culture is really important at Colgate and particularly important to Knoll. And when you find someone who has different experiences and different capabilities, and you can get them to work effectively within what we think is one of the best cultures in consumer staples space, it creates just a lot of power in the business model to bring in new things. And you know, I always said when I joined, you know, one of the great things about Colgate People was, you know, they really wanted to learn. And they wanted to learn to compete more effectively. And so, you know, as someone who came in from the outside, that’s been a great experience.

As far as bringing Shane in, you know, there was a view that he’s done great work in The Americas in terms of driving growth in Danone, you know, in categories that had been a little more troubled from that standpoint. So he’s viewed as a good growth driver and the feedback has been that he’s gonna be a very good cultural fit from that standpoint. I think as we look at terms of bringing the divisions together, think there’s so much great work that JP and his team do in Latin America that we think can influence the North American business, but I’ll let you add your thoughts on that.

JP Zamorano, President of Latin America, Colgate: Yeah. I think that there is efficiencies to be have in terms of supply chain. I think that there is a great opportunity from the consumer point of view as we see the influence of the Hispanic population within The U. S. Market.

I think we can get better aligned in terms of the innovation that we develop in both regions. For some time, do leverage in some of the innovation, but we are not fully integrated. I think that there is also opportunities on how we better transfer talent between the two different divisions. So in general, something quite positive for the company.

Robert Ottenstein, Analyst: Great. Let’s let’s do a deep dive now on on Latin America, which is truly one of the most extraordinary franchises in in in in Staples. So, you know, eighty, ninety, a hundred years in some countries, seventy, eighty, 90% market shares. Can you kinda just give a brief description of of the key countries exposures, a little bit of the history, how Colgate became such a leading player in in in Latin America.

JP Zamorano, President of Latin America, Colgate: Thank you for the comments, Robert. You know, Latin America is the largest division for Colgate. We have two of the largest international markets, Brazil and Mexico. But we also have very strong presence in the other regions of Latin America. We have presence in Andina, Southern Cone, Central America, Greater Caribbean.

We have our biggest business. AuraCare is our biggest business, but we also have a strong presence in personal care and home care. As you mentioned, we have a a long history. A couple years a couple weeks ago, we celebrated one hundred years in Mexico. We’ve been in Brazil and Argentina over ninety years.

We’ve been in Colombia, Central America over sixty years. During all these years, we have been able to build very strong brands, in many cases recognized as local brands, very strong market share positions across many categories, and I think that incredible go to market and supply chain capabilities. All that combines with a super passionate team that, you know, have multi country, multi category experience. Many of our leaders in Latin America were leaders that grew up in Latin America, but as in my case, we went out and worked in other divisions during our career and now have come back to Latin America to continue the the cycle of development of talent and and development of the business.

Robert Ottenstein, Analyst: Great. Roughly what percentage of the business is oral care and then home and personal?

JP Zamorano, President of Latin America, Colgate: To Can I answer that? Very roughly. Yeah, think about half one and split the other two in equal parts.

Robert Ottenstein, Analyst: Great. Okay. And we’ll we’ll we’ll come back to oral care. But just, so we kinda understand so you you’ve got home and personal care. Is that in terms of of Latin America, is that a growth business, or is it just there to kinda add scale?

JP Zamorano, President of Latin America, Colgate: The the the short answer is a growth business. And as I mentioned, you know, we we have very strong presence in in oral care, but we we also depend of of personal care and home care. Our global brands, you know, Colgate and Palmolive, allow us to compete quite quite well in categories like toothpaste, toothbrushes, mouthwash, even bar soaps. The regional brands that we have, and we have many, let me mention some of them, Sorizo, Protex, Suavitel, Fabuloso, Accion, allows to, one, compete in more categories that we will not be able to compete with the global brands and be able to compete in other segments of the market in which we even compete with global brands. So we can compete in multiple price tiers the region, which is important in Latin America, and we can compete in more segments of each one of the categories.

Good example will be Suavetel, which is very strong market share positions in the fabric conditioners category in Mexico, Central America, and Dina. And another good example will be Protex, which is a great complement of Palmolive. Protex competes in the antibacterial segment of skin cleansing, a super important segment in the region. So net net, we have a really good balance of global brands against regional brands, and all of them playing an important role in the portfolio

John Fosher, Head of Investor Relations, Executive Vice President for M and A, Colgate: if I can just add, it’s important to note also that and Fabuloso have great businesses in North America, you know, that exist because of the strength that they built up in their home markets, you know, with Fabuloso being the number one portable cleaner and and having great market share within fabric softener.

