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

Good morning, and good afternoon, everybody. I am Steve Powers. I'm the Head of Deutsche Bank's U.S. Consumer Goods Research, and I'm very happy to welcome Procter & Gamble back to our conference today. Joining us from P&G are Jon Moeller, the company's Vice Chairman and Chief Operating Officer; Andre Schulten, Chief Financial Officer; and John Chevalier, Senior Vice President of Investor Relations. We thank each of them for joining us. We thank each of you for joining as well. Now before we begin, just a few logistical points for those listening in. Jon is going to open things up with a brief update and overview presentation. And then we'll move on to Q&A. If you are joining us via the conference portal, you should see the ability to submit questions in the window in front of you. Please feel free to make liberal use of that at any time, and I'll do my best to integrate your questions into the conversation as we go when the time comes. And with that, over to you, Jon. Thanks for being here.

P&G would like to remind you that today's discussion will include a number of forward-looking statements. If you will refer to P&G's most recent 10-K, 10-Q and 8-K reports, you will see a discussion of factors that could cause the company's actual results to differ materially from these projections. Additionally, the company has posted on its Investor Relations website, www.pginvestor.com, a full reconciliation of non-GAAP and other financial measures.

Good morning, and good afternoon. I'd like to start today with a review of our results and near-term market realities. I'll then talk about the integrated strategies and priorities that have been driving our momentum before and during the COVID crisis. We'll close by addressing longer-term post-COVID prospects, which we believe are strong. First, to look at results. Strong momentum pre-COVID. In the 6 quarters preceding COVID, we grew our top line an average of 5%, which was ahead of market growth. We built momentum during this period with calendar year 2019 organic sales up 6%. This momentum has continued over the past 5 quarters, with plus 7% organic sales growth, while overcoming significant challenges, including the lockdown in China, closure of the travel retail, electro, specialty beauty and away-from-home channels, operational challenges, safely staffing our facilities, and sourcing materials necessary to maintain and in some categories, significantly increase production to serve heightened consumer cleaning health and hygiene needs, a very strong top line. This top line growth, our innovation programs and productivity progress helped drive strong pre-COVID bottom line growth. Calendar year 2019 quarterly core earnings per share growth plus 6%, plus 17%, plus 22%, plus 14%. That strength continued over the past 5 quarters, with core earnings per share growth of 11% on average. Currency-neutral core earnings per share plus 20% in calendar year 2019 pre-COVID, up 15% on average during COVID. Earnings flowing through to cash, averaging more than 100% adjusted free cash flow productivity. In April, we announced a 10% increase in our quarterly dividend, reflecting strong results and confidence in our future. This is the 65th consecutive annual dividend increase and 131st consecutive year in which P&G has paid a dividend. P&G is one of only 10 U.S. companies to pay a dividend for more than 120 consecutive years. Only 3 U.S. companies have increased dividends more consecutive years than P&G. Over the last 10 years, our annual dividend has increased from $1.97 per share to $3.24 per share, up over 60%. This has contributed to a strong cash return to share owners. Between dividends and share repurchase, we've returned $12.5 billion in cash in fiscal '19, $15.2 billion in fiscal '20 and estimate $19 billion for fiscal '21. Over the past decade, we've returned more than $125 billion of cash to share owners through dividends and share repurchase. Turning back to top line. Growth has been broad-based. 9 of 10 categories are growing organic sales through Q3. Home Care grew over 20%; Oral Care and Family Care, up double digits; Hair Care, up high single digits; Fabric Care, Skin and Personal Care, Grooming and Feminine Care, up mid-singles; Personal Health Care, up low single digits; Baby Care down low single digits. Continued strength in our 2 largest markets. In the 6 quarters preceding COVID, U.S. organic sales were plus 5% on average. In the 5 quarters during COVID, the U.S. grew plus 13%. Greater China was growing 11% pre-COVID and has grown 10% on average during their COVID recovery. Focus markets up 9% through Q3 and enterprise markets, which are significantly impacted by market contraction related to COVID, still up 3%. E-commerce sales are up about 50% fiscal year-to-date. Share momentum remains very strong. In the U.S., we're nearing record share levels. Strength is broad-based with all 10 categories growing or holding value share over the past 3 months. Aggregate global market share growth of 40 basis points in fiscal '20 and 30 basis points through March. Consumers are increasingly choosing P&G brands. We will undoubtedly experience more volatility as we move through the crisis. Quarterly results will not move in a straight line, and it will be more difficult to predict. The near-term will be challenging. Input costs are rising sharply. Current spot prices for materials, such as resins, chemicals and other ingredients, are up anywhere from 30% to 200% versus April 2020. Most of