CL - Colgate-Palmolive Company (CL) Annual Deutsche Bank Global Consumer Conference (Transcript)
2023-06-06 13:46:02 ET
Colgate-Palmolive Company (CL)
Annual Deutsche Bank Global Consumer Conference Call
June 06, 2023 08:00 AM ET
Company Participants
Jean-Luc Fischer - Division President of Europe
John Faucher - Chief Investor Relations Officer and Senior Vice President of Mergers and Acquisitions
Conference Call Participants
Steve Powers - Deutsche Bank
Presentation
Steve Powers
Thanks, everybody, and welcome back. For the next session, by the way, I'm Steve Powers. I'm the U.S. consumer staples analyst for Deutsche Bank. And I'm thrilled to welcome Colgate-Palmolive back to our conference.
With us today from Colgate, our Division President from Europe, Jean-Luc Fischer and Chief Investor Relations Officer and Senior Vice President of Mergers and Acquisitions, John Faucher. It is quite ironic that John's last name is Faucher and Jean-Luc's Fischer.
So I think most of us are familiar with Colgate, and most of us are familiar with John or probably less familiar with Jean-Luc. So perhaps we can just have a brief introduction by you of your background and your experience at Colgate, and we can talk a little bit more about your business.
Jean-Luc Fischer
Thank you very much. Glad to be here with you all. I started with Colgate 32 years ago. I started in France, in the French subsidiary, which is one of our strongest subsidiaries in the world in home care, because that's one of the particularities we have in our French business. And then had a very international career with Colgate, after a few years moved to Brazil and then Argentina as Marketing Director. I was Marketing Director in Argentina, then Turkey, then China. So I moved quite a lot around the world and came back to Turkey as General Manager.
I went to New York to lead the Global Home Care business, came back after many years to Argentina to lead the southern cone of Latin America as a General Manager. I came back to France to create the Western Europe hub [and lead] that and was then Division President for Africa/Eurasia. More recently, Division President for North America and since last year, Division President for Europe.
Steve Powers
Okay. So well rounded, and we'll leverage that experience as we go. Maybe talk to us a bit about Europe and the business that you manage today. How is the portfolio similar to different from the rest of Colgate's portfolio? And how are some of the operating environment challenges that you've been facing analogous to the rest of Colgate or different?
Jean-Luc Fischer
So it's a great business. Obviously, all the global brands, we have a – strongly present in Europe. We have some particularities on differences. The biggest one is probably the GABA business with the brands, elmex and meridol in Oral Care that are two very, very strong brands and two of our most successful brands. Elmex more focused on sensitivity and meridol more focused on gums. So a very successful brands. That's one particularity of Europe.
The second particularity is, we have a very strong personal care business with the Sanex brand, which is really a European brand and strong home care business in some countries. But in the countries where we have a Home Care business, it is extremely strong with very powerful brands. The best example is probably in France where we are market leader in the four markets we operate in Home Care.
Steve Powers
One of the aspects of Europe has been clear, and it's impacted the overall enterprises that the cost backdrop in Europe has been severely challenged. Where do we stand now on the cost curve from your perspective? What's your outlook going forward? And then we can talk about some of the offsets that you've been able to put in place.
Jean-Luc Fischer
Yes. So we've been very affected actually by the cost backdrop as much as the rest of the world, if not more, than the rest of the world because the proximity of Ukraine on the war in Ukraine and the fact that Europe realize a lot on things like natural gas and the cost of energy went up so much has impacted us on obviously our margins. So obviously, that has been a significant impact on the business, obviously, for all manufacturers in Europe. And as in the rest of the world, we've been putting a lot of actions to recover our margins. The main action, obviously, has been pricing because in that environment, you have to take pricing even if there is a history of deflation or negative pricing in Europe, we've been able to put some good pricing together like everybody has been able to do.
But it's not only pricing. It's managing all the lines of the P&L to recover funding the growth, which Colgate is excellent at. We've put a lot of initiatives together on the productivity in the P&L. So with all that, we are recovering with our margins, not yet at the level where they were pre this cost escalation, but recovering.
We are also playing a lot with mix, and there is a lot given the complexity you have in Europe, you can play with mix even more on the portfolio of brands we have, the categories we are playing in on the different retail environments, mix is a very important component that can help us. And obviously, we've been playing a big role there. Innovation has been critical, bringing innovation that is margin accretive and that brings real value to the consumers, and we have really accelerated on innovation, particularly in the past 1.5 years. So all this is helping us to recover.
