Kimberly-Clark Corporation ($KMB)

Good afternoon, everyone, and thank you for joining us. I'm pleased to welcome you to a fireside chat with Kimberly-Clark today. The company is in the midst of a strategic evolution, a significant one, reorienting the portfolio by reducing its international consumer tissue exposure through a joint venture with Suzano while expanding into consumer health with the proposed acquisition of Kenvue which will create a broader platform across personal care and consumer health. To discuss the strategy, the rationale behind these moves and how management is thinking about execution and value creation from here, I'm joined by Mike Hsu, the company's Chairman and Chief Executive Officer; Nelson Urdaneta, the company's Chief Financial Officer; and Chris Jakubik, Head of Investor Relations. So thank you all for being here, thank you so much for making the trip to London.

Great to be here, Lauren.

Thank you. .

So we'll get started. So first thought was that given many investors here today have a somewhat outdated perspective of the company, I wanted to start off at a high level. So over 2 years -- just about over 2 years ago, you announced the Powering Care strategy. Mike, could you start by giving an overview of that strategy and perhaps where it suggests the greatest change from how the company was operating previously.

Okay. Yes. Thank you, Lauren. Yes, I think the core idea of Powering Care is the concept of getting the company on a virtuous cycle of growth. And most companies talk about that, Lauren, and that's something I think most companies aspire to within CPG, as you well know, there's a lot of factors conspiring to kind of knock companies off of staying on the virtuous cycle. So it's notoriously hard to do, right? But the core elements of what we're trying to do is really make products better that the consumers want to drive volume, drive great marketing to get consumers interested in our products, great execution in stores, and that will drive the volume. At the same time, we're working to get much more efficient on cost and then reinvest that savings back into product quality or marketing or advertising or anything else. And so hopefully, if you get that cycle right, it starts that virtuous cycle of growth. I think -- so that was kind of the goal. I think the key elements of the strategy, I mean, there's really 3 big components. One, we call accelerate pioneering innovation, right? But the real thing about that is at the time, and you've seen us for a long time. I think at the time I joined K-C, there was a question about whether superior performance was possible in these categories, right? A lot of people externally and even some within the company said, aren't these categories commodities? And how are you really going to differentiate a diaper or bath tissue or whatever product you want to think about. And I would say so for us, that one is that, hey, superior performance is possible, and it's not only possible, but it's necessary. And I think you've seen what's driving our volume is that we've really found a way to make our product superior and desirable, right? And so that's part one. Part 2 is what -- another thing that's really changed is our cost structure. And I think we've been driving industry-leading productivity gains over the last few years. I think the big change in K-C over the last maybe 10 years or so is it turns out there is one best way, right? And I think we were kind of a decentralized confederation of companies that operate in local markets. Products were different in markets. Our manufacturing process could be different. Our assets or our manufacturing assets could be different. And I think what we've learned over time is that consumers are more similar. It doesn't mean all products are identical between the U.S., China or Brazil, but they're more similar than they are different. And so it does turn out -- there tends to be one best way to make stuff efficiently. And so -- and that's kind of what's behind the margin improvement that you're seeing with us. And then the last thing is a change in our operating model. Again, I think a calling card of K-C and what makes us special is we're very attuned to local market competitions. We run our business through the markets. And so that's something we'll always want. But I think what we've done is over lead that local agility with a little more considered global scale to help the markets go faster. And so I think those are the big changes that are driving the performance that you're seeing.

Okay. Great. So with that as context, let's talk about top line trends over the past 2 years for North America and then the International Personal Care business. Organics performed well, and more notably, volume mix has been positive, which is not what we can say for most of U.S. staples. Just to specify for people here who don't know, company had 1% volume mix growth in 2024, that accelerated to 2.5% in '25, and they grew 3% in the first quarter of '26. So how is it that you've been able to drive this in categories that I think many think of as sleepy and really just linked to population growth at best?

