Colgate-Palmolive Firm (NYSE:CL) Presents at Client Analyst Group of New York Convention February 23, 2024 8:00 AM ET

Firm Contributors

Noel Wallace – Chairman, President and CEO

Diana Schildhouse – Chief Analytics & Insights Officer

Convention Name Contributors

Bryan Spillane – Financial institution of America

Dara Mohsenian – Morgan Stanley

Chris Carey – Wells Fargo

Andrea Teixeira – JPMorgan

Peter Grom – UBS

Unidentified Firm Consultant

So, with that, becoming a member of us at the moment from Colgate, our Chairman and CEO, Noel Wallace; Chief Analytics and Insights Officer, Diana Schildhouse. And Noel has made CAGNY historical past right here. 5 years in the past, he laid out a method to reaccelerate development pushed by investments in advertising, innovation, digital capabilities, filling white house. They usually exited 2023 exhibiting some momentum. So, I suppose it is working.

So, I am going to flip it over to Noel to inform us extra.

[Video Presentation]

Noel Wallace

Nice. Nicely, good morning, everybody. We thought we needed to start the presentation with actually reinstating our function as an organization, which is an modern development firm that is actually reimagining a more healthy future for all folks, pets, and their planet. And I believe these two spots do a beautiful job in capturing what we’re coping with all over the world.

Cavities continues to be the primary illness on this planet and we’re well-positioned to assist fight that and supply higher well being outcomes and finally, enhance schooling on the similar time.

And clearly, with the extremely — unbelievable development of pores and skin most cancers all over the world, our capability to take the primary model really helpful by dermatologists and push that with a partnership with Andy Cohen has been terrific. So, a reminder, our Protected Harbor assertion.

As we have accomplished during the last 4 years, it is all the time a prideful second for me to showcase a few of our government expertise round Colgate and actually carry to life a number of the capabilities that we’re scaling throughout the group.

And I’ve acquired Diana Schildhouse with me at the moment, who’s our Chief Digital — excuse me, Chief Analytics and Insights Officer for the corporate, and he or she’s going to speak how we’re scaling a few of these capabilities across the group.

So, a few issues to stage set us all. I’ll shortly recap; 2023, after which I am going to get into our 2024 outlook, however the subsequent a part of the presentation shall be to speak about our technique and the way we’re assured in our capability to proceed to drive development for the group.

Beginning with 2023, you noticed clearly robust development on the high line, 8.5% natural gross sales development, 8.5% high line greenback gross sales development. Progress throughout all of our divisions and all of our classes, which is once more the standard of development that we had been in search of.

Importantly, we noticed an inflection of quantity within the again half of the yr, and we exited the yr with constructive quantity development ex the impression of personal label that we introduced into the enterprise.

Final yr, importantly, the leverage in the course of the P&L was an vital side of what we had been trying to attain as we went by means of the yr. You see that we had development in gross revenue, each {dollars} and margins, working revenue and proportion in {dollars} as effectively. That allowed us to reinvest behind the enterprise and develop our promoting up double-digit. And regardless of the double-digit enhance in promoting we proceed to attract — excuse me, to drive constant earnings development on the bottom-line.

Importantly, working capital has been an space of focus with elevated earnings and decrease working capital. We drove free money stream up 63% on the yr, which is once more our capability to return cash to shareholders, which was terrific when it comes to our efficiency in that space. And you will see, as I am going to get into the presentation, how we’re driving market share persistently throughout the globe.

We anticipate one other robust yr in 2024. Web gross sales up 1% to 4% with a low-single-digit impression from overseas alternate. Importantly, balanced development will enter into natural gross sales this yr with each quantity and pricing development.

Gross revenue margins shall be up, as we stated on the decision. We proceed to anticipate promoting to be up on the yr — promoting shall be up on the yr, which is once more an enormous catalyst for our development that we have seen during the last couple of years.

Base enterprise EPS to be up mid- to excessive single-digits. And once more, vital to get that free money stream persevering with to develop so we will proceed to reinvest behind the enterprise and return funding to our shareholders.

So, 5 key issues when it comes to our measure a really per what I outlined 5 years in the past, and really constant when it comes to how we’re deploying it throughout the group.

Executing the correct technique, we consider, to drive development in a really risky and aggressive atmosphere. The scaling of our capabilities throughout the group. We’re delivering productiveness and efficiencies all through the P&L so as to get that leverage.

Reaccelerating money stream and funding and driving shareholder worth by means of constant and compounded earnings per share development, and importantly, ensuring that we proceed to drive a more healthy future for all folks, their pets, and our planet.

So, let me start with our technique and the way it’s working. We talked in regards to the significance of a development mindset 5 years in the past, and the way we wish to persistently drive natural development throughout all of our classes and all of our divisions.

And you have seen that persistently during the last 20 quarters the place we have delivered 3% to five% natural development or higher in each single quarter. A part of that’s the composition of our classes. On a regular basis use classes, low personal label penetration, excessive model loyalty and emotional engagement within the classes through which we compete.

And also you see the truth that we have added nearly $1.5 billion of incremental gross sales during the last couple of years from $15.7 billion again in 2019, as much as $19.45 billion, so nearly $4 billion of incremental gross sales, so constant good high line development.

Importantly, the benefit that now we have is the good composition of our enterprise all over the world. We compete in 200 markets all over the world. We have a great composition of each creating and rising. Whereas creating might be fairly risky, we have got years of expertise coping with the volatility of rising markets and that continues to be a key driver of our development.

