Colgate-Palmolive Company ($CL)

Okay. Welcome back, everybody. Thanks for joining. For our next session. I'm very happy to welcome back Colgate-Palmolive Company to the conference with a new face. A new face to at least within the Colgate family, Shane Grant, Chief Operating Officer of the Americas is with us. Some of you may know Shane from his time at Danone, prior to that Coca-Cola, but welcome, Shane. And also John Faucher, who is Executive Vice President of M&A and special projects. We're going to use the entirety of our time for Q&A.

And Shane, I'm just going to start with you. As I said, first appearance at the conference with Colgate, you've been with Colgate, I think almost exactly a year as we stand here today. I guess reflecting on those first 12 months, what are your not so first impressions? And I guess, what stood out most positively as you've joined? And also, where do you see the biggest opportunities for Colgate as you look ahead?

Yes. Thank you, Steve, and good to be here with you on this relatively new capacity to have this exchange. Look, maybe firstly, in my first year, I've been head down, unsurprisingly, head down really focused on learning the business from every dimension, horizontally, but obviously, with a deep, deep focus on North America and Latin America. Maybe a few impressions in to sort of start from the top. I mean, the purpose of the company grounded in health. If you think about where the consumer is today and where the consumer is going, the sort of notion of health at scale, which the company stands for, I think is hugely compelling for our teams and certainly for me personally. So that'd be the first thing I would say. The second thing coming into the company is just how impressed I have been at the progress and the journey the company has been on and executing its 2025 strategy, which obviously concluded at the end of last year. And under the leadership of Noel and the leadership team of the company just what I would describe is just a massive transformation of the business model of the company. A business model, which is about top line growth, about margin expansion and reinvesting in the business and the brands. And I think that's been an incredible transformation of the business. Maybe the third thing I would say is what's really impressive is I think the capabilities that have been built and you've, I know, exchanged with the team on some of them in the past, but if you look at the AI and data journey, the GM journey, the science journey, and I think it's just really, really impressive, the progress that the company has made. And then lastly, the other -- the last piece that's just incredibly striking is culture. And this is a company which is blessed with long tenured people that deeply care about the company. To the second part of your question in terms of opportunities, look, I would say that, Steve, is really guided by the 2030 strategy. If you look at sort of the evolution of the strategy, it's categories and brands at the center. And increasingly, the way we're thinking about that mission is through the lens of top category-country combinations and driving those with high conviction, but absolutely brands at the center. The second thing I would say in terms of opportunity is the journey we're on an omni demand generation, which is a hugely compelling space to build the next generation of demand model for the company. The third piece I would sort of point out and is under the capabilities, which is innovation, which a high, high conviction to step up the intensity of the innovation in a period where we think probably macro we're going to need to find ways to make volume and the pricing. And so the innovation quotient of the company, we think is going to be really, really important. And then probably on the same theme, it's going to be a pretty volatile environment. It's already a pretty volatile environment. And I think the international footprint of the company is going to be to the [indiscernible] in that environment because we have people that are used to dealing with this kind of agility and that kind of experience of the company. So look, a terrific first 12 months, much more to go and learn about the company, of course, but maybe some first impressions.

Yes. Yes. I mean, I think the from the outside, the capabilities -- I mean, all of those things resonate but the capabilities journey up to 2025 and then extended now out to 2030 has been pretty -- how does that translate into operating priorities for the Americas region. We'll get into differences between North and Latin America in a bit. But just overall, how do you frame the key priorities for the region?