Yes. I think the main thing I'll say, Lauren, and we'll see if you think this is interesting, but superior product performance equals superior value. A lot of time when you say value, people think you're going to pull price down, right? And price matters. But actually, we believe since you -- people experience our products and if you're wearing a diaper, whether a baby or a senior adult or a Kotex pad, you're wearing it 24/7, right? So it's on you. So people really notice differences and performance. And so I'd say we've made a conscious effort to differentiate our products. We think they are superior than anything that's in the category. And it's been that way for a few years now. And I think that's what's driving the volume. The -- how did we get there? If you reround 12 years when people thought these were commodities, I think what we ended up doing was going through a process of like, "hey, we're going to get pickier about how consumers use these products." And they're not just looking for absorption, right? Things about like comfort, fit, breathability, skin health, all these things matter. And so we're going to spend a lot of time trying to understand how needs will evolve. I will tell you we're on our big exposure and big business in China really helped us because I think that's where we saw both in Korea and China, the Asian markets, the sophistication of the consumer over the last 20 years has really accelerated. There's a lot of manufacturers and a lot of brands, in diapers alone, there's 200 brands in China. So the competition is very aggressive, and that competition forces companies to get better and forces companies to innovate. And so I think what we did was really kind of develop multiple angles of product differentiation, whether that's on comfort, fit, absorption. And I will tell you, we have a big pipeline. We are very proud of big ideas that we have in the pipeline that's coming. We have this -- a lot of the growth that you're seeing is on what we call a Gen 3 diaper core. We have Gen 4 and 5 in the works that's going to be better than Gen 3. And so we're really excited about that. The other thing that's happened this year and you note maybe it started happening in '24 was our emphasis on the value tiers. It turns out consumers in a market like North America are really under stress. And while our premium business continues to grow. And we're driving the premium business very hard with innovation, 90% of the population has incomes at 100 and below, right? And so as category leaders, we don't really want to ignore, right, the bulk of the population. And so we decided to innovate as aggressively in our value tiers. And in fact, in the U.S. on Snug & Dry, I think you understand that we brought our best innovation and most advanced technology and launched it in our value tier first before we've launched it into our premium tiers, and that's what's behind a lot of the volume momentum that we're seeing right now.

It's really interesting you brought that up because one of the things that I have very casually said when asked by investors like why do I think there's no volume growth? Or what's the big challenge in the industry overall. And I always come back to 80% of U.S. consumers are under a lot of pressure and the staples companies have to sell to all 100% of U.S. consumers, right, not just the top 20. And so we care about it, our industry cares about everyone.

And we decided we're not going to be a niche premium company, right? We're going to serve everyone or try to.

Yes. Sounds great. Okay. I wanted to touch quickly on the impact you've seen from the conflict in the Middle East. Back at earnings just last week, you noted the potential incremental inflation should oil remain elevated. But you stopped short of including that in the full guidance. Can you just walk through that decision, why not to bake it in and just kind of what mitigation might look like as you think through the rest of the year? .

Yes. Let me just make a quick comment and then Nelson will -- I would say it's an unfortunate circumstance that the company and our management has become very accustomed to deal with these situations, right? And so this is I think the third military conflict -- the first one in Ukraine and Russia was the first one, kind of on our watch for a multinational deal with in quite a long time. And so then you had Israel and now this one. And so I think operating in a volatile environment is something that we're becoming accustomed to. Our underlying principle, which I think Nelson would want to talk more about is, right, PNOC or price net of commodity cost discipline, right? And so generally, we expect our PNOC to be neutral to positive, right? And so adhering to those principles is pretty core to how we think about our business.

Yes. And Lauren, just to provide a little more color on the situation. So 2 things. One, from a capability standpoint, as we went through the whole COVID situation, all these learnings have been built into our toolkit. And as you remember, we overcame $3.4 billion of costs between 2021 and 2022. And we emerged out of that fairly successfully, we recovered our margins and actually started expanding our margins beyond prepandemic levels at the end of 2023, and we've been on that trajectory. Now as it relates to the outlook, in particular, for the second quarter, we did include and we advised that we expected about $50 million of gross input cost inflation, largely related to the volatility we're seeing in the oil markets. As a reminder, we have about 80% of our input costs already covered either through contractual structures or programmatic hedging programs. As it relates to oil-linked commodities or costs, about 25% of our basket is exposed on one extent or the other. And if you add distribution, it's a little bit higher than that. So the $50 million that we included for the second quarter, we expect to be able to fully mitigate it as the year progresses. That also includes a slight impact from the California distribution center fire that we experienced a few weeks back. Now what we don't know is going to happen in the second half of the year because prices have remained fairly volatile in terms of oil as well as some of the surcharges and force majeure that's being declared by some of our suppliers. So we did some estimates around the scenario of what if oil will stay at around $100 a barrel. And that's what yields a scenario of around $150 million to $170 million of gross input costs that we would face in the second half of the year. That's not built into the outlook, neither any mitigating actions that we would take to tackle them. As Mike pointed out, our teams know that we expect to manage to at least neutral pricing that will cost over time. And they need to leverage all the toolkits within the integrated margin management approach that we've developed over the last few years. That includes revenue growth management, productivity, where we've delivered 6% gross productivity in '24 and '25 in Q1, and we're projecting that for the full year as well as the always on overhead savings that we've been delivering over the last few years. Our plan is we should have much more clarity in terms of what that will be, gross impacts as we close the second quarter. So when we give the update on performance for the second quarter in August, we'll be able to provide a more clear view of what that will look like from a growth standpoint, how much of that can we mitigate? And what, if any, net impact we foresee to the bottom line in the balance of the year.

