The Procter & Gamble Company (PG) Earnings Call Transcript & Summary

Good morning, everyone. I'm Dara Mohsenian, Morgan Stanley's household products, beverage and food analyst. I'm pleased to welcome Procter & Gamble to Morgan Stanley's Global Consumer & Retail Conference. Before we begin, some important disclosures. Please see the Morgan Stanley research website at www.morganstanley.com/researchdisclosures for disclosures. If you have any questions, you can reach out to your Morgan Stanley sales representative. So with that, we're very pleased to welcome Procter here today, including Jon Moeller, who's the Vice Chairman, CFO and COO of Procter & Gamble; as well as John Chevalier, who's the Senior VP of Investor Relations. It's clearly been an exciting few years at Procter with a strong acceleration in top line growth and market share gains with a series of organizational changes implemented in the last few years. So it's a great time to have both Johns join us and give an update. I'm going to turn things over to Jon Moeller to begin with, and then I'll come back with Q&A later. Thanks, Jon, for being here.

Great. Thanks, Dara, and good morning. Let me first start by expressing our sincere hope that you and your families are safe and are well. I'm going to share a few slides. And then as Dara indicated, ask him to join me to spend time on questions that he's received from you. Before I get started, I have my own series of disclosures. So I need to let you know that, as you can see in our safe harbor statement, today's discussion may include a number of forward-looking statements. You can find important cautionary information in our most recent 10-K report, which, together with a reconciliation of non-GAAP measures, is posted on our Investor Relations website. The business momentum that Dara referred to started at P&G well before COVID-19. Very strong results in calendar year '19, top line, bottom line and cash. Our momentum then continued through fiscal year 2020. Organic sales, up 6%; organic volume, up 4%; core earnings per share, up 13%; adjusted free cash flow productivity of 114%. Each of these metrics in line or ahead of objectives that we set going into the year. Momentum then continued in the first quarter of fiscal year '21. Organic sales, up 9%; organic volume, up 7%; the core earnings per share, up 19%; adjusted free cash flow productivity of 95%. With this very strong start to fiscal '21, we increased guidance for organic sales growth, raised guidance for core earnings per share growth, increased guidance for adjusted free cash flow productivity and raised our commitment for cash return to shareholders. Here, you see the quarterly top line cadence, momentum building ahead of COVID and continuing through the first 3 quarters of this fiscal year. And the growth is very broad-based. 9 of 10 product categories grew organic sales in the first quarter. Home Care, up more than 30%; Oral Care, up mid-teens; Family Care, up double digits; Personal Health Care, Fabric Care, Hair Care, Skin and Personal Care and Feminine Care, up high singles; Grooming, up mid-singles; Baby, down low singles. Organic sales growth was broad-based across geographies as well. 5 of our 6 regions grew or held organic sales. 13 of our largest 15 markets grew organic sales. U.S. organic sales, up 16%; China, up 12%; Brazil, plus 16%; Canada, plus 15%; focus markets, up 11%; and enterprise markets, which are significantly impacted by the COVID pandemic, up 5%; e-commerce sales grew about 50%. 30 of our top 50 country/category combinations held or grew value share in fiscal 2020 and last quarter, which we've turned from routinely losing global value share to routinely gaining in January 2019 forward, again, highlighting the momentum of our business results prior to the pandemic. We built global value share of 30 basis points in fiscal 2020 and the first quarter of the fiscal year with growth across all time periods. Our strategies were working before the crisis and have served us well during these volatile times. There have been many puts and takes affecting the business and cost structure. As consumers spend more time at home, we see dynamics play out differently across different categories. More time at home benefits our Family, Fabric and Home Care businesses. But this same dynamic negatively impacts Grooming, men shave less while staying at home, and some other categories like the deodorants. Impacts have also differed across regions. While North America market growth has increased due to consumer spending more time at home, the reverse is true in our AMA region, for example. We've seen disruptions across multiple channels, closures across electro, specialty