this impact has occurred in this calendar year. Freight costs have also increased substantially due to several factors affecting the supply of drivers, the demand for drivers and trucks, and rising diesel fuel costs. Truck drivers, just like all of us, have had to deal with the effects of COVID on their health, the health of their families and the dynamics of things like virtual school for their children. Stimulus programs have provided a source of alternative funds. And as reopening progresses, increasing job opportunities outside of trucking are sometimes more attractive. Each of these has reduced the supply of drivers. As a transformation to an even larger digital economy continues, the demand for trucks continues to increase at each step of the chain down to delivery to homes. Diesel fuel costs are up more than 25% versus April 2020. For P&G, the combination of commodity cost increases and higher freight costs have added $600 million after tax of additional costs since the start of this fiscal year. A core earnings per share headwind of around $0.23 per share, with much of the increase affecting the fourth quarter. We will offset a portion of this impact with price increases, but there's a lag between the time when costs begin to rise and when pricing is implemented to provide an offset. Our Baby Care, Feminine Care and adult incontinence businesses have announced mid- to high single-digit price increases in the U.S. that will go into effect in mid-September. Earlier this year, we executed a significant product upgrade on our Japan liquid Ariel detergent, coupled with a 35% price increase. We recently announced to retailers a list price increase on Tide Simply, Cheer and Era in the U.S. effective in September. In countries such as Turkey, Russia, Argentina and Brazil, we've announced price increases in most product categories to offset a portion of recent currency impacts. We're analyzing input costs and foreign exchange impacts in other categories and markets and are assessing the need for additional pricing moves. When opportunities allow, we will close a couple of price increases with new product innovations, adding value for consumers along the way. Another unfortunate reality is that in many countries, the number of COVID cases are the worst they've ever been. As the U.S. continues to reopen and China remains strong, lockdowns in some countries are widespread. Risk of supply chain disruption remains high. Channel closures will likely continue. Current models predict it will be 2023 or 2024 before there are enough vaccines broadly distributed to cover the world's population. While early forecast for 2021 GDP were calling for rebounds, virus spikes in markets like India and Brazil will likely delay their recovery. Even in these difficult markets, P&G market share has generally been strong, indicating the trust and confidence consumers have in our superior performing products. Predicting year-on-year growth rates is especially difficult given the extreme market level volatility we experienced last year. For example, in our fourth quarter last year, the U.S. and China accounted for more than all of our organic sales growth. As we lap those dynamics this quarter, we're expecting a sharp headwind in gross margin from geographic mix. Impacts like these, coupled with rising commodity costs and freight imply a strong challenge in the near term until pricing and productivity savings ramp up to provide a larger offset. We believe this is a temporary bottom line rough patch to grow through, not a reason to slash investment in the business and not a reason to abandon a strategy that has been working well before and during the COVID crisis. As we continue to manage through this crisis, we'll continue to focus on the 3 priorities that have been guiding our near-term actions and choices. First is 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. Third priority is supporting the communities, relief agencies and people who are on the front lines of this global pandemic. These priorities are completely congruent with our strategic choices, which we remain confident in and 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 and categories where performance plays a significant role in brand choice. In these performance-driven categories, we've raised the bar on all aspects of superiority, product, package, brand communication, retail execution and value. Superior offerings delivered with superior execution drive market growth. Leading category growth with superior offerings mathematically builds market share and builds the business for our retail partners. We've made investments to strengthen the long-term health and competitiveness of our brands, and we'll continue to invest to extend our margin of advantage and quality of execution, improving options for consumers around the world. Here are a few examples. Tide and Ariel are innovating to extend their superior cleaning performance advantages while encouraging consumers to reduce their carbon footprint. Ariel's new campaign, Every Degree Makes a Difference, advocates lower washing temperatures. Up to 60% of laundry's carbon footprint comes from heating the water in the washing machine. Lowering the washing temperature is the single most important thing we can all do to reduce the environmental impact of laundry. To achieve our goals, we continue to innovate to ensure superior performance in cold water, and we utilize superior communication to educate the consumer on the benefits. Let's take a look at the copy. [Presentation]

