CL - Colgate-Palmolive Company (CL) Presents at Goldman Sachs Global Staples Forum (Transcript)
2023-05-16 12:29:06 ET
Colgate-Palmolive Company (CL)
Goldman Sachs Global Staples Forum
May 16, 2023 9:35 AM ET
Company Participants
Juan Pablo Zamorano - President, Colgate-Latin America
John Faucher - Chief Investor Relations Officer and SVP, M&A
Conference Call Participants
Jason English - Goldman Sachs
Presentation
Jason English
All right. Hey, guys. Thank you again. So we’re going to keep this show on the road. Keep it going. So next up Colgate. So we saw this morning was a turnaround story from a SMID cap personal care company. You guys were here, Edgewell. Now we turn to another such story, but one being executed on a global scale. As many of you know Colgate’s growth had slowed a few years back as its market share was being chipped away on multiple fronts. But since then, with the CEO at the helm, the company has been able to bend the trend back up, following substantial reinvestment, rejuvenated innovation and improved execution. But as you will hear, the saga is not yet over. The company’s performance has markedly improved, but further progress lies ahead. And to detail the progress that's been made and the opportunity that lies ahead, we have two of the company's lieutenants who are leading the journey: Mr. John Faucher, Chief Investor Relations Officer and SVP of M&A; and Mr. JP Zamorano, the current President of Latin America. Gentlemen, thank you so much for joining us.
John Faucher
Good morning, Jason.
Jason English
JP, let's start with you. This is my first opportunity meeting you face to face, and I imagine the same holds for many of the folks out here in the audience. So, before we get too deep into it, just give us a primer, give us a background. You've been with the organization in lead for an incredibly long time. Talk to us about your career journey.
Juan Pablo Zamorano
Thank you, Jason. I started in the company 33 years ago in Colombia. Grew up in marketing, left Colombia 25 years ago and spent most of my time in three geographies, Latin America, Asia and North America, in both U.S. company and global roles. Did some interesting marketing roles, Marketing Director of Central America, Marketing VP for the U.S., I did global home care. I managed some of our business around the world. I managed China for four years, managed Mexico. Then I was President of North America. And since four years ago, I came to Latin America.
Question-and-Answer Session
Q - Jason English
Well, very worldly. Been all over the place. Sounds like you've probably racked up a lot of frequent flyer miles along the way. Hopefully you can use them on retirement, keep them safe. And so your position in Latin America is an interesting one because often we talk to investors about the growth advantages of Colgate. And on paper you can look at your category country footprint and say, yes, like they just have more exposure to growth than anyone out there. But one of the pushbacks we hear from investors is -- but they've kind of got a feeling in terms of market share, your position is so dominant -- dominant position has -- brings with its strengths. The con is, it's hard to keep the growth going. You're the target, right? Like when you're the dominant, number one, you're the target that everyone's going to chip away at. I think that's particularly true in Latin America.
So, to all the skeptics out there who say, of course Colgate's going to be an evergreen market share donor, that's what happens to brands with such dominant market share position. What would be your response to that?
Juan Pablo Zamorano
We have really a strong market share in Latam, and in some categories, larger turnovers, tooth paste [1,275], but they go all the way down to 30% to 40% and depending on the category. Per capita consumption is a super interesting opportunity for us in Oral Care. If you look at, we have some countries like Brazil and Costa Rica, where people in average brush about two times per day. But if you take, most of the other markets will be 50% to 90% of that level. So that's why we are so committed on investing on our Bright Futures plan. We cover in Latin America about 30 million kids every year, and we are an important component of the 1.6 billion kids that we have covered as a total company.
And we also work on occasions. Most of the people will be pretty disciplined about brushing in the morning, but some people skip at night. So, giving reasons for doing that and reminding people is super important to us.