Steve Powers
And is there – my assumption is, the answer is no, but you tell me if it's true. Is there opportunity for more pricing from here? Or is it from here a revenue growth management story?
Jean-Luc Fischer
So first of all, the bigger story is a revenue growth management story. And we – at Colgate, we call it the 7 levers of revenue growth management, and we are activating each of those 7 levers, and we are playing there very, very aggressively. There are more opportunities for pricing. That said, we are very careful in that field because obviously, pricing, consumers even are under a lot of pressure. And pricing is having some impact on volumes. We also see private labels that are growing.
So we don't want to go too far in terms of pricing. The best opportunity in revenue growth management for us, and this is where we've been playing the most is relaunches of our business, bringing innovation, upgrading our formulas or packaging, bringing technology at price points that are going to be margin accretive. This is probably where we have the biggest opportunity. On that, consumers that can afford it, they will afford it. And that will not have a negative impact on our volumes. So we are playing a lot here.
Last year was more about taking a lot of pricing. This year, it is a lot about relaunches. And we've been focusing all our teams on bringing new technology, bringing new news to our brands. And that's the best way to differentiate and to justify the premium price versus a private label. So we are doing a lot of that this year. Right now, we are having a major relaunch of our Sanex brand. We are relaunching the entire brand. Obviously, that's a great opportunity.
We've been relaunching our whitening business on the Colgate brand with the MPS technology that gives super whitening almost at the same level as hydrogen peroxide, which is a real technological breakthrough because getting the same whitening as hydrogen peroxide. Hydrogen peroxide is regulated in Europe. So you cannot have the same levels as what you would have in the U.S. So we have this new technology and we've been introducing Colgate Ultra, we call it Colgate Ultra with that technology. Obviously, that's a premium price point, and it is very successful. So we're doing that on Colgate.
We have a full relaunch of our meridol brand on Oral Care. We've just had a big relaunch of our Soupline brand, where we are market leader in France with new packaging and the new formula, which are even better experience for the consumer. So we're doing a lot of that. On that the consumer is ready to pay for because consumers that are loyal to our brands, they are going to pay for that. And this is a big part of revenue growth management that we are playing.
Steve Powers
Okay. Great. You've got manufacturing facilities dotted across Europe. What percentage of the portfolio that you're selling in Europe is manufactured in Europe? I'm assuming it's relatively high.
Jean-Luc Fischer
Most of our products are manufactured in Europe. We have various plants across Europe. But they are very specialized plants. So we have a large Oral Care plant. We have a large Personal Care plant. We have a large Home Care plant, obviously, closer to where the Home Care business is, and that's where most of the business is produced. We have a few – we are still importing a few products from some of our highly efficient plants in the world in a few categories, but this is tiny in the mix of our business.
Steve Powers
Okay. So we package all of that alongside productivity initiatives and funding the growth. Maybe talk a little bit about some of the levers you have on that front. But what's the path that you see forward in terms of rebuilding margin in Europe because the margins have been depressed.
Jean-Luc Fischer
Yes, yes, yes. So we're getting there, and we will get there. I think it's a revenue growth management, and we have more. Actually, we see revenue growth management, and we were just having worktops in the last few weeks. And we see that with three-year plans. So we really look forward to the future because, again, a big part is about mix and is about the relaunches that we are going to have to bring more value to our consumer. So that helps us to rebuild margin, and that is going to bring us back to where we used to be in terms of our margin in Europe.
And that's critical because as we are doing that, we are able to reinvest behind our brands. And Europe is actually probably the region in the Colgate world where in the past, we've been cutting the most advertising which is not healthy for the long-term future. So focusing on bringing value to consumers and upgrading our brands on the consumer experience and talking to the consumer about it through advertising is the best way for us to not only grow in the future, but also have a healthy margin that help us to have what I call this virtuous cycle of growth, margin, we can reinvest into the business and build long-term sustainable profitable growth for our brands.