Superior product and packaging innovation. Superior brand communication. As a result, globally, Fabric Care share is up 50 basis points past 3 months. Shifting to our Oral Care business. Superior performance is driving market growth. Oral-B iO power brush offers an irresistible consumer brushing experience. It improves brushing efficacy and compliance with position-sensing technology. The value of this superior performance is evident to consumers even with a premium price, driving market growth in the power brush category. P&G's global value share in the brush segment is up 2.5 points over the past 6 months. Let's take a look at the iO power brush copy. [Presentation]

Through Q3, P&G has contributed more than half of U.S. power brush category growth, driven by iO, which is expected to reach nearly $200 million in sales in fiscal '21. IO has already achieved more than 50% share of super premium toothbrushes globally. Crest 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 mid-single-digit organic sales growth for P&G's global paste businesses through Q3, contributing to strong market growth for the category. In the U.S., we recently launched the next breakthrough in teeth whitening. Crest Whitening Emulsions create a micro thin layer of concentrated peroxide droplets, enabling consumers to move beyond occasion-based whitening to a product that can be used up to 4x per day with no rinsing or brushing needed. Let's take a look at that copy. [Presentation]

The results are strong. This innovation has achieved a 13% value share, is contributing toward high teens organic sales growth through Q3 and is driving nearly half of the U.S. whitening category growth. Moving to our North America Baby Care business. We've recently upgraded Pampers Swaddlers, delivering a significant softness improvement. In Baby Care, we're innovating across tiers, ensuring we maintain superiority in the premium tier while we innovate to regain superiority in the mid-tier. Early results are encouraging with U.S. Pampers Swaddlers' share accelerating from 1 point past 6 months to 1.4 points past 3 months, contributing to total Pampers market share growth of over 2 points in the past 3 months. Strong in-store execution enabled 2 points of distribution gain over the past 3 months. Moving to our European Gillette business, an example of product and packaging superiority. Superiority is being delivered by improving a majority of our handles and cartridges, moving to plastic-free packaging on our razors, simplifying our lineup, improving on-shelf fundamentals and improving margin for our retail partners. In France, our first country of launch, the Gillette business is growing sales, users, household penetration and share. Good business results and good for the environment. The move on packaging, which will extend across our Gillette and Venus brands in the U.S. and Europe, saves the equivalent of 85 million water bottles per year. Our Home Care business is another example of strong category growth and business momentum, driven by superior innovation in each subcategory. In Dish Care, Dawn Powerwash delivered around $150 million in sales in year 1 and was a significant contributor to Dawn's U.S. all-outlet market share growth of more than 400 basis points over the period. In Global Air Care, Febreze SMALL SPACES innovation and the product upgrade on plugs has driven high teens organic sales growth through Q3 and 70 basis points of value share growth over the past 12 months. Global Surface Care has grown organic sales nearly 40% fiscal year-to-date, with global value share up over 1 point in the past 6 and 12 months behind strong innovations across brands, including Mr. Clean, Clean Freak, Magic Eraser Sheets, the launch of Microban 24 in February 2020 and Swiffer wet and wood floor launches. These superiority investments drove market growth and strong results even before people started spending more time at home and adopted new cleaning habits during the pandemic. The business grew organic sales plus 7% in fiscal '19 and plus 16% in fiscal '20, strong momentum that only accelerated. Global Home Care organic sales are up 27% through 3 quarters of this fiscal year, driving 1.3x our fair share of market growth, about 40%, with P&G market share up 1 point. Superiority is enabling strong results in our China Hair Care business, with organic sales up mid-teens through Q3, one of the strongest growth periods in the last decade. Pantene is leading the growth with organic sales up over 20% fiscal year-to-date, following 4% last fiscal year after multiple years of flat to declining sales. The brand addressed significant gaps across several superiority vectors, launching premium innovations in the underdeveloped segments of conditioners and treatments, and improving how we communicate with consumers online. Two examples of premium innovation launched in the fast-growing conditioner and treatment segments, Pantene Quench Shot Masks and 3 Minute Miracle have successfully attracted new consumers to the brand as well as expanded the regimen of the current Pantene shampoo consumer. These innovations have contributed to around 35% market growth in these segments online over the past 12 months. Superior brand communication required driving strong social buzz for our products in a highly fragmented category, where consumers frequently seek information from social media and key opinion leaders before buying their beauty products. Pantene shifted most of its advertising dollars into quick digital engagements and influencer live streaming during major online promotional events. Let's watch a few. [Presentation]