In addition to per capita consumption, we have many other opportunities. We have the opportunity of premiumization. If we take people from our family toothpaste or base business into Colgate Total, that will be a jump of about 150 to 200 index. It would tell, take them to a whitening toothpaste will be 200, 250. If we take them to some of our therapeutic solutions, we are talking more between 300 to 500 index. In addition to that, that's a pretty good opportunity for us. And obviously as we go more digital, you can identify the right targets to be able to do that. Who is the people that are buying our family toothpaste and will be a good prospect to buy the whitening toothpaste, that we can do that in an easier way today.
In addition to that, we have some of the channels or retail environments in which we do not have high market share. Pharmacies are good one, that between total market share and pharmacy, about 2,500 basis points for us. So that's a big opportunity and one that we're taking advantage of. And then there are some other categories like electric toothbrushes, which are very low penetrated. You probably know we have a really interesting partnership with Philips in Latin America. We introduced our products in Brazil and Mexico. We're doing quite well. And I should mention, it's not only about Oral Care, we have many other categories that we can tell the same story.
Jason English
Okay. But what does the category mix look like in Latin America?
Juan Pablo Zamorano
Good question. We have a significant more important Home Care and Personal Care business in Latin America. I would say it's a good balance between Oral Care and the other categories. The interesting part is that the other categories allow us to have critical mass to: one, build stronger partnership with our customers; second, build a stronger go-to market, especially as we go into the indirect trade; build much more efficient plants. A good example of that would be our plant in Mexico where we have the four categories -- three categories and in that plant -- it’s the largest plant in the world. And obviously, you have the efficiency. And then a super interesting part that I always mention is training for our people. When you are in oral care, you are extremely good at brand building, you are really good at using the professional, leveraging the profession for your business as you go into the other categories, for example, in Home Care, you learn to get more front to money, you make sure that you understand how you drive volume, you make sure you understand how to drive the distribution in all the retail environment.
Jason English
So you mentioned professional channel. I assume you're referring to like the dentist community and the medical detailing sales force. Do you have the medical detailing Salesforce throughout America? And is that global for you, John?
John Faucher
Yes. So we do have global and JP can talk about how it's worked in some of the other markets. We put together sort of a center of excellence in the center to focus on the profession, whether that's for vets, ved techs, dentists, hygienists, derms, aestheticians, really sharing that learning across the different categories, and it's going to be a big focus for us. It's become a bigger focus over the past couple of years, particularly given some of the pushes on therapeutic that JP mentioned and also some nice opportunities on brands like PCA SKIN and Elta.
Jason English
Yes. I want to come back to the derm side in a bit because that's still relatively new for you. But JP talked about the trade-up ladder and how it's not just about a share game, it's also about a category game and how do you get consumers trading up and the premiumization. It sounds like you're having good success with that Latin America. What are you doing elsewhere in the world, like to drive consumers up these rungs?
John Faucher
I think JP talked about the therapeutic piece. So I'll focus on Oral Care two pieces of it, but it is broader than that. On the therapeutic side, we've made a big push across the world with some of our GABA brands, right? So elmex and meridol, which are brands that we bought back in 2004, and we have expanded them geographically much more aggressively over the past couple of years. Brazil, Argentina, we've used elmex to gain share in pharmacies, and JP can talk about that. In markets in Africa, we've taken meridol, which is a gum health brand. And we've launched that very successfully in markets like South Africa, the Middle East, Turkey. And those are big therapeutic markets where some of our competitors have very strong market shares, and we've been able to go in, generate nice sales momentum and gain some share.
So that's an opportunity. And then whitening is another big premiumization opportunity. And so that is one where with our last couple of presentations, we've highlighted some of the market share gains that we've made in the whitening segment. I think we can grow the whitening segment faster and gain share within toothpaste, -- and if you look at those share numbers, we've had nice share gains, but it under indexes versus our global market share.
So we can grow whitening faster and gain share in whitening at the same time through products like Optic White Pro series or Glow, which we just launched in Latin America, our new MPS technology, which we've launched in Asia and Europe big opportunities.
Do you want to talk about maybe the premiumization in Latin America?