We are doing a lot right now around that. And we have a clear three-plus year plan on that. I'll just give you an example. We've launched very recently in France, again, on Soupline brand and Soupline brand is one of our largest brands in France on fabric softener. We've been innovating by being the first one to launch solid fabric softeners in the shape of heart, so it's Soupline heart. So no water, a great sustainability story. We've just launched that under Soupline, and we are investing on advertising it, and that's a great story that's going to enhance further the image of the brand. It's a nice premium product, and that ignites this virtuous cycle of growth that I was talking about.
Steve Powers
As you find some relief from the cost pressure and yet still invest behind these initiatives, is 2023 a story of margin stabilization and then the margin rebuild is to come? Or is – can you make progress on margins as we move through 2023.
Jean-Luc Fischer
So we've lost margin. We've lost quite a lot of margin in 2022, yes, and I guess you've seen that. And that's where we've been the most affected. 2023, we are rebuilding that margin. But we are not going to be able to rebuild that margin just in 2023 fully. So that's the first step. But we are rebuilding part of that margin, and we have other productivity initiatives in the P&L that help us to reinvest behind our brands, and 2024 will be a step two of rebuilding that margin. And obviously, looking at how the costs do evolve, we should be able to more or less get there.
Steve Powers
And that's analogous.
John Faucher
The only thing I would add to that is, if you think about it, the first step is – the first thing is you get the pricing in the P&L to get the gross margin back up to fund the advertising, et cetera. So the first step is getting that gross margin moving in the right direction, which gives him the P&L flexibility and all the other Division Presidents the flexibility to invest back into the business to drive volume again.
Steve Powers
Yes, which is a corporate-wide dynamic this year, right, as you're trying to rebuild gross margins. So can we talk about that at the total company level?
Jean-Luc Fischer
Sure.
Steve Powers
You've – I mean relative to, I think, market expectations last year, the first quarter was a good solid progress relative to where you exited 2022 on gross margin. You've talked about sequential progress throughout 2023. Can you just maybe give us a little bit more color as to the various drivers of that as we go through the year and a little bit more sense of cadence because I think there's different perspectives as to whether it more happens sooner or more happens later? Anything you can share on...
John Faucher
Sure. So I mean the issue is I think what created the confusion in the market, right, is if you take a look at 2022 gross margin sequentially, right, it moved down quarter by quarter by quarter as we dealt with escalating costs coming out of the war in Ukraine, et cetera. So despite the fact you're taking more pricing, despite the fact that you're ramping FTG that raw material inflation and the other costs, labor inflation, et cetera, we had some transactional in Europe, you saw the gross margin decline sequentially quarter-by-quarter.
So what's happening is this year, we expect gross margin to improve sequentially quarter by quarter, Q1 versus Q4, Q2 versus Q1, Q3 versus Q2 and then Q4, a little bit better. I mean Q3 – Q4 is going to be more similar to Q3 than Q3 is to Q2 and Q2 to Q1. So you put all that together, I think we feel comfortable with that trajectory. I think what created some confusion is it creates a situation where the year-over-year change really escalates as you go through the year, given the comparisons, but that's the way the model works and that's because there will continue to be additional pricing as we go through the year, there will continue to be additional productivity.
And then raw material prices on an absolute basis have come off their highs, right? So you get a little bit of sequential relief in at least some of our big commodity buckets, let's say, resins and fats and oils, which are the two biggest pieces. So you put all that together, we made good progress in Q1. And as those efforts continue and as we benefit from a stabilization in the Hill's supply chain, right, with the high levels of capacity utilization really created some inefficiencies. We think we're pretty much past that. That should also help on a corporate level.
Steve Powers
Okay. Is there – just a mental math on that? It seems like given what you're cycling in the fourth quarter, there would be room for a larger step up as you go into fourth quarter like that 3Q to 4Q?
John Faucher
Year-over-year, yes, Q3 to Q4, again, look, this is staples, right? People don't look at things sequentially, everyone models year-over-year. But because the year-over-year comparisons are so dramatic, yes, that's why I'm talking about sequential. So if Q4 is up sequentially versus Q3, the year-over-year change in Q4 will be notably bigger.
Steve Powers
Yes. So you're saying – sorry to belabor this, but you're saying the costs...
John Faucher
Okay. Every single meeting we have goes through the same math.
Jean-Luc Fischer
Good. Everyone have the same information. So what that implies is the cost you incurred in absolute terms in the fourth quarter of 2022 were similar to the third quarter of 2022. So it seems – because to me, it seems like you have a lot of incremental costs that builds in the fourth quarter of 2022 that were unique versus the third quarter of 2022.