Yes. Probably unsurprisingly, Steve, that 2030 agenda a huge influence and trickle down onto the agenda from an operating point of view into Latin America and North America. I mean, I think if you think about the innovation agenda, specifically, again, that starts with the brands. And the way we're thinking about that in both of the geographies. But I think across the company is really, firstly, just core excellence. The superiority of the core brands investing in those core brands, making sure those core brands are vibrant and healthy, but then certainly, innovation and a stepped-up agenda. And if you think about Latin America and you think about the innovation agenda through the lens of socioeconomic level and the pyramid and shaping the innovation agenda to deliver for all extremes in that pyramid. We think that's going to be really, really important. And increasingly, that's true in the U.S. The dynamic of a k-shaped economy, we see is alive and well in the United States. And so thinking about the innovation agenda to serve all parts of that pyramid. But for us, in particular, I would say a huge opportunity around premiumization. So that would be, I think, the innovation piece. I think on the omni demand generation, this notion of a 21st century demand model of the company, I think, is relevant for all of our geographies, but at the center in North America, at the center in Latin America. And I would describe that as figuring out ways for the company to win today. So you think about the channel environments that we need to be competitive in, and if you think about the U.S., for example, it's pretty clear. You've got to win in mass. You've got to win in club and you've got to win in digital commerce, and so it provides a really clear road map. But also with an eye on the future and you think about the capabilities that we're building around social commerce agentic, so that duality of kind of setting up the ODG model for this 2-speed delivery. And then revenue growth management, which I think if we buy the hypothesis that this next 5 years, we're going to need to find new ways for the industry to grow our categories to grow revenue growth management, we think, is going to be a really important tool that I would describe as sort of the fundamentals of good pack-price architecture, but also employing some of the next-generation tools we have in the business like [ promo AI, ] which is really allowing us to step up the precision and the frequency of price adjustments with our customers to be able to deliver better RGM outcomes. So net, Steve, highly relevant for North America and Latin America, as you would expect, with maybe some specific application, which we're excited about.

Yes. You're in a unique position because Latin America represents kind of the economic engine for Colgate, multi-decade strength, dominant market share in some key categories. And North America, by contrast, is kind of the biggest opportunity for incremental improvement. Drilling -- how do you compare and contrast? And what are some of the strengths in Latin America that could be leveraged in North America or maybe vice versa? .

Yes. I mean, clearly, Steve, those businesses are in different start points. I mean it's obvious from the results they are, and we're crystal clear on that. I mean maybe to comment on Latin America first, if you just stand back from that business sort of from a fundamentals point of view, and I've been spending a lot of time with our teams right across Lat Am, the fundamentals of that business are just mightily impressive, enormous brand strength market-leading household penetration, incredible loyalty, just really a powerhouse brand led by the Colgate brand. Underpinning that is just real execution muscle across a diverse set of channels but just huge execution powerhouse in Latin America. And then thirdly, people, long tenured, experienced expert operators of our business in Latin America. And so just fundamentally, that business is really sound and it shows in the results. The current environment, we see the categories relatively healthy, somewhat pricing-led but still underlying volume growth, positive market shares across most of total progressively recovering, but the team doing a very nice job in terms of premiumization with platforms like OPTIC with good success with innovation like purple. So fundamentally, we feel good about Latin America. The results are good, and we expect that to continue. North America, obviously a very different start point. And Noel mentioned now on a couple of conference calls that it's a real focus for us as a team. It's clearly a real focus for me and our North America group and our leadership team. Fundamentally, the mission there is to improve the organic sales growth. I mean, that's the #1 mission that we are aiming for. To give you a sense of sort of the dynamics, if you kind of roll back to sort of February 2025, the categories themselves, I would describe it sort of moderate growth, but pretty consistent growth. We have seen in the first weeks of May, some degradation in the categories. We have seen those categories markedly slow. So obviously, we're watching that and preparing the business to respond to that dynamic. And to some extent, it's probably unsurprising given the state of the consumer and some of the obvious pressure on the consumer. And then there is a structural underlay of this K-shaped economy, which we see only sort of becoming more dynamic. From a market share position, we did see some share on Oral Care in the first quarter. We've seen that somewhat stabilize. The path back on that is premiumization, premiumization, premiumization, which -- and we started that journey. So the relaunch of OPTIC was a very, very good first step. We see some initial positive response to that. We're also doing what I would describe as some surgical interventions on some pricing action where we see some promotional intensity starting to tick up. The categories have remained largely rational, but we have seen some slight uptick in activity, which we're dealing with. And then the other lever we've got in North America, more short term is our Home Care business, in particular, which has performed very, very well, brands like Fabuloso, Suavitel, which we think can be big growth engines for the company. So obviously, a lot of focus on that business, the categories underpinned by ODG and some step-up we can do in some channels and then underpinned by really rebuilding a much more assertive innovation pipeline, which we've made very, very good progress on.