beauty, dental offices. In Japan, department stores still don't have beauty consultants, which impacts our premium SK-II business. Our P&G Professional business, our away-from-home business, has been impacted by low occupancy in hotels and restaurants. On the supply chain, we've seen some benefits from higher throughput as we simplify the number of SKUs. However, we've increased cost to source materials, staff factories and transport finished goods. Through all these puts and takes, our strategies have enabled strong results during this volatile period and leave us well positioned to deliver post-COVID. As we've outlined before, we've established 3 priorities that have been guiding our actions and our choices during the crisis. First is, of course, ensuring the health and safety of our P&G colleagues around the world; second, maximizing the availability of products we produce to help people and their families with their cleaning, health and hygiene needs. These products are more important than ever given the needs created by the current crisis, increased awareness of health and hygiene and the additional time that we're all spending at home. Third priority is supporting communities, relief agencies and people who are on the front lines of this global pandemic with product donations, PPE production, financial support and using our marketing and communications expertise to encourage consumers to support public health measures to slow the spread of the virus. Taken together, these priorities help ensure P&G is there for employees, consumers and communities who have always been there for us. These priorities are completely congruent with our strategic choices, which remain the right ones. They are the foundation for balanced top and bottom line growth and long-term value creation. A portfolio of daily-use products, many providing cleaning, health and hygiene benefits in categories where performance plays a significant role in brand choice. Superior science-based products delivered with superior packaging, consumer communication, retail execution and value in all price tiers where we compete. Superior offerings drive market growth, which in turn drives share, sales and profit growth. This creates a winning proposition for all concerned, high expansion versus zero sum. This is evident in our U.S. Fabric Care business. Over the last 40 years, P&G U.S. Fabric Care has grown by 5x, 500% in a market that has grown 4x. Market growth has been the main driver of P&G's growth, 80%, which we've driven with leading innovation. When we grow the market, we will grow share as we have in Fabric Care, up 5 points, with strong growth in profit and margin. Meaningfully superior unit dose detergents, Tide PODS and Gain Flings have driven over 90% of U.S. laundry detergent category growth since they were introduced at roughly a 50% price premium per load. Earlier in this year, Tide POWER PODS and Gain Ultra Flings were introduced, delivering consumer benefits associated with the current reality of larger and fewer loads by driving correct dosing, combating set-in stains, eliminating strong odors and giving a long-lasting scent. This innovation is contributing to high single-digit laundry category growth over the past 12 months with P&G's share of the unit dose segment nearly 80%, up over 1 point. 28% of U.S. households now use a unit dose detergent, up 12 points over the past 3 years, with much more opportunity ahead. Fabric enhancer scent beads are a great example of a superior product and package, packaging that shows the product and communicates the scent benefit with a squeeze scent release, distinctive and appealing. Fabric enhancers are the fastest-growing segment in the U.S. Fabric Care category, up double digits. And scent beads are the fastest-growing form, growing over 20% over the past 12 months. P&G's scent bead offerings are growing ahead of the market with cumulative value share growth of 8 points in the scent bead segment and 9 points in fabric enhancers over the past 4 years, superior innovation that grows markets and continues to drive strong results over time. Tremendous upside remains here, too. In the U.S. scent bead household -- our U.S. scent bead household penetration is only 18%, and beads are currently used in only 7% of laundry loads. We've recently launched into China, Thailand and Spain with additional expansion opportunities ahead. Another example of raising the bar on superiority is our global Home Care business. The Home Care team invested in product performance and packaging in each subcategory: hand dish, auto dish, air care and surface care, including the launch of Microban 24 surface sanitization products and Dawn Powerwash in February 2020. Brand