Results are strong. Pantene's social buzz was a 660 index versus a year ago. And for the first time in the brand's history, Pantene became the #1 conditioner brand in the 2020 Double 11 event. Both Quench Shot Masks and 3 Minute Miracle are on track to deliver sales growth over 100% this fiscal year, disproportionately contributing to the strong category growth in these segments, penetration gains above 10% for Pantene conditioners and online share gains of almost 1 point for the brand. Superior retail execution is also driving growth. In the U.S., our Fabric Care business worked with Kroger, our grocery retail partner, to improve the quality of the shelf arrangement with bigger, bolder brand blocks. Over the past 2 years, our business there has grown over 20%, and our share is up nearly 6 points. Importantly, category sales have increased over 9%, with P&G driving 100% of the growth. We recently launched Fairy dish care at multiple retailers in France. In this very competitive market, the team focused on big in-store events, displays and share of shelf. Superior retail execution helped Fairy achieve 20% share of shelf and 20% market share in just the first few weeks. Our superior retail execution is a competitive advantage. P&G was ranked #1 for the sixth consecutive year by our retail partners in the most recent Advantage Report, extending our lead over household and personal care and food and beverage competition. P&G was ranked #1 in the U.S., #1 across focus markets and #1 in each of the enterprise markets. Importantly, ranked #1 globally across all 7 performance areas. Superiority extends to consumer and customer value. In April 2020, we concentrated our Tide liquid formula in the U.S. and Canada to reduce the amount of water and drive more cleaning power per drop, which resulted in 2 to 3 points of consumption lift for Tide and enabled category growth. Let's see how this is communicated to the consumer. [Presentation]

Given the strong results of this execution on Tide, we're concentrating the balance of our U.S. and Canada laundry liquid portfolio in September. Superiority is an opportunity that never ends. It's a relative measure versus the best competition in the market. It's not a static target. There is always upside to grow categories and delight consumers. A good example of this is fabric enhancers, the fastest-growing segment in the U.S. Fabric Care category, up double digits over the past 12 months. Despite strong sustained growth, there remains significant upside potential in household penetration across all forms, liquid fabric enhancers, scent beads and dryer sheets. And once we're present in a consumer's household, significant opportunity exists in load penetration, which is illustrated by the table on the right. We've made investments to strengthen the long-term health and competitiveness of our brands, and we'll continue to invest in advertising, innovation and go-to market execution to extend our margin of advantage for consumers around the world. The strategic need for these investments, the short-term need to manage through rising input costs and the ongoing need to drive balanced top and bottom line growth, including margin expansion, underscore the importance of productivity. We've delivered significant savings over the past 10 years, and we see many more opportunities ahead to reduce cost and improve operational efficiency. Productivity work never ends. We're delivering savings and efficiency improvement in all parts of the organization and on all elements of cost 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 by embracing lean innovation, acting with the speed and agility of a start-up to create the future. We're reinventing brand building with precision tools like propensity modeling that allow us to reduce spend while increasing our reach and relevance. Over the past 5 years, we've delivered over $2 billion in media savings and efficiencies, much of which has been reinvested into higher reach and effectiveness. We see much more opportunity ahead for further savings and greater effectiveness. We're advancing supply chain network capabilities in the face of the COVID crisis, and we'll build some of these changes into how we work in the future, accelerating platforms and machine learning to better understand consumption patterns 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 shopper experience and driving category growth. The organization structure we implemented in July 2019 is working, 6 industry-based sector business units managing 10 product categories with a differentiated approach in focused markets and enterprise markets and very small corporate groups with best-in-class functional expertise. 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 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 profit. We believe we're well positioned for the future. The relevance of our categories and 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 is potential for increased preference for established reputable brands that solve newly framed problems better than 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 giving rise to the productivity inventions of tomorrow. New digital tools are being brought to the forefront, providing another productivity driver on the factory floor in our labs and in the office environment. Our business exhibited strong momentum well before the COVID crisis. We've strengthened our position further during the crisis, and we believe P&G is well positioned to serve the heightened needs and new behaviors of consumers and our retail and distributor partners, post crisis. We have the right strategies, we have the right portfolio. We have the right organization structure. We have a team of 99,000 employees focused on executing to delight consumers, win with customers and deliver balanced growth and value creation. We're stepping forward, not back. Focused on growing through the near-term challenges we're facing, 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 share owners. Thank you.