Okay. All right. Great. Before we get into talking about Kenvue, I wanted to just talk about the joint venture with Suzano a little bit. So for those in the audience who might not be aware, when Kimberly announced Powering Care, there was a third segment as well called International Family and Professional. In June of 2025, they announced a deal to sell 51% of that to Suzano forming this joint venture I'm going to talk about. So could you just talk a bit about the strategic rationale for that transaction? Why -- and also why Suzano is the right partner?

Yes. They're a great partner. I think that this transaction is really about building a better tissue business. And I think we realized, Lauren, that wholly controlled by ourselves I think we had structural challenges to enable us to do that. And what were the structural challenges. Our International Family and Professional business or the tissue business maybe the biggest component is here in Western Europe, right? And so Andrex here in the U.K. and then we're in most markets on the European continent. But given the share positions in Europe, I would say the margins in Western Europe are structurally lower, right? And because of that, our earnings were highly volatile. And why were the highly volatile. The only thing that fluctuated was pulp costs, right? And so it made it difficult within our control, we had to cope with the volatility of the input cost, while the margins were kind of at a fixed amount. And so really, the magic of this transaction is in partnership with Suzano, which is our second partnership. We did a similar transaction with our Brazilian tissue business, and we sold that 100% of them a few years back. But their cost structure on fiber is inherently stable, right? So the only thing that fluctuates is the price, right? So what you're marrying and creative business that has stable prices, stable costs and they can operate more effectively in this environment. On top of that, I would say both companies have operating strengths. Ours is paper making or tissue production. Their's tends to be more industrial, pulp production, agriculture, ours also commercial execution, right, selling, marketing, all those things that they don't do as well. And so the reason why it's a joint venture is we both bring strengths to the party that we both value, right? So we think there's a great structure, and it's going to build a business that's going to be a very good tissue business.

Okay. In Brazil, though, you sold at 100%. So just did they have a different capability set in that market with regard to the commercial aspects or the paper making that made Europe a different decision.

Not because of that. I would say they're doing a great job with it. And so I forecast this will go very here as well. I think maybe the reason why a full exit is I think we will evolve over time. That's part one. But part 2 is there's more behind what we're doing on either side, right? They have their developer, we're having more capability with what we're developing on the tissue business, and we both want to be able to participate in sharing that. So there is a reason why it's kind of a measure. But I think over time, could they increase their ownership stake, it's possible.

Okay. And just to add, I mean, 3 things where we see also benefits from how we structure the transaction, Lauren. So the first one with a 49% stake, once the transaction closes, we expect our shareholders to participate in the value creation that we foresee in the following years. Secondly, there's an important cash amount that will be received by Kimberly-Clark at the moment of the close, which we will deploy for the Kenvue acquisition as part of the cash consideration, which again will allow us to maintain a strong balance sheet post the close of Kenvue. And then lastly, adding on what Mike said, there is a fixed mechanism for us to be able to exit at a time when Suzano offers to purchase our remaining stake. .

Okay. Great. Perfect lead into Kenvue. So that was June. So then in November, you announced plans to acquire Kenvue.

It was a busy year.

Busy year. Yes, thanks, guys. So while I'm sure most of them are well aware of the deal, maybe you could just talk a little bit about the strategic attractiveness of this business combination or just plainly like why are Kimberly and Kenvue better together?