We stated 5 years in the past that we wanted to get again to fundamentals. We wanted to get again to the core merchandise that now we have that signify a major a part of our enterprise. We have to get again to our heritage of bringing nice science-based merchandise to the market, and ensure that we proceed to premiumize our portfolio.

So, let me begin with how we’re science to drive innovation and to drive development throughout our portfolio. MaxFresh, an enormous core enterprise for us all over the world, significantly an enormous enterprise in India. We developed new know-how that considerably enhanced contemporary breath.

Contemporary breath continues to be the primary cause customers purchase a toothpaste product, and we’ll ship nice science-based product in that market to drive incremental development, not solely in opposition to the multinationals in that market, however importantly, a number of the native manufacturers.

Complete, an enormous a part of our core enterprise. We’re very excited in regards to the launch of Plaque Launch. Once more, scientific breakthrough when it comes to our capability to take away plaque, one of many main causes of oral well being illness, and we’re launching that all over the world as we converse.

Premiumization. We talked about actually flexing our portfolio a few years in the past, taking a number of the premium manufacturers that now we have in different markets. On this case, the OMX model out of Europe and launching that in key markets internationally. This has been an actual incremental development for us. as we penetrated new channels that we traditionally weren’t very robust in, and our capability to carry science-based know-how into the market.

You’ll be able to see right here in Brazil with the launch of Elmex, the class — we grew the class 18%, and that was pushed by a 64% development of Elmex and now one of many fastest-growing manufacturers within the pharmacy channel in Brazil.

Probiotics, an vital perception that we’ll see throughout each oral care, private care and skincare, an attention-grabbing perception that our scientists have developed when it comes to our capability to essentially play into — how will we create higher micro organism within the mouth, higher micro organism within the pores and skin so as to create higher efficacy of our merchandise. That is the launch of prebiotic in China.

Lot of gum points all over the world. Customers first cause to assist their gum issues is to go to a softer toothbrush. We developed this unbelievable know-how and a brand new gum care skilled product. 6,000 bristles has an unbelievable cushion clear with a singular AFT know-how, once more, very clinically pushed and really scientific-based when it comes to how we’ll enhance gum well being and customers everywhere in the world.

Nice partnerships as effectively, a phase that we did not compete in 4 or 5 years in the past, our partnership with Philips, a number one, clearly, model within the electrical toothbrush phase. We have launched with a partnership in Latin America, achieved primary within the class in Mexico, and rising very, in a short time in Brazil as effectively.

So, once more, nice partnerships, actually partnering with main manufacturers within the phase and a number one Colgate model that individuals are very conversant in. The vital on this one is that we’re rising class {dollars} fairly considerably, and that, which suggests extra folks coming into the class.

Likewise, in Brazil, now we have a number one share in mouthwash. We have clearly continued to carry new know-how into the phase of mouthwash, which have been slightly bit sleepy. However that is our core model relaunch of Plax with higher odor elimination within the formulation, which has been terrific in that market.

Nearer to house right here in Hiya, one of many fastest-growing toothpaste available in the market, an acquisition we made just a few years again, is doing great available in the market, among the best velocity SKUs that now we have at the moment and a number of the key retailers shall be launching this quarter a brand new vitamin C innovation that gives whitening advantages within the class, and we’re very enthusiastic about how that brings incremental customers into our franchise.

All of us want slightly little bit of this, tightening our pores and skin and eliminating these wrinkles. It is a very, very superior clinically-driven PCA product that you simply see right here on the display screen, the Max Age Renewal serum. Very premium priced advocate by means of dermatologists and estheticians. And clearly, we expect we’ll see good outcomes from this as we carry the anti-aging into the portfolio of PCA.

Sanex, an enormous model. We do not speak loads about right here, however an enormous model in Europe for us, needing to ensure that we revitalize that enterprise. We have once more gotten into the aerospace of prebiotics and we expect we have got some nice innovation coming within the subsequent couple of months to carry incremental makes use of into the class as effectively.

Massive innovation, the primary of its form in France, a number one model within the material softener class is Soupline. We’ll be launching a unit dose in a market, a strong unit dose, which you see offers 72% much less plastic and also you get the identical quantity of softness and the identical quantity of perfume supply by means of the product. So, I believe a terrific innovation to drive incremental class {dollars}, which we see within the first three or 4 months of that launch already.

Fabuloso, one — a model we do not speak loads about, launched about 20 years in the past right here within the U.S., however a really, very huge model in Latin America, one of many main cleansing merchandise right here within the U.S. now. We’re persevering with to pay attention that complete line, which clearly offers enhanced advantages to us and improve advantages to the patron by means of improved efficacy and improved perfume.

Actually need innovation right here. For these of you with canine, you recognize that fur generally is a actual drawback in your clothes. We have launched a brand new distinctive for pet mother and father to repel pet hair. So, clearly, a great breakthrough, and we’re seeing nice trial and repeat on that as we launch that throughout the U.S. market.

And ending off with one other kind of innovation, which is how we have used our capital to essentially drive capability and adaptability to enter new development segments throughout the markets through which we compete.

That is all of the moist merchandise popping out of our Tonganoxie plant, which is our most refined plant on this planet right here in Kansas, and it is permitting us to essentially penetrate the moist phase with an entire assortment of several types of merchandise within the moist phase that we traditionally did not have prior to now. That is additionally going to permit us to extend shelf house and clearly compete in segments which can be quickly rising all over the world.

So, that is the innovation. I believe an entire relook at how we had been innovating throughout the market, ensuring that we weren’t solely centered on the massive core companies, however getting extra into the breakthrough within the transformational space.