Juan Pablo Zamorano
Yes. And just to be before I get into that, interesting part is that these conditions are not only about toothpaste, but you can even start with the professional in which you can have products for whitening or for a periodontal treatment that you can give to your patients before, during or after the treatment or you can have consumer mass products that will reach the same conditions. And yes, sometimes they lead with toothpaste, but sometimes they lead with at-home products or they lead with other categories like mouthwash. So it's a tremendous opportunity.
John mentioned the using the power of the portfolio of brands that we have globally a little more openly than what we used to do before. And a great example will be -- if we go back to the opportunity we had in pharmacies, about 25 points of cap versus the total market share we have in the market, the Southern Cone being Brazil and Argentina represent a significant portion of that opportunity. We decided to introduce elmex in those markets. We started in São Paulo, in that region, which is the first region. We already have 7 points of market share in pharmacy, which is quite substantial. We are expanding, and we do that in a way that at the same time we expand the brand and build distribution, we expand the coverage to the dentists and therefore, we have the model of dental recommendation then used by the product and it becomes a very nice cycle.
Jason English
And you're a few years into this journey, right?
Juan Pablo Zamorano
Absolutely.
Jason English
Now a couple of years ago, I think some of the improvements you were seeing as a result of this were being masked by some other disruptions. You had a disruption. I think it was in Colombia. You've had been -- last year we came, there were some supply chain issues preventing you, I think, from getting toothbrushes into the market. We've had these externalities kind of shock to the system that have masked your underlying performance. Where do we stand on those now? Are those issues all behind you? And are we in a situation now where the underlying improvement is going to be playing out to reported results?
Juan Pablo Zamorano
Absolutely. I mean businesses in Latin America is in very good shape. I think that if you want to do business in emerging market, you will have to deal with issues from time to time. Now those issues are the same for everybody. What is important is that you have a team that knows how to face those issues and overcome them. And we've been doing business in Latin America for almost 100 years. So this is native for us. I don't think that there is any major issue that I can highlight now. Obviously, as we took aggressive pricing to protect our margins, we have seen some of the volume being affected, especially in some of the categories that are more sensitive to pricing, bar soaps, liquid cleaners, dish -- for example, dish washing.
But we have seen a sequential improvement and having the margins in the right place obviously give the flexibility for us to invest behind our brands. We have -- we can put money against advertising, we can put money against our innovation. We can put money to make sure that we activate the brands at the point of sale.
Jason English
Yes. And are your gross margins in expansionary territory now?
Juan Pablo Zamorano
You mean to say expansionary, are growing?
Jason English
Growing year-on-year?
Juan Pablo Zamorano
Yes.
Jason English
Yes. That's what I thought. Just drawing a blank on the bridges that you guys put in your 10-Qs, which are very helpful, by the way, thank you for that. And pricing has been a key component of that, clearly, in Latin America, where you've got tremendous pricing muscle. I mean you were dealing with currency devaluations year-upon-year. John, can you walk us through the rest of the world and where you sit with pricing?
John Faucher
Sure. So I mean as we went in going back and looking as raw materials really became significantly inflationary it's about two years now. Obviously, we began to take pricing. And again, as JP can talk about the emerging markets playbook that we have in terms of being able to execute against pricing across the business. We've got a lot of muscle that's built up over the decades there.
We took additional pricing on the back of the war in Ukraine. Obviously, when we saw significant increases in what we call fats and oils, in tallow, palm oil, palm kernel, soybean oil. And so we're lapping some of that pricing now. We have taken additional pricing pretty much across the world so far year-to-date. And so I think going forward, as we begin to lap some of the pricing last year, I think you're going to see less pricing in the market. There is still raw material pressure, but it has lessened. And so I think we feel good about the pricing we have in the market and the response that we've seen. And I think you're going to see that turn into gross margin expansion as we've guided for, for the year. And we would expect gross margin to improve sequentially. Improved sequentially from Q4 to Q1 and then from Q1 to Q2 and then into the back half of the year. So I think we feel like we've got the right trajectory of gross margin at this point.