John Faucher
Yes. And that will impact the year-over-year gross margin percent change – change in percentage…
Steve Powers
Okay. I got you. I got you.
John Faucher
Right. But that doesn't affect the sequential change in gross margin from Q4 to Q3 because that was all in 2022.
Steve Powers
Got it. Okay. You probably also got this question every meeting, volume trajectory, right? So as you're – as we're cycling pricing, those pricing is coming down, you're moving more to revenue growth management and you made a call for volumes to come back into positive territory in the back half. Your visibility on that, your confidence in that.
John Faucher
So I would say – I'll have you to talk about Europe in terms of how you see the volume – I mean so what we talked about was getting back to balance, right? And so we're not giving exact timing in terms of when that inflection point is going to happen. What I would say is if you look at the volume trajectory over the past several quarters, despite additional pricing, volume performance has improved over the past three quarters, let's say. And so we think that's encouraging.
As we head into the back half of the year, we will cycle up against easier comparisons, which is also from that standpoint. I think it's a little bit unknown, and we talked about this on the Q4 call, we talked about in the Q1 call, the lack of visibility, certainty, whatever term you want to use on the back half of the year, I think we're all waiting to see what that glide path is to get there. I think we feel like – we have the marketing plans in place. You only talked about the increase in advertising. That's going to help.
Again, we're going to see – I think we will see a return to a more normalized promotional environment, which I think is fine, and that's what's built into our plan. So as you look at that, I think we feel good about continued sequential improvement. We're not ready to call the true inflection point. I don't know anything you would add from your perspective?
Jean-Luc Fischer
Well, in Europe, you see volume really affected right now by the pricing. But what you see, we feel confident that we will recover that first of all, but we are in our second year of pricing what we've seen, partly year one and the experience we got last year is you take pricing, volume gets affected quite strongly in some markets at the beginning and then comes back. And we saw that happening last year, but the cost increase was so high that we had to take a second wave of pricing, which had another impact on our volume.
So we know that volume is slowly coming back on the categories, and we're already seeing that in some of the markets where we get really upside surprises in volume. And the other thing is this is an area where we are putting a lot of focus in terms of formats, in terms of the entire RGM plan that we are getting, so that we rebuild the volume. So you'll get volume that will come back with the incremental advertising investment that we are having that is already happening, volume coming from the innovation but you will also have volume coming from specific volume tailor-made activities.
I would give an example; consumers are right now looking for value. So large sizes, for instance, large size packs are bringing good value to the consumers and obviously when you have a larger size, you have less packaging and the margin is – it helps you to rebuild the margin at the same time. So that's a great RGM initiative.
Steve Powers
Okay. Is the competitive environment, whether it's in Europe or globally? Is that – would you describe it as rational? It's been rational? Would you describe generally?
Jean-Luc Fischer
I think it has been very rational. And I do think that because everybody has been facing the same situation and that the situation in term of cost, partially in Europe has been so extreme, everybody has been extremely rational about the action that have been taken. Yet the market remains extremely competitive. You see that as soon as some competitors, particularly in key categories for them are able to rebuild some margin. They reinvest in order to drive volume through promotion and they become very aggressive. And we are playing that game. That's the game we play forever in Europe.
Steve Powers
And then more globally, any callouts?
John Faucher
Again, I think very rational. Again, as Jean-Luc said, everyone is facing the same pricing pressures with the raw materials. And so in certain categories where there can be more raw material based, you might see a little more promotion. But if you take a look at what everyone said publicly, particularly, let's say, calendar Q1 conference calls, lots of focus on innovation, lots of focus on advertising reinvestment back in the business.
So again, if you see a return to normal promo, as Jean-Luc talked about, but the real focus is incrementally trying to drive the volume back the right way. As we look at this getting that gross margin back up, and we're still down year-over-year, getting that gross margin back up as a priority and a lot of work goes into that, and you want to make sure you sustain that so you can get the gross margin back to where it was previously.
Steve Powers
Yes. There's been a lot of conversation into this conference at this conference around retailer pushback, either alongside or even ahead of consumer pushback on pricing, maybe less of an anomaly to you in Europe, but clearly a point of concern for investors as we think about the U.S. market. Give perspective on the retailer attitude towards pricing as we've taken a lot and as we look at a consumer that is showing signs of fatigue.