After which we wanted to determine how we had been going to take these in a few of our classes and actually drive them with endorsements by means of the occupation so as to create the premium nature of our merchandise and the stickiness that we actually wanted.

And for us, it actually begins with the occupation in lots of our classes. A fantastic instance is oral care and whitening. You’ll be able to see right here Chair to Sink technique, the place we initially went very aggressively into the patron facet of the enterprise with an entire array of various superior whitening merchandise that we promote to retailers.

We then went into the direct-to-consumer space with out-of-home, with our whitening pens. After which importantly, we’re now going into the skilled phase with some excessive efficacy merchandise that shall be bought by means of the occupation. You’ll be able to see the wide selection of pricing that now we have throughout these three segments.

And that is driving market share for us. We have nice, nice incremental development on the whitening. That is the whitening share that you simply see right here during the last three years, and also you’re seeing that persistently all over the world as we standardize our method to rising whitening throughout all of our core markets. These are the highest eight markets in entrance of you.

Importantly, it isn’t solely taking the efficacy and the science to the patron. We have to ensure that we’re exhibiting up within the significance of our merchandise and conferences all over the world.

And I assumed I would showcase a Hill’s instance, I simply acquired again from Orlando a few months in the past, the place we had one of many largest pet convention conferences on this planet, 27,000 vet well being professionals attended this convention, an excellent alternative for us to showcase our science and our medical superiority within the space of vitamin. And I had the Hill senior staff in addition to stand with me.

Nice to see our manufacturers present up and nice to see the unbelievable ardour that the vet well being professionals have in the direction of the model and the prevalence that we proceed to ship in that phase.

We talked about onc care as a product for pets which can be affected by most cancers. Sadly, when pets endure from most cancers and the kind of prescribed drugs which can be prescribed actually lessens their urge for food. We have to discover methods to maintain the vitamin on the optimum ranges so as to have these medication take their — take probably the most impression when it comes to advantages.

We see this by means of onc care and a extremely an excellent story when it comes to how we’re seeing that drive incremental buy within the class in addition to incremental credibility with the occupation.

You bear in mind the story final yr, I hope, on Dave [indiscernible], our Head of R&D, at Hills and his canine who suffered from most cancers. Actually, we used Arlo right here as one of many preliminary trial canine in our most cancers — within the most cancers product. And I am completely satisfied to report that 9 years later, he continues to be a really wholesome and vibrant canine and positively onc care helped him cope with a number of the most cancers points that he was struggling when it comes to growing his urge for food and vitamin.

Elta, I began off with that purposely as a result of it is an important product. We now have the primary model really helpful by dermatologists. That continues to be a core technique for us to construct the attention of this product and drive trial and repeat throughout the market. We proceed to be very centered on opening up new doorways and getting that endorsement strengthened much more.

Okay. So, that is the innovation, that is skilled endorsement, after which the subsequent huge factor is clearly the communication of this nice science and getting the broad-based consciousness and the trial out of our merchandise all over the world.

Begin with promoting, and we stated 4 years in the past that we had been going to remain constant to our technique of deploying extra promoting across the market to drive constant high line development. You see the rise 10% to gross sales, and we anticipate that we’ll proceed to extend that each on the greenback and a % foundation in 2024.

That has pushed constant market share efficiency for the model, which is terrific. That is our world market share on toothpaste. However market share is just one dimension of trying on the well being of our manufacturers.

As we have talked about earlier than, it is actually about family penetration, which incorporates all channels. And as you recognize, as we have talked about earlier than, Colgate continues to be the primary model, most penetrated model on this planet of all CPG merchandise, so a place that we’re very, very happy with, and a place that we wish to proceed to develop.

We’re not solely robust in Oral Care, we clearly have power throughout the steadiness of our classes. As you see right here, now we have a primary and quantity two place throughout most of the classes through which we compete, and that provides us an excellent place to speak to the retailers when it comes to driving incremental class {dollars} throughout their companies.

On the finish, it actually comes right down to best-in-class advertising. You have acquired nice science, nice endorsement from the occupation, after which we have got to ship it by means of nice, best-in-class advertising.

And finally, we’re actually centered on getting the execution of our technique carried out in retailer in a really, very completely different manner. And I believe throughout COVID, we actually misplaced slightly little bit of that edge that we had traditionally in retailer. And this has actually been a aggressive benefit for Colgate is an space that we have actually stepped up our focus to make sure that we get the execution in retailer and you may see a number of the terrific work that we’re doing all over the world.

So, what I wish to go away you there when it comes to the essential tenets of our technique is that we’re very assured and the consistency of efficiency that we’re delivering within the market.

We’re assured in the truth that our capability to proceed to drive balanced development throughout each pricing and quantity and finally, ship a product that satisfies the patron and drives final market share for the enterprise.

I’ve talked about during the last 4 years, it’s not solely about getting the expansion mindset again within the firm, what’s vital is that we’re constructing capabilities each short-term and long-term.

Final three years, we have talked loads in regards to the capabilities that we’re constructing. And I am actually completely satisfied at the moment to speak about we’re not simply constructing these capabilities anymore, we’re actually scaling them, and we’re seeing the advantages of these capabilities coming by means of the P&L and the efficiency of the corporate.

So, let’s speak slightly bit about scaling these capabilities as we centered on the brand new ones that we relined to be choiceful of. We’ll speak about a type of in every in flip, and we wanted to make sure now we have the folks, the processes, and the incentives throughout the corporate to construct these capabilities. And as I discussed earlier, we’re actually happy that we’re ready the place we’re actually scaling them.