Thanks for that, Jon. I appreciate it. Welcome, everybody. Welcome, Jon and Andre. I guess I want to pick up on some of the strategic themes you touched upon there. But as you alluded to, I think many investors are trying to size up here now, not only for businesses like P&G, but just in general. And I think personally, there's tremendous support for what P&G has accomplished, how you've accomplished it and how the business is positioned for the long run. But just amidst reopening recovery trends that are far from solidified and the inflation that you called out in the presentation, there's just hesitancy to say this is the time we should double down on P&G. So -- and I know you all and David will give more of a full outlook when you -- alongside fiscal 4Q results. But what can you say to those investors who are looking for a clearer picture of how P&G will fare through this hopefully temporary transition period over the next few quarters, and who may be concerned about some of those inflationary and mix and comparison headwinds that you called out?

That's a big question. Let me take it in several different slices. The momentum on our business has never been stronger. If you look at our sequential share progress, that continues to build. We will, as we come out of COVID, hopefully on a global basis at some point here, have categories that have disproportionately benefited from changes in consumer habits and needs, which will -- in which the rate of growth will be reduced. On the other hand, we have categories that have been negatively impacted and channels that have been negatively impacted by COVID that as things reopen should increase significantly. We also have, in the year that we just -- if you look, for example, one of the categories that contracted during COVID was deodorant. I just saw the latest report a couple of days ago on the deodorant category in the U.S., which is now at 15%. So as things reopen, there are some things that will be negatively impacted, some things that will be very positively impacted. The other thing that we've all kind of read and heard about but probably haven't translated to its impact for P&G is what happened to flu and cough, cold. So we had one of the worst seasons ever in our PHC business, still grew 3% and built significant share. But presumably, as we all begin interacting with each other again, that becomes a significant positive. The other thing I would point to, and then I'll come to inflation and cost pressure, but we try to make it very clear in the presentation we just shared with you, our business had very strong momentum, top and bottom line pre-COVID. And that only built as we went through COVID. So this isn't a COVID -- the recent results are not a COVID story. They're a strategy, momentum and execution story. And I don't see any reason in the near term why that should abate. We will have index comparison challenges, as I mentioned in the presentation. There will be bumps along the road. But we're better positioned, I think, than we've ever been. Relative to cost inflation and pricing. That, too, is a very real challenge, particularly in the near term, as we mentioned in the presentation. And as everyone knows, the savings that are required to offset that as well as pricing tend to lag the cost inflation itself. So for the next 2 quarters that -- next few quarters, that will be a bit of a challenge. But we have succeeded, I believe, in making productivity a part of our culture. That will help significantly. And our business model is based on innovation and superiority, which gives us the ability to price while increasing the value the consumer receives. So we're better positioned, not perfectly positioned, but certainly better positioned than companies whose model isn't as strongly based on innovation. So -- and it's also just worth repeating, and then I'll let you move on to the next question. Despite near-term challenges, we are not changing the strategy, as I mentioned in the presentation. We are not backing up. We're doubling down or moving forward. And again, to the extent that this has been working, particularly in driving market growth, that is what's most important in the mid- to longer term and what we're going to stay focused on.

Great. Great. Maybe one follow-up on that. Just as you -- and you alluded to it in the presentation for more pricing over the last few months has built more pricing to come, do you have concerns in this environment, just of the consumer's ability to bear it and elasticity concerns? Or is the consumer backdrop robust enough and your own offerings compelling enough to power through that and so that the pricing becomes a net positive, both to the top line and to offset some of the inflation you talked about?

We'll have to see. And obviously, it's different in different parts of the world and in different categories. But in many parts, certainly of the developed market, if you look at our 2 largest markets, for example, the U.S. and China, the consumer is very healthy and very strong. Savings levels have not been higher. Obviously, there's some polarization that's occurred within society. So I'm not looking past that. But on balance, we're interacting with a very healthy consumer. And our superiority profile and the value that, that creates for consumers has never been stronger. None of that is a guarantee that we won't encounter some of the challenges you described in a given market or category or even more broadly. But I feel better -- I feel we're better prepared, better positioned than we've ever been to take this on.

Great. Lots of follow-up questions coming in from the audience on the near term. I don't know if there's anything more you can offer on that. I guess, I might ask it in the sense that I know that -- and Andre probably knows this as well. Every time you go into a meeting, you have your chart, right? Your balanced top line and bottom line growth and margin. Is there anything that you see now that says, hey, fiscal '22 on balance, we need to pass on that. We can't hold ourselves accountable for that balance over the next 12 to 15 months because it's just too tough? Or is it more of a, as you said, 2-plus quarters of transition, then we can -- then the productivity and the pricing, everything else kicks back in, and we get back on the horse?