Other companies do have logistics in COGS, we have it in SG&A, that is providing some favorability as well as you look at our gross margin performance on a comparable basis. And then obviously, we have the impact of the pet food supply acquisition, which is impacting our gross margin. But we are, I think, well positioned to make the progress that we've talked about on the last couple of calls.
Jason English
So I mean the progress is evident in many of your segments as we unpack it and including for consumer products overall, when you roll up those and look at it as a consolidated business. One of the laggards has been Europe where the margins are still down substantially year-on-year gross margin despite lapping a lot of downward pressure last year. Is that just a byproduct of the difficult pricing environment in that market?
John Faucher
Yes. I mean, so I think -- I mean, a little bit. So pricing in Europe, as you know, has generally been deflationary, not just for us, for CPG generally over the past many, many years. And so what we have seen is over the last 18 months, we've been able to get some pricing in Europe for the first time because of the significant raw material and gross margin pressure. There is generally less pricing available in Europe than there is in other markets. And it probably came in a little bit later, again, given the way the negotiation processes work over in Europe.
On top of that, we have had -- if you look at FX right now, Europe is one of the regions -- for the first time in a while, JP is not the poster child for our FX headwinds, we're really seeing -- we saw more of that in Europe over the last 12 months or so, that seems to be abating as we look at the recent strength in the euro versus the dollar. So less of an impact there. So you have, I think, a little bit less pricing. Pricing went in a little bit later on foreign exchange. And then also natural gas, which was a bigger headwind in Europe going into conversion costs than in other markets.
So yes, I would say Europe a little bit behind from a gross margin inflection point standpoint. Africa/Eurasia, Latin America, as JP talked about North America. We've begun to see that inflection point. Asia, Europe a little bit behind and then obviously Hill’s, given some of the raw material as well as the acquisition impacts there.
Jason English
Well, let's unpack that because as you point out, like the rest of the business has performed pretty well. You're seeing good improvement. And I don't know if everyone else does roll up consumer products, but if you roll up consumer products and look at it as a stand-alone entity, your performance last quarter was stellar, and the progress you've seen quarter-on-quarter is great. There's a couple of holes we can poke here and here as you can with any global company. But holistically, the performance is solid.
Hill's top line has been phenomenal. But the amount of margin degradation seen over the last couple of years have been really substantial. I think -- and I was surprised. I went and looked at Nestle. So I unpacked Nestle's P&L, and they haven't seen the same compression, General Mills has with Blue Buffalo, but Nestle hasn't, they've been going sideways, but they've been going sideways at a much lower level than you. So they weren't coming from the same level of profitability.
So one could look back and say, geez, maybe like to get some of this expansion, you've had to rebase the profitability of the business. You've had to put more in, maybe lower-margin channels, maybe lower-margin products, maybe a lot more marketing. Is that part of the story here? Like are the highs we saw before, just unattainable? Was the type of growth you're aspiring to for that business?
John Faucher
So when you talk about the high, you're talking about sort of 20 -- like 6, 7 years ago, highs, right?
Jason English
Bumping up against 30s, right? Like high 20s margins.
John Faucher
Yes. So I think if you go back to sort of the changes that we put in place really starting at the end of 2018 with the Science Diet relaunch, right? What happened was we really found our groove in terms of looking at that in terms of saying, okay, leaning back into science. And we said, okay, the pendulum had swung dramatically towards organics and naturals, and we began to sense that shift in terms of pet parents and vets wanting to talk more about balanced nutrition in the portfolio and the role that science can play in extending the time that people have with their pets. And so we really leaned into that. And so that was a couple of different things. We invested in ingredients. We invested in packaging. We invested aggressively in e-commerce. We invested aggressively in advertising, right? And we said, okay, this is a brand that is Hill's by Science Diet and prescription diet are incredibly well positioned for this environment. So yes, we leaned into that.
There's also a component of the fact that Hill's has a significant North American business, which allows us to drive very nice net sales growth, meaning sales in dollars as well as dollar-based profit that goes along with that. And so we made a big investment in Hill's, both domestically as well as internationally, and that's paid off in terms of significant growth.