As you bear in mind, we had Pat Verduin are available and speak about innovation 4 years in the past now? Three, 4 years in the past. 4 years in the past. We then had Brigitte King come and speak about our digital transformation. You bear in mind Eve [ph] got here and talked about our advertising transformation, and I am happy to have Diana with us at the moment to speak about how we’re reworking information and analytics and scaling internet all over the world.

So, speak slightly bit about innovation transformation. A giant refocus for the corporate. We actually wanted to make sure that we stepped up our innovation, transfer away from the close-in line extensions to driving actual folks insight-based innovation that was going to drive incremental worth to the classes and to our enterprise.

And we did new incentives throughout the group. We offered new coaching throughout the group. We structured the group in a really completely different manner to make sure that we had been getting the give attention to innovation, and that has definitely paid out for us.

Then it was the communication of digital. We wanted to rework the corporate to grow to be a digital-first group. And Brigitte and her staff, we employed a major quantity of expertise from the surface to assist improve how we had been enthusiastic about it, offering the coaching and the processes throughout the group as effectively.

And also you see a number of the soundbites there that we have actually upped our sport within the digital house, and we proceed to seek out alternatives to drive elevated ROI with the spending that now we have within the market.

That is helped us drive our off-line development as effectively. That is our e-commerce year-after-year constant development there as a proportion of our complete gross sales now as much as about 15%. And I believe, once more, an attribute to the — testomony to the truth that we actually drove a consistency of function on digital and what we needed to perform and now actually transferring that into an omnichannel atmosphere and the advantages that we’re seeing each throughout brick-and-mortar and our off-line enterprise — our on-line enterprise, excuse me.

Advertising was the third, and Eve [ph] talked about that when it comes to how we’re enthusiastic about advertising, coaching our folks to get again to the core of what we actually do, which is creating nice persuasive content material within the markets, concentrating on that as we have to throughout the market and guaranteeing that we get the return on funding from all of the spend that we’re placing into the classes through which we compete.

So, with that, let me flip it over to Diana. She’s going to take you thru our information and analytics transformation and the way we’re scaling now all over the world. Diana?

Diana Schildhouse

Thanks, Noel. Good morning, everybody. So, it could go with out saying, however the final 5 years have seen each an explosion of information of every type in addition to developments in computing energy and know-how. This mix has meant that mastering information and analytics has grow to be a driver of development for the businesses which have leaned in right here.

And I used to be assured in regards to the alternative that we had at Colgate after I joined in 2021. We now have a confirmed monitor document of investing in and constructing strategic capabilities.

Colgate model is in additional houses than every other. So, there was alternative to drive scale at a very world stage, and Noel and the remainder of the staff believed within the energy of what information and analytics might do.

Analytics has developed considerably from what it used to signify to what it’s at the moment. It is gone from easy modeling in Excel spreadsheets of manually pulled scanner information to at the moment the place we’re bringing collectively many various information sources in a much more automated trend, and making use of much more superior methods like AI, machine studying and predictive and prescriptive analytics. It is action-oriented, it is forward-looking, and it is remodeled right into a driver of tangible enterprise worth.

And at Colgate, we have been accelerating when it comes to constructing this functionality. Two years in the past, we participated in BCG’s Knowledge & Analytics Benchmarking Survey, and we simply retook it once more a few months in the past to trace and measure our progress.

And now we have discovered that during the last two years, Colgate has superior extra shortly than our CPG friends in constructing this functionality. Particularly, our scores in areas like our use of AI and superior analytics, our use case execution, in addition to the extent to which we have pushed change administration and construct to information tradition have all seen vital jumps.

How did we do it? How have we superior so shortly in constructing this functionality in simply a few years? It began with creating a transparent enterprise-wide analytics technique with just a few key parts.

The primary is focus. Our method shouldn’t be tech-first or tech for tech’s sake. It’s tied to particular enterprise questions that we’re attempting to reply and precedence use instances the place we knew we might add probably the most impression.

Scale. Our options are constructed with world scalability in thoughts. They’re versatile, they’re adaptable, and so they’ve been examined throughout completely different market architypes, whether or not we’re analyzing Bodegas in Latin America or hypermarkets in APAC.

And at last, impression. We have embedded the self-discipline of measuring the worth that this analytics offers to the enterprise, each when it comes to high line development in addition to efficiencies.

I am going to stroll you thru two of our precedence analytics use instances, RGM or income development administration analytics in addition to media analytics to provide you a way of the way it’s come to life.

So, beginning with RGM. We now have constructed a full stack utility in-house with our personal proprietary algorithms, and we have scaled it to our high 30 markets globally. We have constructed predictive value elasticity and state of affairs planning in addition to promotion and assortment optimization capabilities.

It provides our groups a fast view into what’s working and what’s not in order that they are often way more exact and surgical about actions that they are taking at a SKU stage and a tactic stage.

And we have heard from our groups on the bottom simply how a lot worth they’re seeing out of this analytics each when it comes to servicing income alternatives, but in addition time saved that may be spent on really actioning the analytics and reacting extra shortly to modifications available in the market relatively than spending time on information preparation visualization.

You’ll be able to see right here just a few examples of how these analytics have come to life throughout three of our precedence markets lately, Brazil, Mexico, and the U.S., the place these analytics have recognized alternatives round pricing in addition to driving premiumization and commerce up.

Media is one other precedence analytics use case for us and an area that’s consistently altering. So, it is one through which we’re making use of next-generation approaches to ensure that we’re maintaining with that tempo of change. It spans instruments like advertising combine modeling, but in addition consists of retail media analytics, e-commerce, CRM, and first-party information analytics, in addition to Clear Rooms.

