Colgate-Palmolive Company (CL) Earnings Call Transcript & Summary

Okay. Welcome back. Thanks, everybody, and thanks, especially to the Colgate Company, who we're thrilled to have back, especially thrilled to have back Noel Wallace, Chairman, President and Chief Executive Officer of the company. And we're going to use the entirety of our time for Q&A. So thank you, Noel, for joining us.

Pleasure.

We'll just jump right in. So I'm going to start, the way I've started a lot of these conversations, with just sort of the environment that we're all finding ourselves in. Very eventful start to 2025, lots of different competing pressures essentially on both the consumer and really your retail partners, especially in the U.S. Maybe we start there, just talk about your assessment of the consumer broadly and how recent dynamics have impacted your categories?

Yes. We came into '25 expecting to see a slowdown. Obviously, a lot of inflationary pricing in '24 -- '23 and '24, strong volume growth in the back half of '24, so we've had some tough comparisons moving ahead into '25. So the full expectation thing will slow down. I mean what's changed that is, I think, a much more pensive consumer. And I think you've heard it consistently throughout the week that the consumer is a bit uncertain and as a result, being more cautionary in their purchase patterns. And as a result, we're seeing slowdown in the categories. If I move around the world, I mean, obviously, the U.S., we talked about it on the call, we had -- just in context for those of you who didn't hear what I explained, 12 categories down in February. We had about half those categories improve in March, half go the other way; and in April, everything got a little bit better. And I would say, consistently, we're seeing a little bit of slight progression in the categories that we saw from the beginning of the year. But you can just see the volatility and the movements that we're seeing based on what I would consider a consumer that's very cautious on their purchasing patterns. As we go around the world, Europe is still doing okay. I've been with the Western Europe team. I was with our Europe division this past week. And overall, we're seeing, obviously, a little less pricing in the category, but we're seeing great share growth in perhaps a more muted category, volume starting to come back into the categories, which is nice. So overall, I would say, pretty good. Latin America, in general, pretty consistent with what I talked about on the call. Mexico has gotten a little bit better. Brazil, perhaps a little bit softer. But overall, pretty consistent, not significant moves. Asia, maybe a tale of 2 stories there. India, a little bit of slowdown in the urban market, pickup in the rural market. China is still kind of moving sideways, up and down, and not really seeing more stickiness in terms of where the categories are going there. And obviously, that's a bit concerning in terms of predictability of where China will go, but not a big business for us, but we watch it very, very closely. Africa doing quite well, doing better than we had -- we saw in the first quarter. So overall, some pretty good signs coming out of Africa. And did I leave anyone? And the Hill's business in a muted category, executing extraordinarily well, growing market share in every single segment in which we compete and driving some pricing in the category as well. So overall, a mixed bag, a consumer that's cautious. But a reminder, we compete in nondiscretionary categories. And as a result, we fully expect the categories to improve as we move through the back half of the year. Things just need to settle down a bit. I mean all the noise that you're hearing in the market has created a consumer that's going to be more discretionary on the purchases.

Yes. What about from a retailer perspective? I think most of the controversy has been around the U.S. and retail inventory levels. We've heard this week some companies that seemingly avoided destocking in the March quarter are now seeing it in the June quarter. Others have said it's better. Others have said it's continued. Where do you stand in the U.S.? And then is there any other dynamics around the world to think about?

Yes. We haven't seen a major move on trade inventory levels. Again, trade inventory levels are a function of a couple of things. I imagine they're managing their working capital very carefully based on where their input costs are coming from. And as a result, they're very cautious. They've been in categories where they feel they can squeeze a little bit back, they may do so. In categories where we're seeing consumer destocking, i.e., consumers perhaps not buying 3 bottles of distillate where they're buying one. As a result, when they see the category slow down, they'll take inventories down as a consequence of that. But overall, we haven't seen a dramatic impact on our business. And that's to say that, that could happen certainly in the back half of the year based on the economic and political environment that unfolds. Around the world, pretty consistent with that. I mean I would say internationally, I generalize, given we operate in markets around the world that we've seen a general improvement in the retail environments around the world. We've seen constructive promotion environments. We've seen at least the buyers very focused on growth and innovation and growth in value, and we're delivering against that. So U.S., a little bit more cautious, where international perhaps closer to what I would consider normal.