communication was step changed with educational TV advertising, which delivered an immediate lift to the category and our brands by showing consumers more ways to use these products. In-store execution was elevated with additional navigational and educational signage to help consumers choose the product that was right for them. These superiority investments have yielded strong results and, most importantly, again, grown markets even before people started spending more time at home due to the pandemic. In the last 2 years, P&G Home Care has driven about 60% of global category market growth and accelerated organic sales growth from low single digits to double digits, increased profit, improved market share 1.5 points and increased household penetration. The business grew organic sales 7% in fiscal '19 and 7% in the first half of fiscal '20, ahead of the crisis, great momentum that only accelerated as people started spending more time at home. Global Home Care organic sales growth was 16% in fiscal '20 and more than 30% in the first quarter of fiscal '21. Our Oral Care business is another example of raising the bar on superiority and driving strong market growth with premium innovations that deliver superior performance and grow markets. Oral-B iO power brush offers an irresistible consumer brushing experience. It improves brushing efficacy and compliance with position-sensing technology. The value of the superior performance is evident to consumers even with a premium price, driving market size growth in the power brush category. iO is off to a strong start. Early results are ahead of target, and P&G's global value share in the brush segment is up 2 points over the last 3 months. Crest also continues to bring new innovations to the high-performance premium segment of the toothpaste market. Innovations like Gum Detoxify, Enamel Care and 3D Whitening with Charcoal have driven high single-digit organic sales growth for P&G's global paste business and contributed to the mid-single-digit market growth for the category. Our Oral Care team has also been innovating to strengthen our product ladder in the mid-tier. In North America, we've recently launched ARC white strips, and Gleem battery toothbrushes, complementing our premium Crest and Oral-B offerings, superior-performing products in their respective price tiers. Globally, P&G Oral Care's superior innovations have driven 35% of total category market growth over the last fiscal year, well ahead of our aggregate market share, with broad-based growth across paste, brushes, rinses and whitening products. Superiority is an opportunity that never ends. It's a relative measure versus the best competition in the market, not a static target. And of course, our competitors are not standing still. We must continue to invest to create and extend our margin of advantage and to drive growth in our categories. Superior offerings delivered with superior execution drive market growth, building businesses for retailers and mathematically building market share for P&G. We've made investments to strengthen the long-term health and the competitiveness of our brands, and we'll continue to invest to extend our margin of advantage and quality of execution for consumers around the world. The strategic need for these superiority investments, the short-term need to manage through the crisis we're all facing and the ongoing need to drive balanced top and bottom line growth, including margin expansion, each underscore the importance of productivity. We're completing our second 5-year, $10 billion productivity program, but we won't stop there. Productivity has become a part of who we are. It's now as integral to our culture as innovation. We're driving cost savings and efficiency improvements in all facets of our business, cost productivity and cash, up and down the income statement and across the balance sheet. Success in our highly competitive industry requires agility that comes with a mindset of constructive disruption, a willingness to change, adapt and create new trends and technologies that will shape our industry for the future. This applies across all areas of the value chain, including innovation, brand-building, the supply chain and digitization and data analytics. We're driving constructive disruption in our innovation by embracing lean innovation, acting with the speed and agility of a start-up to create the future. In brand-building, we're reinventing media using precision tools like propensity modeling that help us understand where our consumer is on their path to purchase, which allows us to reduce spend while increasing our reach. In our supply chains, we're advancing our network capabilities in the face of the