On the -- you're not the first to observe recent slowing in North America. I guess your perspective on how much of a concern is that? Do you expect -- do you see that more as -- we -- is it more in your base case, a timing blip and that we kind of resume still modest levels of category growth? Or do you see more risk of this as a real inflection to the downside. .

Look, it's probably honestly, Steve, too early to tell. We've seen some of this degradation occur really from the start of May, so it's taken for what it is, which is 3 weeks of data. So we will see where the consumer settles. We're obviously preparing the business with the portfolio lends in mind through the lens of how do we think about the business in terms of the right kind of stratification of the business. We want to be able to serve the lower end of the socioeconomic consumer base exceptionally well, and we have the tools for that with a platform like Cavity Protection, for example. We want to be able to serve equally the premium consumer and you think about the role of the brands like hello or OPTIC, we have the ability to serve both ends of that consumer spectrum. But Steve, those dynamics would be in the strategy anyway. And it's just how we adapt those strategies for the moment as opposed to sort of wholesale shift in the business.

Yes. I guess -- and Noel has mentioned a strategic reset in the U.S. And I think you've just touched upon components of that. But some of those components, innovation, RGM aren't not really new. So is it -- is the -- is what's new, just the elevated focus that North America is getting within the broader corporation? Is it we need to be tighter on execution? How would you define what's changing in North America?

Yes. Look, firstly, Steve, I think on the North America question, we have spent the last number of months, and Noel has referenced this on the calls, doing what I would describe as a deep diagnostic on the business. And that is not a valuation of the last quarter. It's really been a valuation of the last decade. And obviously, when you take that sort of a view on the business, you can see some exceptionally good things and there are some really, really exceptional things in the chassis of the North America business that we think we can accelerate. And then there's clearly some things to fix. But we've also looked at it through the lens of where do we think the consumer is going, where are the big revenue and profit pools in the market, where the channel bets we want to make. So it's a pretty comprehensive piece of work we've done. I think to answer your question, the go-forward plan has got all the components, you would expect it to be to be an end-to-end plan, which is it makes pretty clear choices across the portfolio of the brands that we think we can really scale and bet on. I would tell you, for example, in Oral Care, the opportunity we have for premiumizing the business is just enormous, just enormous, both in the emerging brand spaces in whitening and then whole new segments that we really have not penetrated today. So I say we conclude that piece of work on Oral Care being really optimistic about the potential of the business, underpin what is still today the most powerful brand in the category in terms of consumer relevance. Same logic on Home Care, where we have some businesses that we think have been probably underleveraged with enormous potential on a go-forward basis. Same on Personal Care. So we've done a pretty deep dive in the categories to look at what are the brands that we want to really prioritize and invest in and innovate on. On ODG and the channel selection, again, a pretty clear picture, some immediate channels that we need to win in an upweight that we talked about, some channels that we need to prepare for the future. And then on the innovation front, the team has done, I think, some excellent work to rebuild a pipeline of innovation at scale over the next 3 years. And obviously, it's going to take us a while to deploy that and some of them are going to be tactical and some of them are going to be very big scale in nature. But we've thought about that challenge through multiple dimensions. We thought about it through the lens of a constant renovation of the core. We've thought about it through the lens of new, wholly new big bet innovations we can make, and we thought about it through the lens of retail environment-specific innovation. All of that underpinned by capabilities that you mentioned that we think we can take from the company level and apply much more assertively into the North America sale. The last thing I would say is that this sort of reevaluation of the business has given us an enormous opportunity to reengage our people. And the power we've seen in being able to communicate with much more to come here, here's the road map for the business, gives our teams a real opportunity to really buy into that road map and be part of that turnaround story, and we've seen that enthusiasm build in spite of the current results. So look, a long way to go, Steve, but we feel really good about the work we've done and a lot of execution ahead.

Great. One last question on North America, which is you spoke to innovation, premiumization, servicing the upper end of the K. At the same time, a lot of the center of gravity in Colgate's Oral Care franchise and definitely in Home Care and Personal Care is in the value area. Is there -- are there opportunities to lean into some of those brands and lean into value to service the more strained end of the K.