Okay. And as you net it all out globally, just in terms of your scorecard from a market share perspective. You mentioned Western Europe as a point of strength in general, satisfaction with market share trends?

Very satisfied. I mean when you go back to where we were in 2019 and really getting an inflection back on the top line of the business, that's translated into brand penetration, which is everything for us; translated into obviously increased market shares on our Oral Care business. We've seen a little bit of mix change. Obviously, our very high shares in Latin America. You've seen the dollar improve; most recently, obviously not, but historically, over the last 6 to 9 months strengthened. We've seen the mix effect a little bit in our market shares, but our volume shares and penetration continue to be very, very strong across the world.

Good. And tariffs, another big topic. Less so the -- well, I guess, most of this is the dynamic and the ever-changing assortment of tariffs and kind of the moving target. I guess remind us of sort of your direct-indirect exposures in terms of -- from an import-export perspective and then how you're managing through this volatility?

Yes. A lot of moving parts to tariffs, I'm sure, as all of you well know. And we were quite clear to try to get out in front of that as quickly as we could in the quarter earnings release. And we announced the impact of tariffs that were implemented and announced as of April '24, and we've stayed very true to that number. We'll see where things ultimately unfold. There's been some puts and some takes to that, but we're holding to that. What's interesting is not dissimilar to what we -- what happened during COVID, we've really taken the opportunity to continue to optimize a highly efficient global supply chain and find ways to make that supply chain more efficient. And we operate on what we call a net corporate benefit, and we look for opportunities to move production around from one site to another based on the net corporate benefit to the company, and we've built a lot more agility and flexibility. There are some longer-term implications that we will consider and be very thoughtful of once we see a real clear line of sight on where things will ultimately settle out. But right now, we're simply trying to manage some of the uncertainties and handling that, I think, quite well. Productivity, we've stepped up within both the manufacturing space as well as our funding the growth initiatives. We're looking at more efficiencies across the P&L. So we're doing the best job to offset that. We -- as you know, in our quarter update, we provided continued dollar-based earnings growth despite the tariff, despite foreign exchange because we think we've got a good line of sight to the predictability of that.

Yes. If we -- kind of stepping out or stepping back, I think you talked about this at CAGNY, your strategy has been working to deliver consistent top line and bottom line compound growth, and that's the objective. What would you -- how would you articulate the key building blocks of that strategy? And I'm assuming it is, but why do you feel it is so well suited or especially well suited for the current environment?

Yes. I just had some discussions earlier this morning on really kind of reframing some of the really transformative changes we made at the company back in 2019, and that was coming off a period of basically no growth on the top line. We were a $15 billion company. Market shares were stagnant or in decline, innovation wasn't performing and we really had to get a growth mindset back into the organization. So we put together a '25 strategic plan that gave us a clear line of sight on the opportunities that we had to drive growth. We were much more selective and choiceful on where that growth was going to come from, much more deliberate in the category composition of where that growth was going to come from. And we unlocked opportunities that were very different for us in terms of our go-to-market. So case in point on Oral Care would be we really were leveraging the multiple equities we had in the world versus just Colgate. We tried to make Colgate work for everything in the world, and we found that in places like Europe, unlocking elmex and meridol were a huge growth potential. We've taken those into certain markets around the world. Hello in the U.S., a huge growth opportunity. We very much focused on the pet nutrition industry. We felt that was a business that we could truly win in based on the strength of our brand. We put advertising, significant innovation, improved our supply chain. That's unlocked a lot of top line growth as well as operating margin. And we got the organization focused on really understanding where innovation needed to go. And we uplifted our resources and innovation, focused on the core businesses. The composition of our categories where we compete and we have very strong shares. The big part of that is core, and we weren't renovating the core business nearly as frequently as we needed to, more resources in R&D. And then while we built the gross margin back in the P&L and grow the top line, what that afforded us was the opportunity to really build capabilities that we saw were going to be absolutely necessary for the long-term health of the company. And it was all about building durable, sustainable top line growth and capabilities that we think are going to help us grow faster in the long term despite the volatility that we see in the world. So digital capabilities, data capabilities, AI capabilities, science and innovation capabilities. And the strength of the P&L and the flex that we had in the P&L afforded us the opportunity to build all those. So as the markets start to slow, we're not having to spend additional money to catch up to those capabilities today. We have those capabilities well entrenched. We've got more to do to be sure. But the good news is we've had the ability to kind of get ahead of the curve, so to speak. And as I often say internally, get back on our front foot. And we were on our back foot and we needed to really think about the future rather than the quarter, and that's where we built the plans against.