Yes. Okay. I know for some outsiders, it may not be the most intuitive -- we're excited. And we're excited about in our minds, creating the preeminent health and wellness leader globally, right? And that's kind of what we're doing. And so -- and what do we mean by that? One, there's a couple of things, covering our categories. I think we've done a great job growing our categories. I would say, our categories this year are growing about 50%, 2.5%. And that's kind of the historical range of kind of where we are. I would say the Kenvue categories grow at a higher rate to start with, and they have built in multi-decade tailwinds. And so that was both in health and wellness driven by the logic of a globally aging population, right? And so -- and as the population ages, demand for the Kenvue portfolio along with ours, like our adult care business will continue to grow. So there's some strong built-in tailwinds. But really, what we're trying to do is similar to what we talked about with diapers and serve the 100% of the population, what we really want to do and believe we can do is raise the standard of care for all. So our goal is to provide extraordinary care for all. What does that mean? I would say our view is a lot of these health and wellness categories, particularly within self-care we view are lower penetration and relatively underdeveloped, even though they're great solutions and have been around for a long time. And so we believe working together and understanding kind of markets and a neat spaces more structurally that we can expand the categories over time in a more disciplined manner. I think, obviously, there's tremendous geographic complementarity between our portfolios. If you're not as familiar, they're very big in Europe. They're about a $3 billion business in Europe. After our IFP or our Suzano transaction, we'll be about $100 billion in Europe. And so there's an opportunity for us to grow our business here. Similarly, they're very big in India, which is a market that we've struggled in with our Huggies brand. And so we see great opportunities there. Flip it around the other way, we're about a $3 billion business in Mexico, and they're just a few hundred million there. And so I think we see from a geographic perspective, Lauren, an opportunity to kind of grow both businesses through distribution, right? So that's kind of one set of areas. The other is if you think about consumers that we're serving, we're covering basically the same life stages through different ends of the category. So we're in baby. Obviously, they started their business or their company within baby care. And so -- and we're obviously in baby, but then you keep going serving women whether that's through feminine care products for skin care or beauty or whatnot. All family, we do it primarily through tissue, but they have a lot of products like Listerine with Band-Aid, they cover all family. And then finally, the active aging, which we primarily do through Poise and Depend. And so we think there's a lot of complementary in terms of serving life stages and maybe the opportunity for us, Lauren, is we've been working in a lot of markets, primarily in Asia and the U.S. but increasingly across our other focus markets to develop an advantaged consumer engagement model powered by digital. And we've made a lot of progress I would say, over the last 10 years, and I think that's an opportunity that we feel like we can really expand with the Kenvue portfolio as well.

Okay. Great. So one pushback that we've heard pretty often is that Kenvue's categories are fundamentally different from yours. Things mentioned are like channel mix, seasonality, competitive concentration barriers to entry. I'll skip the geographic exposure, you, of course, have commented on that and just even expertise. So how would you respond to that, the fundamental differences between the businesses.

Here's my argument, Lauren. I want to tell you that when you ask about Powering Care, I'll say the tenets of Powering Care apply to Kenvue's categories, too, right? And if you just click through what are those? I would say how we've been able to manufacture growth in what you would characterize are slower growth categories, I would say it's a deep understanding of needs and really being, I would say, very specific about what sophisticated consumers are looking for. And even when -- and consumers -- it's very hard for consumers to say, this is what I want for the future. right? And so you have to kind of -- you have to piece it together, right, through insights and research and understanding. And then -- but I think we've been able to do that, right? And I'll just -- like one example, right, this whole thing around -- our current product on Kotex that's selling great globally has this liner that pulls the menses or the liquid away from the surface of the pad and it channels it into crux of the pad, right, to spread it out and disperse it, right? That's -- no consumer can ever tell you that's what they want, right? But what they said was we want to feel dry, right? And that's kind of how we deliver it. And so I think the core idea is we've got to understand what the need states are and what they're trying to solve. And then what we do well is we declared like this is what we're going to win on. And we declared that like 10 years ago. And then we kind of plowed all of our financial R&D researches into solving those problems, right? So I'd say need state and then aligning the tech pipeline to support those need states. Second, this consumer relationship model. I think interestingly, I told you we've been investing a lot in digital. Our e-commerce shares, and I think you probably know this fact, our e-commerce shares are 700 basis points higher in North America than our offline shares, right? And so we think we have an advantaged model, we have an advantaged model in China, in Korea. Increasingly, I think we're feeling great about Indonesia and Brazil and what we're doing online there. And so we do think there is a different engagement model that's going to be much more efficient than the traditional marketing model that also applies to the Kenvue brands. The third area I talked about margin management. And I think it's early, but we're excited about the integration planning. I think even though they're high margin, and I think our average is close to 60%, right, our average is approaching 40%. So they're much higher margin, but we also think there's much more opportunity to improve the margins on the Kenvue side through cost discipline. And our calling card, given that our margin structure is lower is cost discipline, execution discipline, and I think a lot of that applies to Kenvue. So I think while the categories look and feel different. I think as you may be familiar with, in the world of CPG, I think the basic principles apply. I mean, honestly, the 3 of us on -- that are sitting the front row, you know we all came from Kraft and we didn't even know how to spell diaper if you spotted us the D 12 years ago, right?