And we’re specializing in scale right here as effectively. So, we have scaled our media analytics throughout markets that signify greater than 85% of our gross sales globally. It is serving to our groups perceive what — the right way to set the optimum spend stage, the right way to optimize inside channels and levers, and the right way to attain our customers with the correct message on the proper time with personalised content material and precision concentrating on.

And now we have nice proof factors right here. We have seen constant double-digit ROI enchancment over the previous couple of years, each once we take a look at general media ROIs in addition to once we break it down by digital ROIs and conventional media ROIs. We’re driving elevated effectiveness and effectivity on the similar time that we’re growing our promoting spend.

Driving worth from analytics shouldn’t be potential with out clear high quality information, which is why reworking our information basis has been a key pillar of our analytics technique, and one which we proceed to put money into and give attention to. We have additionally unlocked new development alternatives by means of retailer information partnerships with one instance being the Clear Room that our Hill’s staff has constructed with a key specialty retail companion.

Clear Rooms permit us to carry collectively our first-party information, the retailer’s first-party information, in addition to extra third-party information, all in a protected and privateness compliant manner that allows joint worth creation with our retail companions. Right here, it is allowed our Hill’s staff to succeed in new audiences with personalised content material and precision concentrating on in addition to to drive elevated ROIs and family penetration.

We won’t speak about information and analytics transformation with out speaking about AI. And conventional AI or machine studying is strictly what has been powering the examples that I’ve proven. Our fashions and algorithms are in a position to run 1000’s of equations concurrently. So, it is work that simply merely wasn’t humanly potential earlier than.

Generative AI, then again, opens up a completely new set of alternatives for us. And now we have energetic initiatives underway in key strategic areas leveraging generative AI. And it is all of the work that we have accomplished, bringing in the correct expertise and upscaling the group in the previous couple of years that is ready us to reply as new applied sciences like gen AI emerge.

Driving a change of this kind is not only about tech. It is about folks. It is about making a tradition the place information is seen as a part of everybody’s job, not simply the analytics staff.

One of many ways in which we have constructed this tradition at Colgate is thru studying and upscaling. We partnered with our HR studying staff to create a bespoke Knowledge Literacy & Analytics Academy, with over 14,000 staff taking evaluation, taking curated programs that had been tailor-made to their perform and function and incomes badges, together with Noel himself.

Our folks have embraced the chance to study and upscale on this vital space, and we had been proud to be acknowledged with the Brandon Corridor Gold Award for this program.

So, we have made vital progress in constructing this functionality. However everybody who’s learn an article or two recently about gen AI is aware of that the information and analytics house doesn’t stand nonetheless. So, we’ll proceed to evolve and iterate on bringing next-generation approaches to bear and are leveraging and integrating AI in additional areas throughout our enterprise.

In the end, it is the work that we have accomplished prior to now two years to construct the strategic functionality that positions us effectively now to be agile and proceed driving the transformation.

I am going to hand again to Noel.

Noel Wallace

Thanks, Diana. What you did not inform you is how humbled I used to be after I took that take a look at realizing that I completely knew nothing about analytics and information. I had an excellent thought of how vital it was to the corporate, however definitely, getting that schooling throughout the corporate has been basic to us.

Okay. So, we opened up by speaking about ensuring that we had been deploying methods to drive constant high line development for the group. And that is actually about our development mindset that we have talked about for the final 4 years.

Then importantly, we wanted to determine how — as soon as we had that robust high line development that we felt was very sturdy, how will we get the leverage again into the P&L by means of our productiveness and effectivity applications, and that is what I wish to speak about now.

Our funding to development has all the time been a singular ability for the Colgate group, our capability to do it year-after-year drive funding alternatives to drive incremental margin and finally, fund our promoting.

And you’ll see after a major yr of inflation in 2022, we actually ramped up our funding and development efforts in 2023 and delivered a document efficiency for the enterprise. We anticipate this may normalize as we transfer ahead, significantly as we see prices begin to be extra benign within the present atmosphere.

And that has acquired us again to the leverage that we wanted when it comes to the gross margin within the P&L, driving constant margin development by means of the final couple of years, once more, by means of the aggressive pricing that we have taken, the premiumization of our portfolio by means of new innovation, and clearly, a number of the funding the expansion that I simply talked about. And we — as we talked about on the 2024 steering, or the 2024 outlook, we are going to proceed to see gross margin enlargement in 2024.

Our productiveness initiative, once more, well timed again in 2022 earlier than we noticed loads of the price inflation coming by means of the market when it comes to our personal packing supplies. We wanted to get the center of the P&L extra centered on getting price out.

We put a program collectively to ship $90 million to $110 million of incremental financial savings for the enterprise, and we’re effectively on monitor to ship that, which is able to — that program will end up in 2024.

And you’ll see the leverage that we put again into the P&L. And that is actually vital for the corporate, actually vital for us so as to give us much more flexibility when it comes to how we had been going to ship development in clearly a really risky atmosphere. We proceed to cut back our overheads as an space of alternative to ensure we’re working much more effectively and getting the price out of the system.

Okay. Let me transfer on to that. So, we have pushed the highest line, extra leverage within the P&L, which is driving extra earnings development, that earnings development with improved outlook on working capital. We actually needed to enhance our free money stream so as to ensure that we’re driving shareholder worth, each short-term and long-term for the enterprise. That was our Tonganoxie plant that I referred to upfront, our new state-of-the-art facility in Kansas, which is producing all of our moist meals now.