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

The key headwind we faced back in 2018 and '19 is we just weren't growing the top line. And as all of you well can understand, if you're not growing your top line, it's very difficult to get leverage through your P&L. And the sustained growth that we've had and in some respects, peer-leading growth in the top, particularly on an organic basis, has afforded us the opportunity to make a lot of strategic choices within the middle of our P&L. And when you make those strategic choices on how you want to grow margin, where you want to invest, the categories you want to emphasize, the capabilities you want to build, that's building long-term health for your business. And where we're not reacting to how do we deliver a quarter, we're thinking about where do we want to be 2 to 3 years out. So we developed a '25 plan that really helped guide the organization on very specific choices that we needed to make as an organization. You have 34,000 people working in 200 markets around the world. The biggest challenge a leader like myself has is ensuring they're aligned behind the growth opportunities that we have. They may see a local opportunity, but we need to fully exploit the leverage and the scale that we have as an organization by going after global opportunities. And that's what the '25 strategy did and helped us accelerate it. We're going to California in a couple of weeks to launch our 2030 strategy. And it's a wonderful position to be in where you're not saying, okay, here's a new strategy for the company. It's taking what we know we do well, what we didn't do well in the '25 plan and now building from that in terms of the capabilities that are well on their way to hopefully unlock continued predictable growth for the company.

Are there things that you feel you didn't do well in the '25 strategy? And what would they be? And what are your early thoughts on how to course-correct?

Yes. We put a lot of -- at least some of the feedback that we've received from our employees is a lot of change. And change is never easy for an organization, and I think cultures adapt and weather the change as effective as the people feel engaged in that change. And we've done a great job in getting the organization to see where we want to take the company and that change has happened. But there are areas where I think we can do better. Innovation is one. We've really stepped up innovation, but I wholeheartedly believe that we have a lot more to do there on getting the innovation to be more insight-based, getting the innovation to be more premium. We still, consistently around the world, despite the strength of our business, under-index in the super premium side of the market and that's what's driving a lot of the category growth. So we need to bring true science-based perceivable superior products into the market, and we're very focused on doing that not only from a science basis, but also from an advocacy basis in terms of how we get our partners in that space along with us, whether it be the profession or key opinion leaders.

Okay. Yes. So go back to what -- I tried to ask this question, I think I might have made it unclear. But just you've spent -- you've rebuilt the middle of the P&L from an A&P perspective. I think when people hear it flex the P&L and we're worried about top line headwinds, and that means protect the bottom line and flex the P&L by potentially pulling back on demand building expense, including A&P, which I think gets people nervous in the extreme. How do you think about that? Is that a point of flex with A&P in the P&L? And how do you reassure people that you won't overflex it?

We have spent a considerable amount of time, obviously, building the advertising line in the P&L, and that has been a key driver of our top line growth. I think there are other aspects that have really helped top line, the choices, the strategy, obviously, the execution against the fundamentals. But certainly, in our business, advertising is very important. We needed to build the advertising line to build back the health of our brands. Our brands have deteriorated, particularly as we moved away from the core. And I can confidently sit here and say that over the last 3 years, the amount of advertising we put behind the business has absolutely improved the health of our businesses. So they're in a much better place than they were 5 years ago. I mentioned the capabilities earlier that we had the leverage in the P&L to invest in capabilities, whether it's at the margin line or the NBO line. Those capabilities have now made us much, much smarter in how we think about our media allocation. So we were having discussion with Western Europe that despite in a certain market, they have held advertising, their ROI is up 15% on their advertising. So arguably, you get the same impressions by spending 15% less. So we -- in a market like we're operating in today where we've seen a slowdown in certain categories, by all means we're going to be cautionary to ensure we're driving top line growth and return for our shareholders. So yes, advertising can be a lever in that. We will decide that lever based on the effectiveness that we have in the market and the return on the investment that we're seeing based on the category growth aspects that we have. So my sense is we have other aspects. The other one I would talk about lever in the P&L is the margin. Our business has great gross margins, and we've done a really good job in getting the gross profit back to peer-leading levels. The Hill's margin and operating margins have come back to really, really strong levels. Having high margins is great in fast-growing categories. It's even better when the categories have slowed because you're generating still good operating dollar leverage in the P&L. So we feel good about where we are in the constructs of the P&L. We'll see where things unfold. But the strength of the equities and the investment that we put in, that is the single most important thing to take pricing in the market. If you want to take pricing, your business has to be strong and the investment that we put behind both the Colgate side of the business and the Hill's business would indicate that.