Absolutely, yes. When we think about really a full revenue growth management playbook. As you said, we've got brand platforms that serve that bottom end consumer exceptionally well today and also for us, perform a very clear role in the business. If you take a platform like Cavity Protection, for example, really important business for us, serves the mid- to lower socioeconomic consumer, plays an important volume role for us, and we will absolutely keep providing energy behind that. If you think about brands like Fabuloso and Suavitel, they sit slightly below the category average price point, really important platforms, and we can premiumize those brands. So for us, it's very much and as opposed to an or. We want to be able to service the full market, particularly in the context of the K-shaped economy.

Which is something I think you've done well in Latin America. So pivoting kind of back to Latin America, you mentioned relatively resilient and broad-based performance thus far this year and for a while. I guess as you -- as your attention focuses increasingly on North America, how do you maintain that consistency and that growth in Latin America, especially should macro conditions soften?

Yes. I think that I think continuing to extend the strength of that business that we talked about earlier. I mean if you think about the foundation of that business, because the brands are strong, because we have this execution and go-to-market capability, the foundations for continued performance, we think are just absolutely there. I do think that there will be continued efforts in that business, and we've seen very, very good progress already around the premiumization opportunity even in Latin America. If you think about what the team has done on [ Luminus, ] for example, we've seen enormous pivot to more premium opportunities to continue to develop and grow the category. I also think that there is -- and this is a longer-term item where if you think about the structure of that business in Latin America. In some of our markets, we have a true multi-category play. And in some of our markets, we are much more of an Oral Care-centric plan. And so obviously, we are thinking about what does the category shape look like across Latin America over the long term. And -- but doing that very, very deliberately, doing it with an eye on making sure the core businesses today are healthy but over time, we see certainly more expansion opportunity in Latin America. The last thing I would say in terms of any change in the market context in Latin America if there is deterioration in the consumer context, one of the real strengths of our Latin America business, and again, back to the team, they have proven remarkable in being able to manage through different cycles. You talk to our team in Venezuela or you talk to our team in Argentina and they have largely seen at all. And so the ability of our teams to be able to manage through different market contexts, we have a lot of confidence. And to some extent, we think that business can be somewhat or weather. So I think continuing to drive the strength of the business and a team that can adapt, we think, along the way.

Okay. Maybe, John, you want to weigh in on this, too. But I'm curious, Shane, you think about leveraging best practices across the company, first off, within your regions, even within subregions across categories, how does that work today? How evolved is that? Is that an opportunity? And then how do you engage with [ Panos' ] organization? And how do we share best practices and evolve the broader corporation across regions?

Yes, for sure. I mean, firstly, if you think about the capability journey of the company, the company has been on a capability journey where it has successfully scaled a number of big capabilities and done that globally. And those -- that capability build has been led from the center and driven right across the company. So if you think about the journey on AI and data, if you think about the journey on revenue growth management, if you think about the innovation process that I know we've talked to you about before. Those are globally scaled capabilities led from the center and truly global in nature. It's also true that we have some centers of expertise that have naturally emerged in the business. So if you think about the Hill's business, for example, I mean, highly developed capability on the use of data, on the use of the profession and what I think we could describe as a precision marketing model. If you think about Latin America, I mean, the execution power and the customer expertise is clear. If you even take North America, for example, Total was born in North America. OPTIC was born in North America. So we have proven in that geography that we can build big global franchises. And then if you think about Asia, for example, I would say, from our perspective, probably the leader in omni demand generation and thinking about advocacy at scale and social-first marketing. Then the question on scale is some of it is structural. Our global teams are clearly charged with driving best-in-class execution across the company, taking good ideas and scaling them fast. Purple is a probably a good example of that, born in China and now in every geography in the world and driving very impressive growth. It also happens organically, and it happens organically in my experience because of the culture we have, which is Colgate is a highly networked company. And I say that in the best possible way, which is -- we have team members that have been at the company a long time, have deep relationships and want each other to be successful. And therefore, good news travels fast, and therefore, we get more scale. Maybe one last piece on that. One of the, I think, really interesting dynamics we're seeing in the business today, which is the one application of AI in the company, it's giving us an ability to lift and shift good programming faster, particularly in marketing communications because it's giving us some common backbones that we can iterate and scale geographically much, much faster. So look, I think a combination of some structural items, some center-led items and then a bit in the cultures, which is allowing us to scale, I think, good ideas quickly.