Robert Ottenstein, Analyst: Is there any opportunity for Hill’s in Latin America? Is that worth the

John Fosher, Head of Investor Relations, Executive Vice President for M and A, Colgate: I mean, Hill’s has a pretty good business in Latin America. The premium dog food segment is still relatively nascent from that standpoint. But Mexico in particular has been a really nice growth market for Hill’s, and I think we will continue. We’ve got so many growth opportunities at Hill’s across the world. I was just in Europe meeting with the European Hill’s team.

There’s a lot of room to go. When your best market has 7% market share, there’s just a lot of opportunity on a great brand like Hill’s, but Mexico in particular is a is a good market for us.

JP Zamorano, President of Latin America, Colgate: And so while we run the business independently, we we provide you know, we are collocated. We provide all the support that we can. And more important, we provide plenty of talent to his his business in in the region.

Robert Ottenstein, Analyst: K. Let’s let’s just touch on briefly how well the consumer’s doing in in Mexico and and and Brazil. I know your business was very strong through COVID, and then you had a little bit of election boost and a flip side. But, you know, obviously, a lot of stress, you know, at least psychologically on on on that that area. How how is the Mexican consumer today?

And then maybe touch on what you’re seeing in Brazil just in terms of consumer demand in the and and and the general marketplace and how that’s evolved over the last six months.

JP Zamorano, President of Latin America, Colgate: Okay. So as you mentioned, during COVID and during the period of significant inflation in Latin America, we saw the consumer holding up pretty well. During that time, marketing and good innovation and execution, we were able to drive very high organic growth for several years with good combination of volume and pricing. Most recently, and probably we will talk about twelve months or so, we saw less growth in the region. We probably connect that with the cumulative effect of inflation.

We connect that with a little bit of consumer sentiment, and we connect that with some of the economic news that, obviously, tariffs and all the communication around that topic that happened in the market. In the case of Mexico, and we saw the slowdown in the case of Mexico, as Noel mentioned, we have seen recently an improvement. I think that, that also is going to combine with some pricing that we have taken in both Mexico and Brazil, a much better comparisons versus last year. So I would say, to summarize it, has been slow. I think we had a first quarter that was slower than everybody was expecting, but some conditions improving over time.

As we think more longer term, I like to think that we’re going to go back to pre COVID levels and having the market growing, I would say, on the higher part of our corporate guidance. And and, obviously, that grow being a split between volume and value.

Robert Ottenstein, Analyst: And and Brazil?

JP Zamorano, President of Latin America, Colgate: I think Brazil, most or less, have followed the the pattern of of Mexico with a little bit of lag, but but have followed the the pattern of Mexico. Mexico, we saw the slowdown right after elections. It was incredibly fast. Brazil took a little bit of more time. Brazil also has some tough comparisons in the half versus the half, tougher comparison.

Robert Ottenstein, Analyst: Well, I think one of the most visible or important innovations this year has been the Total relaunch. And I I I think you started in Latin America or certainly one of the markets. So, can you talk a little bit about, the importance of the Total brand so we get a sense of how relevant it is, what the relaunch was, what the relative price point is, is this really going to push the premiumization agenda, how does it compare to your core toothpaste? And how it’s going? What sort of traction are you seeing?

JP Zamorano, President of Latin America, Colgate: Thank you for the question. Colgate Total is a super important component of our portfolio. Just to give you a reference, before the relaunch, Colgate Total was about 15 points of market share out of the 74% market share that we have in LatAm. It it represented or or having that franchise strong represents a tremendous opportunity for us. One, because it continues to only to fit within the the purpose of the company to provide better health for the for the population.

because it represents a wonderful opportunity of premiumization. So you get a reference, Colgate Total is priced between one eighty to two twenty price index versus our base business. The relaunch was a wonderful opportunity to bring new technology to the region, technology that will be aligned to the rest of the world, a new concept approach talking about prevention, new advertising, great packaging, and unprecedented levels of activation. We started with the main variant in the fourth quarter of last year. Results have been super positive, and we expect that to continue during 2025.

Robert Ottenstein, Analyst: Now right. So so so it’s six or seven months now. Yep. In terms of the incremental Colgate total sales that you’re getting, how much of that is trade up within your portfolio? How much of that is maybe market share gains?