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

Yes. One of the more significant changes we made going into the '25 strategy is we made our IT organization part of the growth strategy. They were a cost center before. We're obviously at the forefront of SAP. We've got great tech stacks across the company and enterprise systems to use via our partnership with SAP. But we weren't using technology as a growth facilitator for the organization. And so what we've done is we've evolved them into an important part of the growth pillars of our organization by ensuring that we're developing tech stacks that make our people smarter and faster in the decisions they make. So SAP, we're going to S4. That will be one system around the world. We're now going to structure all of our data around the world so we can now use AI on top of that data architecture that we have. That's going to unlock significant learning and much faster execution. We've invested in capabilities, digital capabilities with -- internally with our media partners. We've gone to programmatic buying across the Board. We've really moved the organization digitally as assessed by external partners on how we're doing. We've moved up to, I would say, in the top tier, more work to do, but we're certainly making great advancements. We're moving to much personalized marketing back to the ROI nature of how we think about our media spending. And AI now is just a truly exciting aspect for us. We've talked about it back in CAGNY. We've been investing in it for a couple of years, and we think we're very much at the forefront of this. The biggest excitement for me is making our people more effective. And yes, everyone wants to see where is the cost savings, where is the cost savings and efficiency? The real efficiency to be gained in the short term is making our people a lot smarter and faster in what they do, letting our people build their own agents to manage their work and do it more effectively. And the creativity that we're seeing coming from our organization in this space is daunting. I mean they're finding much better ways to run their businesses, to get insights out of their business quicker and make decisions. And I think that's personally the biggest unlock we're going to see in the next year. No question, we'll find business cases to drive productivity in the R&D space, which we're working on with digital twins in the manufacturing space, which we'll work on. A lot of excitement there, but the power of making someone a lot more effective in their day-to-day is going to be, I think, the most exciting piece to watch.

How pervasive is that like across the organization, across the thousands of people who work for Colgate? Is it early innings or is it -- are you at the point where you feel like you have amassed scale...

We made a big strategic bet 2 years ago on this. We have trained every single one of our S&C employees in the company on AI. We now have 3,000 people in the company that we would consider subject-matter experts on AI. So they're building use cases for the organization to share best practices across 34,000 people around the world. And this is where the real unlock is that we got ahead of it early back to building flexibility in the P&L. So we're not having to play catch up. We played catch-up in the digital transformation back in 2019. We were behind. And we realized that we were going to have to bring an outside expertise in to really help catapult us into a better position. That was a lot of work, but we got there. AI would be -- we've learned from that. We got ahead of it very, very quickly. We're very thoughtful on where we think we're going to get the best return on our investment. A lot of shiny objects out there, but we're very pragmatic on how we want to think about the spend.

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

Yes. Listen, the updated guidance we provided, certainly, if you run the math, there's some improvement there. Is it significant improvement? No, it's not in the categories. The categories don't have to significantly improve in order for us to achieve that. They need to at least modestly improve versus where they were in a very disruptive first quarter. So we feel good about, particularly given our global footprint and the fact that the international business seems to be a little bit more vibrant than we've seen, particularly in the U.S. market. That combined with strong market share, strong innovation, great RGM, we feel pretty good that we're going to be able to get a combination of volume and pricing acceleration as we move through the back half of the year. My feeling is, where I sit today, we've got a pretty good line of sight of that. But things are very volatile in the world right now, as everyone knows, and we'll watch it very carefully, but we're pretty confident.