Jean-Luc Fischer
Yes. In Europe, retailers are always pushing back on pricing, actually [indiscernible] of deflation. And they have been pushing back on pricing in the past two years. And they're already pushing back as I see [indiscernible] materials coming down to renegotiate. But the reality, and that's particularly why the relaunch is where you add value behind your brand is so important that helps you to have the pricing stick, but retailers will continue pushing back.
The one thing I would say is retailers have faced the same issues in terms of cost increases as we have and have also increased the price of their private labels actually quite aggressively, maybe even more than what we have done. That dynamic will evolve with the way the cost will evolve. But yes, retailers pushing back is probably the European division is where we see that the most, and that has been historically, and we expect that this will continue and this is continuing.
Steve Powers
Anything in the U.S.?
John Faucher
No. I mean I think the real issue in the U.S. is that you're going to driving value to – you have to focus on driving value to the categories, driving value to your customers and your consumers. So again, relaunches, investing back in advertising and innovation, I think it's a situation where we still haven't recovered the costs, and you're not going to recover all the costs through pricing, right? I mean, Jean-Luc talked about productivity. FTG becomes incredibly important funding the growth, which is our evergreen productivity program in terms of getting back the rest of the margin that you've lost through raw material inflation.
So I think we're very focused on working with our retail partners. We're very focused on finding the right price points, right? There is concerns about consumers trading down, whether that's price points, whether that's channels, we have the portfolio that really plays into that in terms of you can find Colgate toothpaste at $1, you can find Colgate toothpaste at $11. So we provide those opening price points that consumers are looking for. And we provide value either in large sizes, as Jean-Luc talked about or in those smaller sizes. So I think as long as you're focused on ensuring that you are driving value for customer consumer while working to rebuild your P&L, we think that's the best way to approach all of this, and we think that's what's going on.
Steve Powers
At CAGNY, we heard a lot with China as the case study. We heard a lot about the improvements that Colgate has made in both the quality of innovation and the communication to the consumer of that innovation to have more impact. Does that resonate in Europe? Is Europe on pace with that, what we've heard about in China? Or is there more work to be done?
Jean-Luc Fischer
No, no, no, we are absolutely on pace with that. And it's an absolute point of focus. One thing is we tend always to think Europe is a very mature market where you have no growth. I am particularly convinced that we can have growth in Europe, and we are demonstrating that actually and I believe we can have sustainable growth in Europe. In order to have that, I think, two main things. One is innovation and two is the support behind that innovation. So if you don't have the margin that allow that support behind innovation, it's not going to work.
So the dynamics with innovation in Europe, we have, I think Noel is talking about this Horizon 1, Horizon 2, Horizon 3 innovation. First of all, we do a lot on probably more than anywhere else in the world of Horizon 1 innovation in Europe. That's all the relaunches I'm talking about because this is critical for our brands. So we do a lot of that. But we also move into Horizon 2, Horizon 3 innovation. The only thing is, I think we've kind of validated that particularly in the market like Europe, Horizon 2, Horizon 3 innovation. You have to be very selective because if you do not support it with advertising, it's not going to work.
Steve Powers
Just definitionally Horizon 2, is that time horizon, so longer…
John Faucher
So Horizon 1 would be more like line extensions relaunches. Horizon 2, we talk as breakthrough innovation; and then Horizon 3 would be transformational. But yes, there is obviously a time line component that goes with it.
Jean-Luc Fischer
So if I take an example, I was talking about Soupline Hearts, the solid fabric softeners, we would call that Horizon 2 innovation because it's an adjacent – you create a new segment into a category. We would not have done it without supporting it with advertising because you have to create a new consumer habit. And we've done that in the past without advertising this kind of innovation. And it has not been working. So you create a lot of complexity for nothing, very short-term growth and then it disappears. We don't want that. We want it to be sustainable. We have advertising.
So we are more selective than in some other geographies because we have to focus the resources we have, but where we are able to support, we will support and we are supporting it. So a good example is Soupline Heart, but we have a few other ones in Oral Care. We are talking about at-home whitening for instance, which has been a big focus on Colgate and where we are very successful and where we have great technology. So we are launching that, and we are putting support behind it.