I'll let Andre comment on this as well since he's leading the budgeting and forecasting process for our next fiscal year, which we're just in the middle of. But our expectations in terms of balanced top and bottom line growth, have not changed. We expect to continue to deliver that, not necessarily on a quarter-by-quarter basis, but on a fiscal year basis. If we find ourselves in a situation where that becomes compromised, the priority is going to be on executing the strategy, supporting the brands, continuing to build superiority. But as I see the total landscape now, and as we interact, as Andre and I interact with our organization, we're clearly focused on maintaining that balance. That is still the first sheet in every presentation, and I've ensured that Andre will continue in that tradition. But having spoken for it, Andre, any thoughts on this topic?

I would not dare to deviate from the balance guidance, Jon. I think it's one of the most important points for P&G, but also for the industry. I think as Jon mentioned, we don't see this as a quarter-by-quarter progression, specifically not next fiscal year. The first half will be more challenging, as you can imagine, with macro impact hitting the first half, pricing only kicking in towards the end of the first quarter. We have a high base in terms of growth from last year, which eases in the second half. And some of those effects will improve in the second half of the fiscal year. So overall, we believe the balance is still the right way to push forward, but it won't be on a quarter-by-quarter basis, as Jon said. At the same time, I have to say I feel extremely confident in the plan, given the innovation that we're still pushing next year, given the productivity muscle that we are applying next year. So we've got many levers that can help us remain balanced while sustaining the strategy.

Great. If we pan out a bit, and you've talked about the superiority mantra and strategy and how important that is, I think you've demonstrated. When you think about your portfolio, is there a way to measure what percentage of it you think is in the green on those superiority measures versus the part of the portfolio still? I don't know if it's by category, by brand, however you want to split it, but is there -- how do you think about ready all green, here's how we're faring against that superiority matrix?

So we look at that, Steve, with a triangulated set of metrics across 5 vectors, which we showed on the slide there, product, package, communication, retail execution and value. And when we started on this journey, we set the superiority bar very high. We wanted what we refer to as irresistible or noticeable superiority, not just in a lab or proving it to ourselves, it had to translate to consumer delight. And at that point, we were at about 30% of our sales being judged superior across those 5 vectors. That number is now 70% on average. But that's not -- the 30% isn't the measure of opportunity. The opportunity is much bigger than that. What we're beginning to do in categories where we feel we've achieved 80% or 90% sales being noticeably superior across those 5 vectors is just raise the bar again, and use that as a way to motivate the organization to do more, and importantly, to continue to grow markets. So I mentioned in the presentation, we see this as an endless -- an opportunity that never ends. And we've made good progress, but there's a lot more to do. I mean, an example, we've measured the overall superiority equation for unit dose detergents against other unit dose detergents over the last 3 or 4 years. That's worked well for us. It's the fastest-growing form in the category. We have an 80% roughly share. But we've now raised the bar on how we're looking, how we're judging ourselves in terms of superiority in that category. With it becoming, not how do we compare to other unit dose detergents, but is the proposition superior enough that liquids consumers want to trade up? So those are -- there are those kinds of opportunities across the portfolio.

Great. And we're short on time, unfortunately. But I guess in a way to frame sort of where the opportunities may be great, is there one -- I mean, product formulation, product performance, I think, has always been by and large, in the green. That's been your hallmark forever essentially. Is there one of the 5 vectors where you think you have the most opportunity to improve?

Even though we shared a chart that showed that we're ranked #1 by our retail partners, our go-to-market capability, bringing those innovations to life at a shelf, whether it's a physical or virtual shelf, where the majority of brand choices are made, is a clear opportunity. We're in a good position as the data indicate, but there's lots of upside there. The other upside I would point to is not necessarily within the vectors of superiority, but it's related to the organization changes we've made, which were really just -- they're just settling in and giving people an appetite to go even further in terms of establishing ownership accountability, agility, and the difference of that has made so far is huge. The difference that it can make as an addition to all the superiority efforts is significant.

Great. Unfortunately, we're out of time because I could -- I have a lot of questions. But I thank you, all 3 of you for your time. Thanks, Procter & Gamble, for participating in the conference. Thank all of you who are listening, and I wish everybody a great rest of their respective events. Thank you.

Thanks, Steve.

Thank you.

Take care.