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

Yes. We've taken a major global relaunch of Colgate Total back to the premiumization. We've taken significant pricing on that business and early days is market shares are holding and growing across -- in general, across the Board. So we're very excited about that. The Hill's business has launched an entirely new equity campaign in 80 countries around the world. The early signs on that are outstanding. We've got a great innovation pipeline coming behind that. So across some of our Fabric Care and Personal Care businesses, the Sanex business in Europe, we've got some great relaunches on that business that are doing very, very well. So overall, innovation doing well. But the single biggest opportunity we have is still mix opportunity in driving premiumization, and we'll be very focused on leveraging our portfolio systematically around the world in that regard.

Maybe you mentioned strength in Europe. Your business has exhibited strength in Europe, and it's seemingly exhibiting strength in Europe for longer than some other companies. To what do you attribute the success? How sustainable do you see it? And are there learnings that you can take from Europe to other markets?

Yes. First, we've got a great team. Anne-Sophie is here, who runs our Western Europe organization and doing some terrific work with her team. But across the Board, it's a consistent deployment of a strategy. And I come back and I realize this sounds somewhat elementary to some of you, but if you're not consistently utilizing the resources you have on the ground against the key growth choices that you've made, you'll get inefficiency and disparity in terms of execution. We know what we're trying to accomplish. We know the premium opportunities we have in the categories, and we're consistently going after those. The pricing that we've been able to achieve in Europe versus a decade of negative pricing clearly indicates what's possible. We have really stepped up our innovation and renovation strategies to get more pricing in the category. And that's not only helping category growth for our retailers, but helping obviously our market share growth. Our Oral Care market share is at a record level. And again, I talked about flexing the portfolio a lot more in Europe, our elmex and meridol brands driving significant growth, Colgate brands growing as well. And when you have the two working in combination, you can do a lot of special things with the trade to drive more category health longer term. So we feel the pricing mechanisms and discipline that we have in place, but it's all anchored against the consistent strategy that we're trying to execute around the world.

Okay. At CAGNY, Prabha highlighted India as a key market opportunity, which obviously is operated by an independent company in India. But just how do you frame the outlook there for your business, both near term and long term? And where does India rank in terms of the growth drivers of the company over the next -- in the 2030 strategy that you're putting together?

Yes. Depending on what you read, India will produce probably the biggest contribution to the middle class society in the world over the next decade. And middle class is everything to our businesses. That drives premiumization, that drives penetration in the categories, that drives per capita consumption. And so we -- long term, we're very bold on India. We've got a fantastic business there. Obviously, we've seen some slowdown in the urban markets as of late, but the rural market seems to be performing well. You've obviously met Prabha. We have an outstanding team on the ground that's very digitally forward, thinking about where the future is going in that market in terms of both our distribution mechanisms as well as our marketing mechanisms, and we think executing very, very well. We've seen a little bit of slowdown, as I mentioned, in the urban. But long term, a huge middle class opportunity. We're well positioned to go after that. And I think we've got some very clear strategies in place on the ground to deliver on that. We're going to see -- it's going to move up and down, I'm sure, sideways, but long term, how we think about that business, it's a top priority for us.

Okay. You mentioned -- you talked -- kind of implicitly talking a lot about Oral Care. You mentioned a couple of times, Hill's favorably. Maybe kind of focus there. How would you assess current momentum in Hill's? The Pet category more broadly has slowed. Hill's has, to my eye, kept pace ahead of that category, but it's not -- it's facing similar dynamics. So your summation of Hill's performance today and maybe an update as to how you -- where you are in the migration away from private label in that business?