John Faucher
And the only other thing I would add, and Jean-Luc talked about meridol and elmex, those really are power brands that we have the ability to do more with going forward. It may not be Horizon 2, Horizon 3, but they have a ton of potential as we lean into those more aggressively.
Jean-Luc Fischer
Those two brands are huge in Europe, and absolutely critical. And here, the professional endorsement on recommendation is key. And actually, the profession is at the heart of our business model and strategy behind those two brands. So it's a little bit less about innovation. It's more about Horizon 1. At Horizon 1, the technology we bring behind those brands, a superiority of our formula and what they're going to deliver either on the sensitivity benefit or on gums benefit is going to be critical. And that's what we are doing.
Steve Powers
And you mentioned a little bit of historical underinvestment in Europe. So as you're trying to rebuild margins, are you willing to invest ahead on marketing and innovation for the benefit of the long-term? Or are you trying to invest alongside the margin recovery?
Jean-Luc Fischer
So what we are saying, it's not necessarily just a margin. But my philosophy in Europe and particularly because we have different priorities in the company is we have to generate ourselves the funds for extra advertising. If we want to increase advertising substantially in Europe, we have to generate it, either through topline growth – actually on a combination of topline growth and margin growth. That's what we are doing right now and if we are able to put more and substantially more behind our brands, we will do that, and that's what we are trying to do right now. I think we are getting quite successful now.
John Faucher
And if I could just add to that on a total corporate basis. I mean if you take a look at the increase in advertising on an absolute dollar basis and as a percent of sales basis, very robust in the first quarter ahead of the gross margin expansion at the sequential improvement and expansion year-over-year at the total company level. So I think we are seeing that increase happen. And similar to the gross margin commentary, if you look at advertising to sales, we expect advertising to sales to be relatively constant this year as a percentage, given where we started in the first quarter. And as we lap some easier comparisons over the balance of the year, we should see that year-over-year change in advertising to sales move up as we go through the year.
Steve Powers
Yes. Okay, great. One of the – not the most significant cost surprises in the fourth quarter last year, but one of them was Filorga and slowdown in China and associated margin impacts of that. I guess a question for Filorga specifically in terms of how you see the trajectory of that business rebuilding both within China and more broadly. And then, as you think about the skincare offering of Colgate in general, which is centered here in Europe, but has…
John Faucher
Filorga is centered in Europe. Elta and PCA are centered in North America.
Steve Powers
But Sanex as a global brand is European centered. So how do you think about the opportunities for skin care within Colgate? And what role does Europe play in the global expansion?
Jean-Luc Fischer
So there are two things. One is Sanex, which is a mass brand on which I am very confident on the trajectory because we are investing, we are innovating on that virtual cycle I was talking about is happening on Filorga, on Elta and PCA. I'll let John answer…
John Faucher
Yes, I’ll handle skin in terms of how we're looking at that more broadly. So we are expecting – so Filorga obviously has dealt with issues in China related to travel retail. Hainan, all those other issues, the same things you've heard other companies talk about. We have said we expect that to get better sequentially. As we go through the year, we expect sort of slow moderate sequential improvement for that environment generally, and I think that would also apply to Filorga.
PCA and Elta have delivered very solid growth for us over the last several years. Jean-Luc talked about the profession, right? And those two brands in particular bring a strong professional bent, whether it's EltaMD with dermatologists, or PCA skin with spas and aestheticians, and that professional endorsement has created very strong brands.
So I think we feel good about those businesses. So I think, we expect our skin health businesses combined, which again impact North America as well as Europe to show nice improvement as we go through the year and be additive to growth. So I think we feel like, again, not expecting a huge rebound in China. If we do get an increase in Chinese travelers to Europe, particularly to France, that will also help. But we're not expecting that to free up anytime soon.
Steve Powers
Okay. And what about China more broadly. Is there an update on trends you're seeing more broadly across the business, not just the Filorga business?
John Faucher
So I think, we've been pleased with how we've been doing in China. The Colgate businesses had strong trends, which Noel talked about. At CAGNY, we had a transformation of the Darlie brand last year, which has worked well. And one of the problems with China is trying to get some pricing into the business that we're working on trying to get more pricing into. China is one of the reasons why the Asia Pacific pricing number generally is a little bit lower than some of the other divisions. So we're very focused on that. We're seeing an improvement in brick-and-mortar trends. But again, we're not expecting some sort of massive rebound in China. We think it's been a long three years. And we think the Chinese consumer is going to take some time to get back to the new normal from that standpoint.