So, you’ll be able to see a number of the capital expenditures that we put — by placing that leverage within the P&L, getting the revenue up. It has allowed us to fund vital wanted capability investments all over the world, which drove our capital expenditures up in 2022. We noticed it come down barely in 2023, and we’ll see roughly the identical stage of lower in 2024. However once more, nice that we have got the money stream in place to proceed to take a position behind the enterprise and finally drive shareholder returns, as I am going to speak to in only a second.

Improved free money stream. So, this was once more an enormous focus. As you have heard from Stan a few instances. He walks across the firm with development margin money. That is his focus, and clearly, working with the group to get the working capital again to the place we might prefer to.

As soon as we had the earnings development mixed with higher working capital, you’ll be able to see the unbelievable energy that now we have to drive free money stream by means of the revenue assertion and finally up 63% in 2023.

And once more, that is allowed us to return cash to our shareholders, one thing that we’re very happy with. 61 consecutive years of dividend will increase, 129 years — consecutive years of paying a dividend. And along with shareholder repurchases, we have paid again $28 billion to our shareholders, which, once more, one thing we’re very, very happy with.

Okay. So, we have talked about all the expansion facets of the enterprise, after which we wanted to essentially determine the significance of sustainability and social impression within the markets the place we compete, however doing it in a manner that we felt was clearly not solely enhancing our environmental footprint and the social impression of our methods, however driving development for the group on the similar time.

I talked about our function. I began with that. So, we’re Colgate, carrying, modern development firm that is reimagining in all the things that we do a solution to create a more healthy future for folks, pets, and their planet. And this actually embraces all the things that we do at Colgate to make sure that we’re bringing a profit each to our shareholders, to the customers, and to the markets through which we compete.

Our sustainability and social impression is basically in three key areas. One, creating social impression within the markets the place we function, to drive development for the enterprise, and to enhance oral well being outcomes and different well being outcomes available in the market.

Serving to thousands and thousands of house. I discussed earlier upfront. We’re probably the most penetrated model on this planet. We had this unbelievable alternative to talk from that pedestal and speak to customers about enhancing oral well being, and finally, presuming our surroundings and hitting our environmental targets for 2025.

No higher solution to speak about our social impression program than in our Vivid Smiles and Vivid Future program, the place we have demonstrated our capability to teach the significance of oral well being everywhere in the world, significantly to decrease socioeconomic areas. We have hit 1.7 billion college students in that program in our solution to 2 billion college students by 2025 or 2026.

Likewise, on the Hill’s facet, we have — our Meals, Shelter, Love program, the place we have helped 14 million pets get adopted, finally, going house with a bag of Science Food plan, however once more, an vital space to proceed to enhance pet possession and getting folks began off with one of the best vitamin they will discover.

Colgate Complete, you bear in mind again in 2019, we took an initiative to launch the primary recyclable toothpaste tube within the class. We then shared that know-how internationally. And we’re proud that we now have transformed 60% of our toothpaste SKUs all over the world to the recyclable tube. And within the U.S. — right here within the U.S., we’re as much as 90% of our tubes throughout this market.

Importantly, we’re working with recyclable facilities all all over the world to enhance the scalability of this initiative and get the attention on the market that you need to recycle your toothpaste tube.

One other crucial initiative in our race to internet zero carbon by 2024. We have signed a Digital Energy Buy Settlement within the space of photo voltaic. And what that is going to permit us to do when accomplished to provide equal to 100% of our U.S.-based operational effectivity wants by means of that program. So, once more, a terrific manner to enhance upon the sustainability impression of our enterprise.

One other space that we’re deeply happy with is Colgate has extra zero waste crops than every other CPG on this planet, and this has been a concerted effort during the last three years to make sure that we’re manufacturing in probably the most environment friendly manner potential and doing what’s proper for the atmosphere long-term.

So, in abstract, well-positioned to proceed to drive development in 2024 and past. Plenty of modifications that we have carried out. We have discovered loads during the last three years when it comes to what’s labored, what hasn’t, and finally, that is creating sturdy high line development, getting the leverage again within the P&L, and driving constant efficiency from there.

We all know we have to drive balanced gross sales development. We’ll get again to that in 2024. We talked about that within the 2024 outlook. I talked in regards to the significance of not solely constructing the capabilities during the last couple of years, however scaling these in methods to drive effectivity and leverage and productiveness throughout the group and hopefully driving extra market share for the enterprise.

We all know and we’re very centered on driving constant compounded earnings share development. That’s what it is all about for us. That is throughout all classes and all divisions all over the world that contribute in the direction of that up and down the revenue assertion so as to get the leverage that we all know and finally discovering methods to drive free money stream, which we’re very assured we’ll have the ability to proceed to do to return cash to our shareholders and make investments again behind our enterprise.

So, with that, I am going to flip it over to the Q&A.

A – Unidentified Firm Consultant

Let’s go along with Bryan.

Q – Bryan Spillane

Thanks. Bryan Spillane from Financial institution of America. Diana, thanks for the presentation. My query is you talked about constructing proprietary database techniques. I am not precisely positive what the correct phrase is. However how versatile are they to vary upkeep. And I say that within the context of when relational databases hit the market years in the past, folks — loads of firms took the off-the-shelf options, personalized that had loads of problem sustaining them, altering the best way even change. So, simply as issues are transferring so shortly. Simply how briskly can instruments to kind of adapt?