Yes. My overall assessment is excellent. I mean the business is performing tremendously well up and down the P&L, you see all the KPIs moving in the right direction. But I think most importantly is the brand health is as strong as we've ever seen it. And I think that's a reflection of the advertising investment, our continued strong participation with the veterinary community and partnering with them on driving nutritional -- positive nutritional outcomes for pet owners. And that partnership is obviously elevating the brand and its resonance with consumers. The segments, while the category has slowed in the first quarter, Hill's grew in every single segment that we compete, grew market share. And I don't think there's another major global player out there that did that. And again, science still is highly relevant to the category. Our Prescription Diet business, which is obviously providing a therapeutic benefit to pet owners in terms of sick pets, is driving a lot of that growth, that is wonderful for the brand and the equity long term. The supply chain acquisitions that we made, that has unlocked a significant amount of efficiency. You've seen obviously the operating leverage and margins improve dramatically in that P&L. While the category has slowed, Hill's is still low brand awareness and low brand penetration. So we still think there's a lot of growth. The segments that we're focused on and the emerging segments in the market, we're under-index in all of them. So we see real growth opportunities there. And the innovation pipeline is terrific. Big market is the U.S. We will remain very focused on that market. But obviously, international continues to afford us nice growth opportunities in time. We're going to be selective. That brand has a very regimented approach to how it goes to market. It's not a traditional mass market brand. We sell in very select distribution channels, and we build the brand from the profession up, similar to what we do with elmex here in Europe. And that model has worked very effectively in driving premiumization, pricing and loyalty to the brand.

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

We're kind of reaching the tail end of it. We'll have -- we talked about a slightly more significant impact in the second quarter than we had in the first quarter, but I would anticipate by the beginning of the fourth quarter, we will be fully out of private label. We make basically no margin on private label. So while it's absorbing some overheads, we have found ways to potentially mitigate that overhead absorption in other areas. And so we will have an accretive aspect of the margin and using that manufacturing capacity to build obviously much more profitable growth. But the biggest unlock, I think, is the network optimization in our supply chain. And while we were limited in '23 and '24 due to supply chain constraints, while there's a short-term impact, obviously, on your top line, the longer-term impact is you're not able to put the portfolio assortment into the trade and you're not able to provide innovation on a very consistent basis. That is behind us now. That supply chain is unlocking real efficiencies, thinking about how to continue to optimize productivity as it moves through there, while also bringing a lot more innovation and Funding-the-Growth into the business. And I think I'd mentioned we couldn't run any of our Funding-the-Growth projects in '23 and into the first part of '24 because we were at capacity. And when you're not running -- when you're running at 90% utilization, you just have no time to shut those lines down to do anything. Now we're able to be much more thoughtful how we think about the long-term aspects of the category.

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

Yes. Great brand, Prime100. No secret that we've been looking to enter the fresh segment for quite some time. We've obviously seen a lot of interesting trends. But the barrier to entry for us was we had to find a brand that represented the same criteria that we have for Hill's, which is premium, which is significant nutritional value to the vet and a value that they see in the product itself and obviously, a nutritional value to the pet owner. And Prime100 fit all of those: Growing business, profitable business, obviously, very strong underpinning from their profession in Australia; and an incredibly great quality in terms of recipe and manufacturing. So that's going to be a great learning for us in Australia, and that's our plan is to stay focused on that, and we'll see where it goes. The business is performing very well in Australia, above our expectations. So we feel very good about it, but it's a learning. It's going to take some time. It's a different category with a different go-to-market. And ultimately, we'll see how we think about that longer term. But right now, we're focused on Australia.

Okay. I mean, in general, despite kind of a difficult environment around you, it seems like the business is firing on many of the right cylinders. I won't say all because I know you could do better. But has that changed your appetite for M&A, kind of building on the Prime100 example, to bolster capabilities? Has your thinking at all changed in terms of what role M&A plays with regard to portfolio reshaping?

Yes. Listen, I'd be totally honest with you. M&A is really hard, very, very hard. And I think what's nice about our current business environment is that our 2030 strategy is not contingent on any M&A. It's completely organic growth within the business and the opportunity spaces that we see. So by definition, we're not chasing M&A to fill a gap. If we see strategic M&A that complements just like Prime100, that's a beautiful thing and that we can drive efficiency and learning into our own business that we think long term is right, assuming the valuations are right. And I think valuations certainly have come a little bit more in check with where they were historically. But we don't need a major M&A investment in order to change the trajectory of our company. That being said, if we see some strategic bolt-ons that we would certainly consider that.

Okay. Last week, you announced a series of leadership changes. I think they're scheduled to take effect in a couple of weeks, really essentially creating two COO positions and a Chief Growth Officer, among some other shifts. But I guess maybe summarize the change. And really, I guess, what drove the change and how will the new structure better serve the company?