Steve Powers
On market share trends, I guess, two questions. I'd love an update from your perspective on your level of satisfaction with market share trends in Europe, but then also it's been a question more globally and especially in the U.S. where market share trends not just Home and Personal Care, but Oral Care have lagged, some perspective there would be helpful, too, but we'll start with Europe.
Jean-Luc Fischer
Okay. So for Europe, we are very pleased with home market test, which probably have been at a level they have not been for a long time. Oral Care, I'll start with Oral Care, Oral Care, we have in both toothpaste and toothbrushes, our highest share ever in the history of the company. That's driven actually by the three brands that are doing well, Colgate, elmex and meridol and elmex doing particularly well across Europe.
In Personal Care, not doing as well as in Oral Care, but quite confident because of the relaunch of Sanex I was talking about that is happening as we speak, and that has strong investment behind. And in Home Care, very pleased with particularly our business in fabric softeners, which is a very important business for us in Europe and where we are getting very significant market share growth behind our innovation on relaunches.
John Faucher
And in North America, yes, I think there's been a little bit of a – we had, I think, generally solid market shares last year. There's been a little bit of a sequential softening here. I think part of that is the pricing that we put in place in the market. I think we have said, okay, we're going to take the pricing to rebuild the margins to invest back in the business, so big increases in advertising associated with that, along with innovation. So I think you're just seeing potentially just a little bit of short-term dislocation. Getting Fabuloso back will definitely help from that standpoint. And we're seeing that back on shelf. Shipment trends look good. And so from that standpoint, we think that that will normalize. I think you're fair. I think Personal Care, we probably got a little bit of work to do from a market share standpoint. But again, that's one of the reasons for the increased advertising.
Steve Powers
Okay. And so the Oral Care shares that we're seeing, you're not – that's not a point of concern is...
John Faucher
I mean we're focused on it. I mean Oral Care shares in general, have been very solid. There's a little bit going on in unmeasured channels, which again is about 50% of the growth. So we feel fine. I mean, again, we're not going to panic over a couple of months of weak market share. We're not going to disrupt the plan. But overall, we feel the state of our Oral Care business right now in North America is actually very strong.
Steve Powers
Great. Got about a minute left. I'm going to close. Look, I think you were involved in the acquisition. When you were in North America, I think you were involved in the scoping out the acquisition of Hello. And we've talked about Hello – well, now I'm talking about Hello. But we've talked about Sanex and Filorga and EltaMD, a lot of brands that have been actually acquired, which is not something that I think we typically associate with Colgate.
As you think about your portfolio in Europe, or John in your role as Senior Vice President of M&A, how active of a conversation inside Colgate? Is it to think about inorganic opportunities to strengthen the business? How much of your daily life or your weekly life, do you think about this?
Jean-Luc Fischer
So in Europe, we focus where we see the biggest opportunities. And I would say it's still on elmex, meridol, and Sanex, which are formidable brands and where we still have great opportunities in Europe.
John Faucher
I mean I think we look at these things opportunistically, and we have periodic calls with Jean-Luc and his team as well as the rest of the divisions. I think our model is predicated upon delivering through organic, not through inorganic. I think we look at opportunities, valuations have generally been stretched over the last couple of years. And so I think the key thing is if you are focused on driving your own growth, then M&A becomes something where it can be additive. And I think that's what we've really done over the past couple of years by reaccelerating organic sales growth. We can look around and say, okay, is this truly additive to our portfolio. And if it is, we'll consider it if we can get it at a reasonable price. But there's no reason to sort of rush that process. Again, it's got to be strategic. It's got to fit in well and finding an appropriate price to pay has been complicated, shall we say, for the last couple of years.
Steve Powers
Okay. We'll leave it there. Thanks, everybody. Thanks to John. Thanks to Jean-Luc.
Jean-Luc Fischer
Thanks, Steve.
John Faucher
Thanks, Steve.
Question-and-Answer Session
End of Q&A
For further details see:
Colgate-Palmolive Company (CL) Annual Deutsche Bank Global Consumer Conference (Transcript)