COVID-19 crisis, and we'll build some of these changes into how we work in the future. This includes accelerating the use of data platforms and machine learning to better understand consumer consumption and raw material availability. Finally, in the U.S., Europe, Latin America and Asia, we're using data and analytics to better ensure we're in precisely the right stores down to the neighborhood level with the right shelf sets, placement, sampling and marketing, resulting in a better consumer experience and category growth. The structural interventions we implemented 18 months ago are working, 6 industry-based sector business units that manage our 10 product categories with a differentiated approach in focused markets and enterprise markets. And very small corporate groups with best-in-class function expertise are also serving us well. A more empowered, agile and accountable organization with little overlap or redundancy flowing to new demands, seamlessly supporting each other to deliver our priorities around the world. These strategic choices we've made, again, to focus and strengthen our portfolio in daily-use categories where performance drives brand choice to establish and extend the superiority of our brands, to make productivity as integral to our culture as innovation, to lead constructive disruption across the value chain and to improve organization focus, agility and accountability, are not independent strategies. They reinforce and build on each other. When executed well, they grow markets, which in turn grow share, sales and profits. With our integrated strategies, we remain well positioned to serve consumers and create value in an attractive industry. We really do believe there is a bright future, and our strategy is unwavering. Consumption of our products is not likely to dissipate. In fact, the relevance of our categories in consumers' lives potentially increases. We will serve what will likely become a forever-altered cleaning, health and hygiene focus for consumers who use our products daily or multiple times each day. There may be a continued increased focus on home, more time at home, more meals at home with related consumption impacts. The importance of noticeably superior performance potentially grows. There's potential for increased preference for established, reputable brands that solved newly framed problems better than other alternatives, potentially less experimentation, potential for a lasting shift to e-commerce, both e-tailers and omnichannel. Our experience to date makes us believe we are generally well positioned in this environment. We're discovering lower-cost ways of working with fewer resources, today's necessity constructing the productivity inventions of tomorrow. New digital tools are being brought to the forefront, providing another productivity rocket booster on the factory floor and in the office environment. Organizational agility to meet the changing needs of consumers and retailers becomes even more important. So in the longer term, we believe P&G is well positioned to serve consumers' heightened needs and changing behaviors and to serve the changing needs of our retail and distributor partners, all of which are critical to long-term value creation. Our integrated strategies were yielding strong results before the COVID crisis. These strategies are working during the crisis, and we're confident these strategies are the right ones to guide us after the crisis. That said, in the near term, we continue to operate in a very dynamic environment. The prospects of a vaccine and more widely available therapeutics are promising. There is continued hope for additional economic stimulus in the U.S., but we do anticipate a challenging environment through the balance of fiscal '21, especially as cases continue to rise in many parts of the world. These dynamics can result in an increased cost to operate. There's a risk of supply chain disruption from our operations or those of our suppliers being shut down due to local health mandates. Despite this, our improvement strategies are working, which is why we were able to raise fiscal year guidance in our last earnings call. We will manage the short to midterm, consistent with the strategy we've outlined many times and against the immediate priorities of ensuring employee health and safety, maximizing availability of our products to serve cleaning, health and hygiene needs, and helping society overcome the challenges of this crisis. We're stepping forward, not back. We're doubling down to serve consumers in our communities. We're doing this in our interest, in society's interest and in the interest of our long-term shareholders. With that, I'll ask Dara to join me for Q&A.