A – Diana Schildhouse

On the analytics facet, the necessity for adaptation and alter is strictly why we selected to construct these instruments in-house. So, once we’ve checked out eager to, in fact, give attention to scalability, we had been in a position to — extra in a position to modify to the completely different market dynamics and dimensions if we have constructed these algorithms and codes in-house.

We nonetheless have companions that we work with when it comes to information platforms. However when it comes to the precise analytical fashions and the algorithms, we discovered that for our most vital areas, constructing these in-house with our personal staff of specialists provides us that flexibility to have the ability to scale extra simply than an off-the-shelf answer.

A – Noel Wallace

I’d merely add to that, that recognizing the significance of that, we did not have the ability set contained in the group. And whereas Diana talked in regards to the coaching applications that we have carried out throughout the group, we introduced in near about 150, 160 folks throughout the final couple of years to really elevate our capabilities, information scientists, information engineers to make sure that we’re effectively geared up to place ourselves to scale and drive that effectivity transferring ahead.

We may have some in-house developed instruments to make sure, however we’re definitely working with a few of our key companions all over the world to make sure that we get merchandise that maybe can drive extra scalability.

The secret’s scale. What we do not wish to do is be placing locations which can be distinctive to sure markets. And Diana and the staff have been very deliberate working with our IT of us and our tech stacks to make sure that what we do, we will then roll out internationally as a result of in any other case, we’ll by no means get the efficiencies.

A – Unidentified Firm Consultant

Dara?

Q – Dara Mohsenian

Diana, are you able to speak about the way you’re bringing AI and tech basically to your innovation course of and driving enhancements there?

And Noel you talked about the robust efficiency in market share in tempo all over the world. Worldwide, you have had loads of success within the final couple of years. Are you able to speak about sustainability of that? However North America has lagged a bit, so possibly you can provide us a evaluate on the way you drive enhancements there?

A – Diana Schildhouse

Begin with innovation? Sure, so, innovation is one other crucial use case for us when it comes to the applying of AI. So, when it comes to conventional AI and machine studying, we have already constructed instruments and options that assist us to foretell client habits and elements that could be trending for instance, that can be utilized in our improvements.

Generative AI can also be one other huge alternative for us in innovation. So, I discussed that now we have some energetic initiatives underway there. We see that as a device that may assist our groups to maneuver way more shortly by means of the innovation course of.

What we’re constructing proper now, once more, internally, will permit us to provide ideas which can be based mostly on our personal proprietary client insights in addition to any extra insights and simply transfer by means of that course of way more quickly after which take a look at them with digital client twins.

So, it hastens your complete means of conceptualizing new innovation and bringing it to market. So, that is an space the place we’re focusing proper now for gen AI particularly for innovation.

A – Noel Wallace

The opposite half I would add on innovation is on the R&D facet. We’re clearly trying on the wealth and plethora of historical past that now we have on medical trials, and ensuring that we perceive the composition of these formulation and the compounds that we have used so as to be — to get the predictability of the end result extra correct transferring ahead, which is able to reduce the time it takes in R&D, likewise, to finally getting new merchandise to the market.

So, Dara in your second query, the sturdiness of our worldwide share of development after which a query on North America is that North America scanner information there? So, sturdiness of our enterprise. Clearly, loads of the methods that now we have put in place are supposed to create that sturdiness. And I believe you have seen that when it comes to the highest line efficiency.

We wanted to get the gross sales development within the P&L. In the end, the gross sales development would drive, clearly, the share development and the penetration. We reoriented the group much more round model penetration throughout the corporate as a result of finally, we expect that’s the finest barometer to find out, are we getting our merchandise into extra houses. Not essentially is it transferring out of the storage quick as a result of loads of the Nielsen information that now we have all over the world doesn’t clearly embody the complete market. So, BAM penetration is tremendously vital. We see the expansion of that.

The sturdiness goes to come back from the innovation methods that I talked about. In the end, our capability to proceed to drive pricing in markets, our capability to proceed to maximise the effectiveness of our promoting spending that you simply noticed. So, I believe the sturdiness is there.

We really feel actually good in regards to the methods. As an example, I talked about Elmex utilizing the wealth of our portfolio all over the world to go after sure markets the place we have got very low shares within the pharmacy class of commerce, deploying extra of our share development in e-commerce, which is rising very quickly, significantly in Asia, the place our shares are under-indexed in that base. So, there’s loads of upside potential to drive that sturdiness. Hill’s, likewise, our penetration may be very low within the class.

On the U.S., a really difficult marketplace for us. We have talked about that traditionally. And we see the enterprise beginning to inflect positively. The vital a part of the technique during the last two years in North America get the center of the P&L fastened so we will reinvest behind the enterprise.

And that is precisely what we’re doing. We have robust manufacturers. We wanted to get the funding posture again into the U.S. P&L so as to ensure that we’re driving model consciousness and share development, get the innovation coming available in the market, which is beginning to gasoline that development.

So, we be ok with the place we’re. However the U.S. continues to be a piece in course of, and we’ll proceed to give attention to that vital market, however we really feel we have got a significantly better place to develop that enterprise as we transfer ahead, given the place the center of the P&L is and a number of the share development that we have seen lately in a few of these enterprise.

A – Unidentified Firm Consultant

Dara, if I can simply add one level on that, in the marketplace share piece. Latin America, proper? So, Latin America is our largest division when it comes to gross sales and income. And we acquired 75% market share.

So, the momentum now we have in Latin America, you drive that market, you achieve share in these markets. It should develop sooner and likewise the shortage of unfavorable foreign money impression exterior of Argentina, the currencies have been way more steady, that is an enormous — that is actually benefiting that world market share quantity as a result of the true power of the Latin American enterprise actually will get performed out within the world share. Chris?