Great. If I can just add one example to that. So Shane talked about China and social, right? If you think about social spreads across the rest of the globe, historically, big CPG companies would be behind in something like that as you think about the rise of social commerce. But if we can send our marketing teams, which we have and the entire senior team over to Shanghai to see how our China team puts out hundreds, if not thousands of pieces of content to adjust to this new social model, understands how you build brands versus simply selling products in this social commerce model. We have great examples internally that our teams around the globe, whether it's in Europe or the U.S. or Latin America or Africa, they can take those examples and actually come out ahead of the curve as we see that social commerce business expand around the world so that we're not operating behind some of these insurgent brands, which has historically been where CPG companies have found themselves.

Exactly. Yes.

Okay. Great. All right, John, now that we you're talking -- let's get you talking about the rest of the world outside of -- so in the context of the here and now, I talked about some pressure we're working through in North America relative resiliency in Latin America. As we look around the other regions of the world here in Europe, Asia Pac, et cetera, what are you seeing? And how concerned are we about direct and indirect impact of energy shortages?

Yes. So I think if we had all sat here on March 1 and talked about where we thought the consumer would be on June 1 with the continuation of everything that's happened in the Middle East, I think we would have come up with a sort of a more negative situation than where we're seeing right now, where we would say that the consumer is generally held up very well around the world. I think we have seen less of the type of weakness. Even in the U.S., I think we've seen less of the type of weakness potentially than we could have. And so I think that's encouraging. There have been a lot of concerns about the European consumer, about the Southeast Asian consumer. And in general, we have seen less of that indirect impact. I think consumer sentiment is still a little bit soft where we'd like it to be, but better than it potentially could have been. In terms of direct impact from the conflict, very modest. We have, I would say, a smaller-than-average Middle East business, partially because we just have such a geographically diverse portfolio. So I think we're seeing less direct impact, but the consumer is generally, I think, holding in pretty well. If you look across our businesses, Shane talked about North America and Latin America. Europe, I think we've been pleasantly surprised by how the consumer is held in, whether that's Western Europe, Southern Europe, Northern Europe. Still, Europe for us is a little bit of volume, a little bit of price, and that's been sort of our consistent focus. Africa/Eurasia, which has now merged into the EMEA division, we're still getting some FX-related pricing, which is encouragement, we've had a nice volume bounce back. And then Asia, where we had been struggling a little bit from a performance standpoint, we've seen generally the consumer hold in pretty well. We've got big markets like the Philippines, where there had been some concern from investors about how is the consumer going to hold in. We think that business has done very well. China and India, which had been more difficult for us, India bounced back, had a great first quarter. We've seen the H&H business improve sequentially. We're getting more of the fundamentals right there, some easy comparisons, still some work to do going forward. But in general, we've seen that part of the portfolio hold up well.

Have you seen any smaller competitors get impacted by supply shortages? Is there a market share opportunity out of this? Or is it more category resiliency?

We have not directly seen that happen. I think there is an advantage to being a scale player in the world. When uncertainty comes in, your ability to go out and make the right decisions quickly, your ability to secure supply your ability to look out 6, 9 months and get the supply you need in order to keep your supply chain running. But we have not been hearing of major supply shortages for smaller competitors. We think if we're gaining share, it's because we've got great innovation, increased marketing support. We're moving to this omnichannel demand generation that Shane talked about, winning on the ground in a difficult environment. As Shane talked about with Venezuela and Argentina, that's what we do best as an organization.

Okay. Okay. Good. Hill's pet food. There's been mixed signals, mixed commentary on the relative health and resilience of the category, maybe a bit on what you've seen categorically and then how the Hill's business is positioned against that or aside from that?

Sure. So I mean I think we've been remarkably consistent on a -- from a category standpoint with pet food over the last 18 months or so, which is we think the category is generally flattish. And what we are expecting as a company is to outperform by several hundred basis points versus the category, given the strategic decisions that we've made over the last several years, really the last 5 or 6 years. I know there was another pet nutrition company that talked about small dogs, cats, what have you. We have made significant investments over the last 5 or 6 years to focus on those undertapped segments where we under index. We've always had a strength in dry dog food and bigger dogs. And so we built our pet nutrition center. We built a small paws facility to focus on the nutritional needs of small dogs. We opened that about 4 years ago, and that drives a lot of the innovation that we're seeing in the small dog piece, which is the fastest-growing segment of the dog category. We've also made a commensurate investment in cat, where we were under-shared in cat. And really what helps both of those actually is the increased focus on the wet side of the category. We opened our [indiscernible] facility about 3 years ago. We needed more innovation, more capacity coming in wet, both in terms of different forms, in terms of stews and moose and things like that as well as different packaging, tins, pouches, et cetera. And so that's given us tremendous power to innovate. So it's the strategic focus on those undertapped segments, small paws and cat and then the capabilities really scaling the benefits of those capacity additions on the wet side as well.