Great. Thanks, Jon. That was very helpful.

So look, you mentioned that, obviously, the organizational strategy changes have really paid off in terms of driving improved performance both pre-COVID, even more so during COVID, and positioned you well post-COVID. As you think about those strategic changes and the impact it's had on P&G's market share and accelerating category growth, how sustainable do you think those benefits are? Are you sort of most of the way through those benefits? Is it more of an enduring benefit as you look out over time? And just your sense of sort of the payback from here now that you're a few years into a number of these key changes.

If we step back and look at the design intent of some of the organization changes, a large part of it was driven by a desire to focus on the largest opportunities. An example was the decision to manage the business in what we call the focus markets, which were the largest markets where we generated about 80% of our sales and 90% of our profits, with end-to-end business structures reporting to category leaders and to have them focus on growing the market share, sales and profit in those markets and not being distracted with many of the opportunities that existed in smaller markets. And so one measure of whether the organization change is really yielding a result is, what are the growth rates in those focused markets and have they accelerated? And the answer is the growth rates are very strong, and they have broadly accelerated. I mentioned the U.S. numbers last year and in the first quarter. I mentioned the China numbers last year and in the first quarter, very strong growth rates in our 2 largest markets in terms of both sales and profit. And we see that across the other focus markets as well. I don't see any reason why that ends. The degree of growth may change year in and year out depending on macro environment, competitive environment, et cetera, but the benefits of really focusing on those must-win markets should continue. On the enterprise side of the coin, we've really only been in the structure for about 18 months. And we're -- my objective going into it was to ensure that we -- in those markets, we're focusing on the biggest opportunities. We're eliminating some of the losses that we had on some of our businesses while continuing to be a source of growth for the company. And that's exactly what's happened. So we exited last year with only 2 countries losing money across 100 in the enterprise markets, which, for someone like me who's been here for over 3 decades, is incredible. And I expect by the end of this year, barring some significant macro or geopolitical events, we'll be making money in all these markets. We did that while growing the business and while growing market share. That type of result, again, I don't see, absent significant macro impacts, why that doesn't accelerate as we go forward. So I'm thrilled with the change that the organization has made. I'm thrilled that they have broadly embraced it and capitalized on it. Our employee surveys are up significantly in areas that are important, such as be it the decision-making, accountability, understanding of the strategy and my role in it, all of which we still have areas that we -- all of which we can still improve, but again are reflective of a much better organization structure that's delivering and executing our strategies in a much more consistent way. Sorry for the long answer, but it's an important topic.

Right. That's helpful. And then looking specifically at P&G market share, I mean we haven't seen a lot of sustained success for most of the larger companies in the household products space over time, multiyear or 5-year, 10-year, whatever it may be. Just as you look at the type of reaction you're seeing in the marketplace from a competitive standpoint, can you sort of detail the type of reaction you're seeing? Contrast that maybe with what you've seen in the past, just in terms of us thinking about the durability of P&G's market share gains going forward.

I think that it's a very important question, and there's not an absolute answer. As you can appreciate across categories and markets, the responses tend to be varied. Having said that and most importantly, there's a reason I talked about driving market growth 100x in our prepared remarks that we just went through. That's a difference in approach. It's much better if we can grow our top line by creating new business than it is when we grow our top line by taking business from someone else. And in the past, there has been, at least to a degree, a mindset of taking business, taking market share. We want to build new business, build markets. And -- because when you take business, it puts competition in a very difficult spot. Our businesses are fairly some very capital-intensive. And when I'm operating at less than full capacity, I've got an economic problem. And that problem is typically solved by responding in ways that allows me to gain that share back and reutilize the facilities and the entire ecosystem through which I'm bringing products to market. If we can create new business as opposed to take business, a very different dynamic is created. And oh, by the way, the only growth our retail partners care about is that, is it new to the category? They don't care about our respective market shares. So to the extent that we can continue to innovate to drive superiority advantages in ways that grows markets, just like in some of the examples we talked about earlier this morning, our share gains should be more sustainable. No guarantees. And we operate in very competitive industries, so there will always be some up and down, and we'll never build share everywhere. But that mindset is a different mindset and a much more sustainable and, oh, by the way, much more profitable mindset. When we entered the adult incontinence business 5 years ago, we knew very clearly that we had to accelerate the rate of growth in that market in order to succeed. We had entrenched competitors in a very capital-intensive industry. And if all we did was go in and take their business, it wasn't going to end well for anybody. We've doubled the rate of market growth in that category, both in the U.S. and in the European countries that we entered. And it's generally been a win for everybody, including, most importantly, the consumer. So that's our mindset that leads to more sustainable market growth than potentially has occurred in the past. There are no guarantees. We do operate in a very competitive industry, but I much more like our prospects with this approach.

Right. Okay, that's helpful. And then switching over to your relatively new COO role. Any surprises so far? Obviously, you've been a key architect at P&G as CFO for a long period of time. But any surprises to you in that COO role? You mentioned some of the stronger performance in the enterprise markets recently, but I'd just be curious for any surprises or sort of tweaks in strategy that have occurred as a result of you taking that role.