Yes. And what's been, I think, so characteristic of our company is our ability to attract and develop talent within the organization. And this was an excellent opportunity to bring in a very proven leader from the outside who's demonstrated and arguably a very challenging category food to drive growth and new thinking into the business. And so bringing Shane into the business is a great add-on. Historically, if I went back 10 years ago, we have not been successful bringing people in from the outside. In the last 6 years, we've brought in probably close to 200 people from the outside. This fresh thinking has really been well accepted within our organization and people recognize that there are a lot of great ways to drive growth in the business and drive productivity, and we can learn from the outside. And I think that speaks to the humility of our organization. So Shane is going to bring in a great thinking. The Americas combination is great, in my view, because, one, they're inextricably linked from a supply chain standpoint. Two, there's a huge Hispanic influence in the U.S. where we have very, very strong businesses and being able to leverage Latin America more effectively in that regard, we think will unlock possibilities. Latin America has great resources in the space of innovation, digital and online. Those resources can be shared; best practices transferred a lot more expediently across the organization. So we think there's going to be a lot more efficiency there. Getting Panos focused on another part of the business, particularly Asia, where we see a significant amount of growth, much more of his time in that area, and he's a well-versed Colgate person who knows particularly developing markets extremely well. It's going to give us a lot more focus on that. Bringing John in, John Hazlin was our President of the Hill's business, a great strategic mind. He has seen omnichannel develop at a much more rapid pace in the Pet Nutrition business than in the classic Colgate business. That's the future of CPG in my view, is how do you interrupt the very disruptive consumer journey today with an omnichannel strategy and dealing with retailers who want to be omnichannel. And we've done that the best with Hill's, bringing his strategic mind into the Chief Growth Officer will allow us to continue to elevate the capabilities. And Stan, our CFO, 20 years out of IBM, he is as tech-savvy as they come and getting him to focus on obviously using our IT infrastructure to really drive growth and unlock it will be exciting. And we've got Prabha for at least up through October and what's exciting is now we have a senior executive leader really focused on some transformative things that I believe are going to be necessary for our 2030 strategy and accelerating those specific areas with a single-minded focus on getting to execution and deliverability across the P&L.

Great. Stan is a great example of someone that came from the outside and thrived.

Yes, exactly. [indiscernible].

If I'm not mistaken, you can correct me if I am. It looks like the management of Skin Care will move to Panos. Does -- assuming there's no resegmentation that comes with this org change, does that mean that Skin Care moves back under the European segment? Or have you figured that out yet?

No. The Skin Care business is so spread around the world that we want to ensure that we get great execution. We brought in someone from the outside about 2 years ago to really rethink the strategy. Where do we want to play that we can play in and be effective in? That strategy is well in place now. Panos is going to go out and execute that strategy. He does that extraordinarily well in getting his face time on the sales fundamentals required to open up new doors and distribution, getting promo improved that's the kind of stuff that we need to do. We've got a great pipeline of new products, and we've got a great strategy that I think we can execute. That business has obviously been severely disrupted by the China business, particularly with Filorga. But our U.S. business, which is where we will predominantly focus, continues to operate quite well.

Okay. And from a segmenting purpose, reporting perspective [indiscernible] no change?

Today -- no change. Today, no change.

Okay. In the 1 or 2 minutes we have left, I guess, just how would you sum up? I guess, what would you tell investors that should keep most top of mind as they think about Colgate as an investment opportunity over the next several years?

Yes, the history of our company has been on durability and predictability. And I think we've spent a lot of time internally in the organization, getting the culture to understand the importance of a growth mindset and the accountability that comes with that. And getting the organization to understand that, yes, that great organic growth needs to translate to dollar-based earnings growth for our shareholders. And we've spent a lot of time getting them to understand the mechanisms of what does that and why we need to get the balance of pricing and volume, the premiumization in the categories and why we're focused on making very deliberate choices on our investments around the world. We've got a great balance sheet. Our return on capital is best-in-class in the industry. We will continue to obviously leverage our capital very, very carefully in the context of thinking about our shareholders in that regard. But overall, it's making sure that the income statement works. We're driving great innovation to drive the top line and brand penetration, which is happening and deleveraging our balance sheet as we see necessary.

Perfect. Right on time. Thank you, Noel. Thank you, everybody. Thank you, Colgate.

Thanks, everyone.