Q – Chris Carey

Chris Carey, Wells Fargo. So, Diana, you talked a few partnership with a specialty retailer for this Clear Room. I am not precisely positive what that’s, however it sounds attention-grabbing and thrilling.

So, — however it’s round exact — you are concentrating on. So, I ponder how that happened? Was that retailer-driven? Was that out of your finish? I suppose the rationale I ask is, clearly, it is a channel that is been below stress. Hill’s talks about having a really lengthy runway for penetration regardless of possibly a number of the class dynamics in pet meals. So, possibly simply any extra context on how they happened, and the way you suppose which may differentiate your product to realize market share in that channel?

A – Diana Schildhouse

Positive. I can talk about the way it happened after which, Noel, if you wish to add any extra on Hills. So, there are several types of Clear Rooms. Some are retailer-driven. This one really was proactively initiated by our Hill’s staff with the specialty retail companion.

So, it is — it allowed us — it allowed the staff to construct it in a extra kind of customized manner that enabled us to work along with them to share this information. A Clear Room is simply kind of a mechanism for sharing first-party information in an anonymized manner that lets you do media concentrating on and different capabilities. So, this was proactively — now we have proactively approached the retailer to create this one.

A – Noel Wallace

We now have felt traditionally that partnering with our retailers so as to create belief and credibility when it comes to our capability to entry their information and use that to drive class development may be very, crucial to us.

So, take Luminate information with Walmart for example. I used to be simply down with a number of the senior staff at Walmart, and so they talked about Colgate being best-in-class and using take Luminate information to drive incremental class development.

And these Clear Rooms actually open up an enormous alternative to create personalised information from the retailer and from us and create very particular content material developed execution so as to drive incremental velocity of their shops.

A – Unidentified Firm Consultant

Andrea?

Q – Andrea Teixeira

Andrea Teixeira, JPMorgan. So, I needed to return, Diana, to what you stated about AI, now in additional form of trying into the professionals as a result of I noticed within the presentation, you focus your whole focus extra on the dermatology facet, additionally probably extra into the vet.

So, are you able to touch upon how your placing that or that is extra of a second by-product of that progress. You had been focusing extra on the ultimate client after which with the client if you’re with the ability to now have interaction with the healthcare professionals.

After which if I can borrow the touch upon share to speak in regards to the traits in Hill’s?

A – Diana Schildhouse

Sure, the preliminary focus was first on RGM, income development administration, analytics and media. As I discussed, once we set the technique, we needed to be very centered on out an entire use case, kind of from starting to finish and exhibiting that worth from it.

So, the preliminary focus was there, nonetheless, we’re making use of AI and superior analytics for the occupation as effectively. Some examples of labor that is underway is AI instruments which can be serving to our gross sales groups perceive one of the best route to go to, for instance, vets on and the right way to — what merchandise to debate with them. So, there’s loads of capabilities and potential there as effectively that we see for the occupation.

A – Noel Wallace

Your second query was on Hill’s share?

Q – Andrea Teixeira

[indiscernible]

A – Noel Wallace

Proper, we do not publish world shares and it is robust to clearly learn them. However clearly, within the U.S., as we have mentioned many instances, we proceed to drive incremental share development price nearly persistently throughout all channels.

Our share continues to be low relative to the place we expect it may be given the low model consciousness that now we have within the class and the low penetration that now we have within the class. So, that is what’s so thrilling in regards to the enterprise alternatives that we see on the Hill’s enterprise, our capability to proceed to drive incremental share by means of model penetration and clearly, proceed to broaden the presence of the model in segments that we’re not at present competing in very aggressively like vet.

So, the promoting has been basic in driving that and why we have allotted such an incremental sum of money into the Hill’s enterprise as a result of we actually be ok with the enterprise mannequin that now we have, each when it comes to driving vet endorsements, translating that to premiumization of the class, after which driving incremental share within the classes and the segments through which we compete.

Q – Peter Grom

Sure. Peter Grom from UBS. So, I needed to follow-up on Latin America. John, to your level, the momentum there may be very robust. Are you able to possibly simply converse to the sustainability of that momentum. You outlined loads of innovation in Brazil this morning. So, simply your head, I would be curious to get your ideas on the way you see class development evolving, but in addition particularly your capability to proceed to outperform?

A – Noel Wallace

Sure. It is significantly thrilling about Latin America as we had been first to essentially lead with pricing in these classes once we noticed the numerous inflationary environments that we had been coping with. And as we talked about on the fourth quarter name, now we have seen quantity come again into the classes, and we have seen constant quantity come again into our enterprise.

And that is been coupled with, clearly, the innovation that we put into the market, the acceleration of the promoting that now we have within the P&L in that enterprise. and clearly, our capability to proceed to drive strength-to-strength with the good shares that now we have there.

So, we really feel superb in regards to the sturdiness. We have been in these markets for 80 to 90 years. extremely skilled groups on the bottom that know the right way to cope with the volatility, however know the right way to execute terribly effectively when it comes to the present atmosphere.

And a number of the methods that we’re deploying round premiumization have all the time performed — will play very, very favorably in Latin America as we see a number of the vitality of these classes come again. And people actually are — it places us ready to not solely drive each premiumization, however to drive continued quantity development as we take a look at alternatives to drive consumption — per capita consumption.

Query-and-Reply Session

Finish of Q&A

Okay. With that, we’ll — we’re out of time. So, we’ll transfer to the breakout, and once more, thanks Colgate for breakfast and the presentation.