Is there any color that you can give us just so we can understand the incrementality?

JP Zamorano, President of Latin America, Colgate: I think it’s too early to to to be able to drive those conclusions. I can tell you that, you know, we started at fifteen. We are now at 16.1. And so it’s driving about one point top line for for Colgate total market share, and a portion of that is translating depending on the market in the total market share.

Robert Ottenstein, Analyst: And what kind of competitive response has there been? And this is obviously a big deal in those markets. How the comp how’s the competition responded?

JP Zamorano, President of Latin America, Colgate: I I don’t like to say none, but I I don’t think that, you know, at that level of premiumness and with that level of execution, we haven’t seen a major reaction from our competitors about that relaunch.

Robert Ottenstein, Analyst: Great. Sticking with Mexico and Brazil, just globally, there’s been huge changes in route to market, particularly with e commerce, but also, I think, you know, there’s been changes in the pharmacy channel in some countries. And love to get a sense of, you know, what the route to market and and the retail environment looks like in Mexico and Brazil, know, the modern retail, specialty pharma, and then how, you know, you play that with your, you know, portfolio strength. You know, I think you’re bringing in Elmax more than in the past. So how do you match your portfolio to the changes that are going on in terms of route to market in the retail environment?

JP Zamorano, President of Latin America, Colgate: Okay. So you mentioned two retail environments, e commerce and pharmacies. Let me step back and say, obviously, with the critical mass we have with the market shares we have, we have excellent performance across all the retail environments. We have good market shares in direct trade, indirect trade, cash and carries, discounters, any retail environment, we will have a very strong presence. In the case of e commerce, it’s small but rapidly growing.

From the beginning, we decided that that was a retail environment where we needed to succeed and be on the leading edge, not only in terms of performance, but also in terms of providing the right level of support to our customers to develop that business. We have over invested in terms of structure. We have a center of excellence. In Mexico, we have dedicated resources in each one of the markets, and we’re doing really well. In the case of pharmacy, a more established retail environment in Latin America, we started to see a transformation from traditional drugstores to a more nice retail environments and better shopper experience.

As such, saw a tremendous opportunity to drive our market share. There is a significant gap between the share we had in that retail environment of 45% and the market share we we have in the total market about 74. Over the last five years, we have been able to increase about 500 basis points of market share in that retail environment, driving premium therapeutic conditions, which also, again, bring that opportunity to grow the top line. As you mentioned, we have done that with a combination of strategies. In some markets like Brazil and Southern corn, we brought some of our brands from Europe, more specifically, Elmax, and we focus on the pharmacy channel, those brands, and we are doing quite well.

In some other markets where Colgate can drive the dental recommendation and is the leader in the segments, we have used our own Corgi bundles in Latin America to be able to compete in pharmacy. But net net, good opportunity for us, good progress in terms of market share, and and good prospects in terms of what we’re doing in the marketplace.

John Fosher, Head of Investor Relations, Executive Vice President for M and A, Colgate: Robert, if I can just add something. I mentioned earlier talking about sort of incubating and being patient and things like this. And you know, one of the things that JP has led with this Elnex push in pharmacies is we’ve been incredibly patient about building this business the right way using the heritage that we learned from the way it’s been built up in Europe. And you know, it’s not innovation per se because these were existing products although Elmex does have innovation. It’s almost treating it like it’s innovation and taking time to build data.

Robert Ottenstein, Analyst: Looking at sort of the, you know, macro challenges that, you know, come on Latin America, I mean, over the years, currency has been incredibly volatile. Right? I mean and and you’ve gone through a a huge multiple devaluations of the the Brazilian real. You know, currencies are the fluctuations are extraordinary. So can you talk a little bit about how that impacts the business, how you manage through that these type of currency changes?

And if, you know, perhaps we’re in a period in which, you know, the dollar versus the the Latin currencies is flat or maybe weakened slightly, you know, to what extent, you know, that gives you more flexibility. So kinda the tough scenario and and, you know, the hopeful one.

JP Zamorano, President of Latin America, Colgate: Yeah. I I will start it. Listen. If if you do business in Latin America, you better know how to deal with movements in currency. And I think we are very fortunate to have people on the ground with plenty of experience who have gone through many crisis in their careers.