I don't -- success in a large multinational business is not an individual sport. It's a team sport. So I wouldn't attribute anything to me, and I don't want to personalize my response to the question. But what really has been surprising is the degree to which we can inflect markets and the profitability of those markets by bringing true advantage at a noticeable level, first used to all 5 vectors of superiority. It's really quite amazing. In one of our most recent fiscal years, if you look at the top 50 category/country combinations, in those in which we judged ourselves to be superior in 4 out of the 5 vectors of superiority, we drove our intended business metrics, household penetration, share, sales growth, profit growth, value creation, 80% of the time. And where we were superior in 3 or fewer vectors, we grew all of those business metrics exactly 0% of the time. And just seeing this come alive in the marketplace is a real confidence builder because while, again, we operate in very competitive industries and competition is always moving and improving, superiority is something that is within our control. And we've got the productivity program to continue funding that. And the consistency and the degree to which that has had a positive impact on markets and our own business is truly -- the degree is a surprise to me.

Okay. And along that vein, in terms of superiority, one of the big opportunities for P&G over time theoretically is trade-up potential and premiumization in emerging markets over time. Obviously, the superiority and core competency of P&G in terms of value-added benefits and then marketing it sort of fits into your sweet spot. Maybe just give us an update here. China, obviously, went through a pretty severe COVID period and has come out of it. But thoughts around premiumization in China, in particular, but then also outside of China, some of your other emerging markets, what you're seeing here and if your thought process changes at all longer term post-COVID around that opportunity.

I think the opportunity is always going to be there. And the consumer desire is going to be there, not to premiumize, but to improve their lives through better-performing products in categories, daily-use categories where performance drives brand choice. The extent of their ability to realize that desire may ebb and flow as both the health situation and the macroeconomic situation evolve. But the long-term possibility that exists for those consumers to improve their lives pretty much should make us confident in our ability over the right time frame to continue to, if you will, premiumize the business. But again, the focus isn't premiumization. The focus is better meeting consumer needs in categories where performance drives brand choice. China is a great example of that, as you mentioned, not just historically over the last 6 or 7 years, but post-COVID. The same is true in beauty categories in Brazil. The same is true -- the unit dose laundry experience and success, I talked about the U.S., is not just a U.S. success. It's better serving consumers' needs in the laundry category and the willingness of those consumers to pay a little bit more for that improvement in their lives, whether that's convenience, whether that's hygiene, whether that's aesthetics in terms of the appearance of themselves and their families. So it's not something -- again, it has to be rooted in service to consumers. But when that happens in categories where performance matters, we should be able to create greater value over time.

Great. And then maybe switching to the margin side, you mentioned you're coming up towards the end of your second restructuring program. How do you think about productivity opportunities beyond that program? Should we see a big drop-off with the lack of a discrete program? Or are there enough big buckets of opportunity left that we should still see pretty robust productivity similar to historical levels? And then second, are there any big opportunities that have opened up for you post-COVID maybe that weren't there before as you think out over the next few years?