Yes. And Hill's is generally servicing the less stressed consumer in the U.S.

Yes. I mean there's no question that the -- where we're seeing that stress is big bags of dog food, big bags of dry food have gone up in price over the time. So we think we're seeing a little bit of an impact there on the business. What we've also done is, as part of this strategic shift over the last couple of years, we've really increased the focus on the therapeutic side, that's prescription diet, where we have a real opportunity to build the category. That's a lot like what's worked for us so well on the therapeutic side in Oral Care in Europe, for example, where we've gone into the vets, and we've said to them when a pet parent comes in and their dog has, to speak politely, gastrointestinal problems, a better option than antibiotics would be Hill's gastrointestinal biome, right, which is a product that can help stop those problems within 24 hours. . And so we have seen really nice growth on the therapeutic side, which again is really where the hardcore science comes to play for Hill's. So we feel good about both sides of the business, but prescription diet, even higher price points, attractive margins, that's really been going strongly for us.

Okay. Great. We talked about -- let's talk about the environment in terms of its impact on the cost side of things, raw materials, logistics, et cetera. Obviously, those pressures are going up. You have spent a long time trying to build flex in the P&L. Now you have that flex in the P&L. So I guess the question is how much flex in the P&L is there? And how does the strategic growth and productivity program fit into that mitigation strategy.

Sure. So I'll start off on that and then Shane, I think, can probably give you some ideas in terms of how that really all plays out in the businesses. if you're building flexibility in the P&L the right way, you're not using it all up in 1 shot, and that's been a real focus for us. And what it really starts with is our aspiration to deliver consistent, compounded dollar-based earnings per share growth, right? How stocks work, you sustain the PE multiple, you expand the PE multiple through organic sales growth, you deliver very competitive dollar-based EPS growth. Hopefully, you can deliver TSR that compares favorably versus your peers, and that's what we're focused on. And so we have really focused on building that flexibility in the P&L over the last 6, 7 years as we executed '25 in transition to '30 so that even in a tough year like 2025, we can go out and deliver dollar-based EPS growth. So we had negative FX, we had category slowdown. We had increased raw material costs. We had additional tariffs. And we were able to get through that in a way and deliver dollar-based EPS growth that 10 years ago, we might not have had the flexibility to do that. But we continue to build up that flexibility in the P&L. The key for us in a situation like this with the higher cost is to get them out into the businesses, right? And we want to say, here's what we think price of oil is going to be, here's what the impact on our business, and that way, you all can model it. But more importantly, Shane can work with his divisions to model all of those costs. And that's what we did in 2022, which is where we were really the first company in the space to come out and say, "Look, this is going to be worse than you think it is." And it creates a situation where, yes, you're providing the news earlier, but you get visibility in the numbers faster, which we think plays out well over the medium to longer term. So do you want to talk about...

I think, Steve, to sort of extend John's point, we obviously got out quite early, we think publicly, but we got out as importantly, quite early inside the business. And there's enormous power from an operational point of view of getting those cost realities in the P&L and in the system fast, which we did, and then it allowed our teams on the ground, be it in Europe, be it Latin America, be it in the U.S. to respond and prepare. And the way the teams are responding, obviously, is different by market. Obviously, the commonality is productivity, productivity, productivity is the first point of call and really maximizing everything in the productivity pipeline is the first action. And then the pricing action is much more segmented based on geography. Obviously, in Europe, it's much more of a hand-to-hand combat situation. And it's much more careful in the U.S., we're probably going to be much, much more considered in terms of any further pricing action. We think much more, it's a mix play and revenue growth management tool play as opposed to headline pricing given the state of the consumer. But in markets across Latin America, we may have some opportunities where we can drive some more premiumization and pricing. So I think sort of the mechanics inside the business, as John set up, are very, very positive for us to respond at the right kind of pace and with good visibility.