And given the tenure of the people that work in the company, they have done it with us. So that’s the element that I will mention. we we are super disciplined, and I think we talked about this a little bit in in in our previous meeting, to understand what is the transactional effect of foreign exchange into our P and L. And with that, I refer to what is the dollar based component of our cost in our And as we face movements in in negative movements in currency, we immediately take pricing to be able to offset the nominal effect of those transactions.

The benefit of doing that is that one, obviously, we minimize the urge to do it all through productivity. The one is that the pain that you feel because you’re taking that pricing is the same pain that or the same cost pain that others are feeling because they they will have similar cost structures as you will do. So net net, something we have done always, something that, in a way crisis will always allow us to get stronger and something that we have managed really well.

Robert Ottenstein, Analyst: Are you allowed to give us a rough idea of what percentage of your COGS are dollar denominated or not not gonna go there?

John Fosher, Head of Investor Relations, Executive Vice President for M and A, Colgate: Not gonna go.

Robert Ottenstein, Analyst: Okay. Understood.

JP Zamorano, President of Latin America, Colgate: But it it changes a lot by category and even by by region. So it’s not one exact number. And only over time, you wanna localize, but that is very difficult to

Robert Ottenstein, Analyst: do

John Fosher, Head of Investor Relations, Executive Vice President for M and A, Colgate: know, but the one thing I would say, right, is you think about it, given our scale advantages, we are going to have a higher gross margin than our competitors in these regions, which means that their dollar based costs are gonna be a higher percentage of sales than they are for us. So that helps us from that standpoint in terms of making sure we price effectively as JP talked about, but then also we have such great productivity that allows us to get the gross margin.

Robert Ottenstein, Analyst: Great. Brazil has one of the highest incidences of oral care use. Mean, they really take care of their their teeth in Brazil. Are there anything that you can learn from that that are applicable in other countries just in terms of, you know, what has worked so well in Brazil in terms of oral care use and that could be then transported to other countries?

JP Zamorano, President of Latin America, Colgate: Yeah. You’re right. Brazil has super high per capita consumption in toothpaste. It’s not only in toothpaste, but also in other categories. They take two showers per day also, so very high per capita consumption in skin cleansing.

I think it has to do with the culture and the desire to look good and be healthy. I know we have a Brazilian in the room, so I’m pretty sure that he will connect with that comment. I think that, you know, what what what we have taken from Brazil and from other markets is you you have to identify what are those opportunities that will help you to drive that per capita consumption. A good example of that insight will be, you know, people normally are pretty disciplined about brushing in the mornings, but plenty of people are not so disciplined about brushing at night. So finding the key insights and key motivators to, you know, have people brush at night represents a wonderful opportunity for us to continue growing per capita in the region.

Robert Ottenstein, Analyst: Great. So to wrap things up, I think you said that you were hoping or planning to deliver over time at the high end of the three to 5% algorithm. Maybe talk a little bit about how you how that would work. And then just as importantly, what does that mean? What what can you do on the bottom line?

I mean, you already have extremely high margins already. Is there operating leverage? So if you do 5% top line, you get operating income growth of 7%. I mean, how how should we think about that?

JP Zamorano, President of Latin America, Colgate: I think as as I mentioned, we we think, you know, categories are are gonna go back to pre COVID levels. I I think that we will continue to be able to deliver on the on the higher end of the corporation. I think we will have a better balance between volume and pricing. I think that we will remain with the opportunity to continue to drive productivity within our P and L. While margins may be high, we have a tremendous opportunity in terms of premiumization across our business.

And we have, as you mentioned, a critical mass that allows to manage overheads and our investment in a much more efficient way. So I I do believe that, you know, we have very positive in the in the mid and long term of driving good growth and continue to improve profitability in Latin America.

Robert Ottenstein, Analyst: Sounds to me operating profit growing ahead of sales. That’s kinda what I what I

John Fosher, Head of Investor Relations, Executive Vice President for M and A, Colgate: I mean I I think as a total company, yes, we would wanna do that, and we would like to do that across divisions depending on the opportunities to invest, etcetera, but yeah.

Robert Ottenstein, Analyst: Certainly for Latin America. Great. Well, thank you very much, John, JP. Really appreciate it.

JP Zamorano, President of Latin America, Colgate: Thank you.

John Fosher, Head of Investor Relations, Executive Vice President for M and A, Colgate: Thanks, Robert. Thanks.

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