A lot of opportunity remains, and a lot of additional opportunity has been highlighted by the experience that we've all been going through with COVID. Today is a perfect example. The cumulative productivity that's been generated by us together, meeting without traveling and spending a lot of time in the hotels and eating better than we probably would or need to, is huge. And Dara, you and I were talking about this a little bit before the call, how much of that stays post-COVID? How much of that goes back to the old ways? I don't have the answer to that, but I would guess we're talking, in any event, we're talking about significant change on how work gets done. And those changes generally are much more productive in their approach. The advancement of digitization that's occurred as a result of this global experience is incredible. It's actually -- it's very interesting. I mean things like the technology we're using today, like Microsoft Teams or like Webex, existed well before the pandemic, and we just didn't use them, at least to the extent that we are now. And this collective usage experience is significantly advancing people's willingness and desire to improve their own work productivity with the digital tools that are available. We've seen situations where we have maintained 90% throughput in our manufacturing facilities with, at times, only 50% of the resources. That's not sustainable, but there are certainly opportunities that are identified within that. The whole experience we've all been through on social distancing causes a desire to automate to avoid situations where there are a lot of human beings in close proximity to each other working towards an output, and there's significant opportunity there. So I believe -- there's a chart just to give people hopefully confidence. And you've heard me talk about this many times. The chart that I show at each of our leadership team meetings, people get tired of seeing it, I don't. And what it shows is what you would have to believe to deliver top 1/3 total shareholder return in our industry if you were going to do it entirely through the top line, in other words, if you were going to say that margin growth was no more, you would have to grow top line 8% every year, year in, year out to deliver top 1/3 total shareholder return. That's never happened for anybody in this industry for a sustained period of time. So we must continue to build margin at the same time we continue to drive top line growth. And if you flip that and say, all right, margin growth is really important. How about we deliver our top 1/3 total value -- total shareholder return entirely through margin growth? You'd have to believe that you can grow margin 180 basis points a year every year. So 5 years, basically 10 margin points in a highly competitive industry, very unlikely. So the necessity of growing the top line and the bottom line, balanced growth and value creation, if you -- or an opinion, it's a fact and a requirement, and we're committed to both.

Great. And then maybe we can touch specifically on the U.S. market, given its importance to your company. Obviously, very strong growth, double-digit growth the last couple of quarters here. As you look at the balance of the fiscal year, how much of that do you think was tied more to a COVID pickup, given in the U.S., there's been more of an impact than what we've seen around the world? How do you think about sort of your momentum in the U.S. market and that momentum continuing in the balance of the year? And then secondarily, the promotional environment, obviously, has been -- there's been a pullback in the last few quarters here. What are you anticipating going forward in terms of the promotional environment as we cycle over the COVID comps?

So let me answer the promotion part of the question first, and I probably don't have these numbers exactly right, but I think I'm close. Pre-COVID, about 33%, 34% of volume was moving on promotion in our categories in the last quarter of last fiscal year. So as we went through April, May, June, that was reduced to 17% of volume that was moving on promotion. That returned in the last quarter to about 26%. So you're already seeing a return to, if you will, normal promotion levels in some categories in the results that have already been posted. It's not like that's a big scary thing that's waiting out here. I expect we will return as supply and demand equate to each other, which they're not yet in some categories, to those historical levels of promotion. So that's kind of the rough metrics around that. In terms of the COVID pickup in North America, there clearly was pickup in some categories. There clearly was deceleration in other categories. And how that nets out when we get through all this, combined with what I think will be habit formation and habit change related to household activities, which will maintain a somewhat higher level of consumption that occurred pre-COVID, where that all shakes out, I don't know. But I don't look at it as, oh, my goodness, there's this cliff we're going to have to navigate. There are puts and calls across the categories. There are puts and calls across the channels. There are puts and calls across the geographies. And I think our portfolio actually puts us in a pretty good place to both be able to step up and serve consumers' changing habits and needs, but also to survive a fair amount of volatility as consumption readjusts itself post-COVID.

Right. Okay. And then maybe if I could slip in one last question here. Marketing spend, advertising has moved up pretty significantly over the last couple of years. As you sit here today, do you feel like the organization is sort of fully funded at this point or at the right level of advertising as a percent of sales? Or is there a belief that it continues to move up over time from here?

To the extent that we are successful in continuing to bring innovation to market that grows markets, that only happens through generation of awareness of the benefits of those products and how they help me in my life. So to the extent we continue on this journey, I don't know that I would say that advertising ever is capped per se. It's part of the virtuous cycle that keeps things moving forward. Having said that, we have more opportunities for efficiency in advertising than we've ever had. I talked briefly about propensity modeling in our prepared remarks. There's huge opportunities to increase reach, to increase awareness while decreasing the cost of each of those points of reach and points of awareness.

All right. Well, with that, we're out of time. We really appreciate you guys joining us. This is very informative. And everyone, please stay safe, and we'll end things here.

Thanks, Dara.

Thanks again.