I'm sure your...

Sorry, I didn't mean it to sound that way.

Okay. A few weeks back, you announced a leadership team for the combined entity. Not surprisingly, many come from K-C, but there's a few that come from Kenvue. So can you just give an overview of the new organization structure for the combined company, the leadership team and through that decision calculus when bringing over talent from Kenvue.

Yes. Okay, interesting, world-class team. I'm excited. We had a -- so anyways, the process, I'll just give you a little on the process. So obviously, I met with all the leaders on both sides. And we put everybody through this rigorous process with a third-party assessment, right? And so -- and that way to them and then I had my own individual discussions with every leader. . So rigorous assessment and -- but we wanted to set the principle of we're just going to take the best of both. Like we don't really care which side they're from, it's -- we're just going to pick the best, right? That's part one. I will say, number one, I would -- exceptional market and operating expertise. And if you look at our business leaders, a couple of them, John was North America for us, Katie, who runs focused markets in Home. I mean everything is growing. I think you saw in the quarter, I think, John, 95% of his sales were growing share, Katie, 84% of hers. And by the way, for Katie, all of her markets when I gave her those markets were declining once you got them. So I think so 18 months later, they're all growing and growing share. So I think we've got exceptional leaders on the K-C side. John is going to leave North America. Katie will have 5 markets primarily in Asia, which includes China and Indonesia and think of that. I think on the Kenvue side, Carlton, who runs their EMEA business, Leo, who runs Latin America. I think if you look at those 2 businesses, this is what happened when we started doing our internal business reviews just to get to know the categories. I said, "Wow, I don't think we have any markets that performed as well as you guys did," and we're pretty proud of our performance. But I think what got lost, Lauren, is there's some pretty outstanding performance that they've had on their side that kind of got swamped by a few big problems out there. And we know those markets, and they're very difficult to operate within. And I think they've done a really nice job. So I'd say with with those leaders, Carlton, Leo, Andy in Asia Pacific, Andy is going to lead enterprise markets, which is part of Asia and Latin America, together with Leo. I'd say they've got exceptional market expertise. I think they've have done a great job with the Kenvue brands. Andy is newer, but has engineered quite a turn in performance in some of the businesses in Asia. So we're excited about, I would say, the market operational capability of the team. And then functionally, again, we pick the best of both. But I'd say primarily with a focus on the capabilities that we think we need to grow the business now. And I would say on R&D, and you've met Craig, Craig has experience in some of the Kenvue categories. He spent a long career starting at Procter and Unilever before going to Campbell's then coming to us. So I think he's a real R&D pro. I think Tamara she's helping us deliver multiyear industry-leading productivity, and she's going to be great at that. And then interestingly, on the growth side, we tapped Carlos from Kenvue and Jon Halvorson from the Kenvue side. Why? I think we are really excited with Carlos' experience, having been an operator coming from Procter, right, in this past, but detailed operator for a long time and having a disciplined operating mindset to think about category growth, we really love that idea. And then together with Carlos and Jon and Mike Wondrasch, who is going to be our digital leader, I'm going all in on digital, right? This whole thing around the consumer engagement model, that thing is going to be a competitive advantage for us. and we're investing a lot to build it.

It's interesting, too, because, obviously, Kenvue and Heize didn't stand still, right? When Kirk came in, they made some really fantastic hires that you're now bringing over.