And if I can just follow up. I'll finish up on the SGPP piece. I mean the way you build that financial flexibility is you're investing in capabilities, if you can invest ahead of the curve, you do that, so you have flexibility year-to-year on some of the spending. But the other thing, as you noticed, okay, are we entering a period in the 2030 strategy where we want to build new capabilities like ODG, where we know that maybe categories aren't going to be growing at the same rate. That's why you announce something like SGPP last year, build up the fundamentals, go through, figure out what the program is going to deliver and then that gives you the opportunity to say, okay, we're keeping the range of EPS guidance for 2026, despite some fluctuation in the gross margin, right? So that we went from guidance of gross margin up to gross margin down. We kept the range. We did see some numbers come down at the high end of the range. But so the shape of the P&L changes somewhat. But having that flexibility by focusing on the productivity ahead of time, that's what gives you the flexibility. So Shane doesn't -- Shane can go in and say, "Look, advertising cuts not on the table. We need to keep that brand support going investing in AI, not on the table." That's the posture you want to have when you get this level of volatility.

Great. You mentioned investing in AI. I want to hit on that before we close. It was a big focus. It's been a focus for Colgate actually for a couple of years, and it was a big focus at CAGNY, mostly through the lens of Hill's. Shane, how is just digital investments in general, but AI specifically changing the way that work is done within your region?

Yes. I mean I think as we talked about earlier, Steve, I think the company has made enormous multiyear progress on its data foundation and its AI agenda. I think generally, the application we have seen across the markets, including in North America, including in Latin America, has been really focused on a few distinct verticals. And I would describe those verticals, first and foremost, marketing. So efficiency of spend but also speed and cost effectiveness of content creation. We've seen secondly, it applied through innovation. So everything from trend tracking through the concept development and we now get through these cycles at a much, much faster pace. And then thirdly, our supply chain with obviously some obvious examples. Maybe one that I would point out, which I think has had really meaningful impact in North America in particular, but also in parts of Western Europe is a tool that you may have heard about called [ Promo AI, ] which essentially allows us to take shipment data, thousands of promotional pieces of data by week, by customer, by geography and scan data and put them into a large LLM and then work with our customers to optimize the pricing plan. And I mentioned that example because it's providing concrete outcomes today in -- for U.S. customers with an ambition to expand it, and we've seen real concrete positive outcomes from it with an ambition to scale it further. A couple of things we've learned about the application of a tool like that, which I think has been really powerful for the business as we drive the AI agenda. One is developing these tools, what I would describe market back, which is what's the use case, what's the use case in the market and then how do we develop the tool to serve that use case. The other more practical piece is, how are these tools getting integrated into the operating routines of the business? How do they meet the teams in terms of the routines and the ongoing cadence of the business? And then a tool like that, we think, has got ultimately global application, but obviously, because of the trade dynamics, it's very focused on developed markets today, but more to come.

Okay. We're almost out of time, but maybe in closing 2 to 3 priorities that you'd want folks in the room to judge your progress against over the next year? .

Yes, terrific closing question, Steve. Thank you. Look, I think firstly, at the company level, and this is probably obvious reattaching the business to its long-term growth algorithm of [ 3% to 5%. ] That's certainly a focus for us as a team. The team has proven we can do that, and so reattaching the business to that. It's going to be really important. Geographically, I think sustaining the outsized growth in Latin America is going to really matter as you referenced earlier, sustaining what we think is really solid performance in Hill's in EMEA and then early recovery of Asia, we think is very encouraging. And then if we can add on to that recovery of North America over time, we think the company will -- we'll give ourselves a good chance of reattaching into that [ 3% to 5% ] space. And then lastly, I would just say, one of the things that's really striking about the company is it's truly as a global footprint. And we think in this moment, that's a really advantaged place for us to be. But within that, we're obviously very focused on driving household penetration, market share and competitiveness right across the geographies to make sure the model remains robust and sound.

Right on time. With that, thank you, Shane. Thank you, John. Thank you, Colgate. Thank you everybody in the room. Have a great conference.

Thanks, Steve.

Thanks, Steve.