Yes.

Okay. Looking at time. Okay. So cost synergies that you've discussed around the high end as far as CPG deals go. So $1.9 billion or 13% of Kenvue's 2025 sales. You've given us good detail on the breakdown. So just for anyone here, it's 30% in sales and marketing, 30% in COGS and 40% in G&A and time line, largely realized by year 3, but we still get pushed back that the number is just too high, just it's too high. So how would you respond to that?

Yes. So a few things, Lauren. So we've continued over the last months since November 3 of the announcement to build our clarity and confidence on the path to delivering and/or exceeding the synergies. I mean, Russ last week that our earnings update was providing some updates around all the hundreds of work streams that are underway, getting ready for that day 1. . When you look at the benchmark in deals, yes, in traditional consumer staples deals, the average is more around the 8% level. But when you look at consumer health, that average is actually 13%. So our 12%, which is kind of the number, is very reasonable when you look at it from that end. The other element that's important to note is that the 3 sources that you've quoted as it relates to how we drive and attain those synergies are things that we have been executing over the last 4 years at Kimberly-Clark. That's what's allowed us to drive in the last 2.5 years, increasing better performance on the top line, driven by volume/mix gains consecutively quarter-by-quarter, expanding margins, increasing our investments behind innovation and brands, driving better cash flow. And at the end of the day, all of this happening simultaneously. If you look at the 3 buckets on overheads, it's not just the duplicate structures that we will tackle. It's the fact that by us leveraging our plug-and-play approach that we've been talking about, we'll be able to accelerate things like revenue growth management or global business services. If you look at cost of goods sold, it's the same thing. We've chatted about the benefits we'll derive on the transportation side because there are synergies, they weigh out, we cube out on procurement. There's a lot we've done over the last 3 years in terms of driving digital capabilities in procurement that's driving the productivity. And then in sales and marketing execution, we've done a lot in that space. Think of all the agency consolidations that we've done, look at how we've optimized then our working media spend. Look at how we've optimized trade spend. That's what's been allowing us to grow over the last few quarters, and that's what's going to bring all these synergies to life as we go into the deal closing. We're very excited about what they've announced earlier this year in terms of their organizational structure changes because that's basically just setting it up for a way that for day 1, we'll be much ready to execute.

Talk about revenue synergies. Actually, no -- I'm skipping revenues. We might run out of time. I'm going to come back to -- I'm going to skip it because -- we may come back if we have time. I wanted to talk about the scale and then the long tail within Kenvue's portfolio. So they've shared finally that they have 115 brands and 74% or less than 25% of sales -- sorry, 74 brands. So -- and a significant portion of SKUs are just 1% of sales. So we haven't seen any divestitures yet from them. I thought that, that would have happened by now prior to Kimberly's involvement. So just sort of what's your approach going to be. Do you think -- should we think about divestitures? Because there's a lot to be cleaned up there, it would always seem to me.

I'll say -- and I think Nelson will have some comments, too. But I would say, yes, the portfolio can always get better, right? I think portfolios are never fixed. I would say a couple of things. One, we're seeing it. I think one of the reasons they're pausing it is with the deal and everything happening, there's a lot going on. And so I think we're waiting to kind of make sure that we can close properly and get all the work done. But the thing that I also say is it is not as complex as it appears. Because what happens is because of regulatory requirements on a country basis and some brand choices they made, they -- again, they probably -- at some point in time, they operated very decentralized, right? And so there's a lot of brands and formulations for the same category, right? And so if you add it up by category, let's say, pain care, there's dozens of brands in different formulations, but it's all serving the same kind of need, right? And so on the surface, it looks very complex, but from an operating perspective, a little less. Part 2 is while there is a tail, and Nelson and I have some experience from our Kraft days, we also ran a portfolio that was incredibly complex at Kraft, but has also delivered all the profit of the -- or most of the profit of the company. And so I would tell you that the tail is profitable in general, right? And so it's not as easy as striking the tail. And then the third thing that I will say is a lot of the tails in international, I think I just mentioned, international, particularly in Latin American and EMEA is where the performance has been good. And so I think they've developed a way or a path to manage that complexity effectively. It doesn't mean that it's going to stay fixed this way because I think over time, there will be some things that would say, hey, not a great fit long term for what we want to do. There may be some things that we may want to come into the portfolio at some point, depending on how we think about need states and everything else. And so I would say there's always going to be an opportunity to get better. But Nelson is going to say, we're going to stay disciplined on capital allocation.

Yes. And I'll -- just to add to Mike's point, we've demonstrated, Lauren, over the last 3, 4 years. our discipline around portfolio management, where we identify that there is no clear path for a right to win, be it for a brand, be it for a country, be it for a category, we will make determinations on the portfolio. Back in 2023, we sold our Brazilian tissue and professional business. Back in 2024, we sold our personal protective equipment business. We exited private label largely. And we -- right now, we will be probably less than 1% of our revenue exposed to private label. And we are executing the transaction in the International Family and Professional Care business middle of this year. We'll be disciplined. We always want to make sure that we are creating and protecting shareholder value. It's an always on. And of course, it will apply to the new portfolio once we've closed the transaction with Kenvue, but in a disciplined manner.

Okay. Great. I need to talk about Tylenol and also Talc particularly since we're here. So big concern from investors still that we definitely get questions about. From the S-4, we know that your bid for Kenvue came down pretty substantially throughout the process, given all of this, the elevated risk. So just maybe you could share for the audience how you grew comfortable with the potential liability that's, again, potentially unknown size?

Yes. One, I'll start with the science supporting the safety and efficacy of acetaminophen continues to grow. And there was a report that came out at the beginning of this year that kind of further support of the safety. And in fact, it's -- I think even today by almost every governmental health agency, including the U.S. FDA, still recommends Tylenol is the only safe pain and fever reliever for pregnant women, right? And so we stand behind with Kenvue on the science and we're confident in that. In addition, and as we went through our due diligence process and recognize that we have directors like Sheri McCoy, who ran this business for a long time. And Joe Romanelli who was at Merck. Sylvia Burwell, who was the Head of the Health and Human Services department for the U.S. So the Board requested that we really get thorough. And so we did bring in some of the best advisers. Kenvue has hired an excellent counsel who's been defending the case very well, and they're from Kirkland & Ellis. We brought in Gibson Dunn, Ted Boutrous, who I think is generally regarded a top litigator within the U.S. We brought in King & Spalding, who's been arguing and defending successfully some of those Zantac cases. And so I think we brought in a really accomplished advisory team. And so we went through with an econometric firm to estimate what the liabilities are and everything else. And I would say, number one, we feel very good about the science and the defenses of Tylenol itself. And then I think I've said this publicly a few times, and we've gone through different scenarios of litigation. And I would say all scenarios end up being significant or I would say, generational value creation even if you assume some number for the litigation side. So we feel very good about both the science and then the economics of the deal.

Okay. So to round this out, I want to maybe take a step back. So you're -- the company is in the midst of a transformation that is finally taking hold optically stand-alone, Kimberly, I think, from a fundamental standpoint. Clearly, really excited about the opportunities in front of you. But M&A of this scale often proves more disruptive than initially expected. So I guess why acquire Kenvue and introduce more complexity to now to a story that was really beginning to take off. And what do you think Kimberly looks like in 5 years?

Yes. So that's exactly the -- I will say, Lauren, because I think you're channeling some -- a subset of investors, Chris, that are a little frustrated with me because they saw the play happening, Powering Care working, it's going to move in the right direction, right, finally, all that kind of stuff. . But I guess my retort is, okay, we definitely believe, and we believe our organic play is going great. And Powering Care is going to continue to go great. We're very confident. I think the thing is, though, building a company for the next 50 years, not for the next 5. And so if you look at the portfolio combined, I think there's going to be built-in tailwinds that are going to be tremendous for multi-decades. And I think not in 50 years, but in like, I would say, in 5 years, you're going to say, "Well, I can't believe you didn't think about this earlier." And so -- and we're going to do it the right way, right, by generating a virtuous cycle. And we're really excited about the potential. We're really excited about the Kenvue team, the organization. Our cultures end up being surprisingly similar, Lauren, in the fact that care is kind of at the core, like what motivates K-C'rs and what motivates Kenvue'rs is taking care of their consumers and help them live healthier lives. And so I think we'll be able to do that together better.

Okay. Great. We have to wrap there. But thank you so much. I learned new things today despite how much I already know about your company. So thank you for coming you.

Thank you.

Thank you.