Now as I look at this, the ability to continue to invest to keep that flywheel going is important, right? So we may take some of that incremental gross profit dollars and invest back in advertising if we feel like we have an opportunity, right? So JP has some of the highest market shares we have around the world, have 75 for a region. Hill's, our best market share is in the U.S. where we have about a 5% market share in terms of retail pet food. So there is a significant opportunity there if we invest.
You add in Europe where there's a market share opportunity, Latin America, Asia, where there's long-term consumption opportunities because the category, the science part of the category is very underdeveloped. There's a real opportunity for us to invest. So yes, the investment levels have moved up. If you take a look at the total company advertising to sales ratio over the last 5 years, it has moved up nicely. I will tell you, Hill's has moved up more than the total company from that standpoint. So that's a piece of it.
The second piece that I'll highlight just because it's more of a temporary more of an optics piece is the impact of the acquisitions, the supply acquisitions that we made last year, right? So you can do the math in terms of figuring out what the overall impact is on Hill's at the gross margin line because we've given that number for the total company basis, you can figure that out on a percent of sales basis. That's obviously been substantial.
The third piece in this would be the raw material impact. So we have seen significant raw material impact at Hill's, probably more than what we've seen on the balance of the other company, and it's still seeing elevated raw material inflation right now. So that's driving -- we're at a different inflection point there from a timing standpoint on those raw materials versus some of the other categories we have.
Now on top of that, we did see some inefficiencies from running at 100% capacity utilization, right? So the sweet spot from a capacity utilization would be not at 100% because then you're expediting raw materials to get in, you're trying to avoid losing sales, right, because that's the market share. And so what happens is we had some inefficiencies in our plants as we were running at very high capacity utilization rates. Those should be gone now that we've been able to use the incremental capacity to take capacity utilization down to a more comfortable level. So I think we feel very solid that with the pricing we have productivity. We have ramped up FTG at Hill's, and I think you're going to see higher levels of FTG at Hill's going forward, which I think is very good. We feel good about the rate of gross margin expansion going forward at Hill's. And so I think you're going to see some improvement there.
Jason English
And FTG stands for fueling the growth, productivity...?
John Faucher
Sorry, funding-the-growth. Funding-the-growth. Okay. See I didn’t really know. FTG, productivity. That's the key point there. Okay. A lot to tune on there. So first, the Red Collar acquisition, the gross margin dilution, that's also accompanied with SG&A leverage, right? Like -- and we can do that math too, if we assume this business had about 10% EBITDA margins, which is a typical margin for a co-man type business. And it's giving you substantial offset to that gross margin at the SG&A line.
John Faucher
Correct. Correct. The SGA is -- SG&A is definitely lower.
Jason English
And the cadence for -- and that's transitory, but it's going to take time because you've got to rotate out some of the co-man and private label business you're doing there, which is very low margin, and replace it with your much higher-margin Hill's volume. What's the cadence? How long does it last? And what's the relationship risk tied to that? Like if you're doing private label for a retailer and presumably it's one of your retailers like that could be damaging, like they don't want you to maybe give that business up.
John Faucher
So I mean, we have very good retail relationships and I think we feel very comfortable in terms of how we're managing through the whole process that goes along with this. So that is not something that we are -- it's something we took into account, but it's not something we're overly concerned. So as we look at this, you and some of your co-workers have done some work on overall supply within the pet food industry. And we think there is going to be some increase in supply. You've seen a lot of the manufacturers talk about this.
So over the next couple of years as industry supply moves up, we think we have the ability to transition this capacity, which right now is being taken up by private label. We think we have the ability -- we think that will find a home, and we'll be able to transition our own volume in which obviously, as you mentioned, is a very nice margin accretive situation when we transfer our private label volume for one of the more profitable brands in the segment.
Jason English
Yes, for sure. And you mentioned global reach for the business. Can you give us a snapshot of what the geographical footprint looks like? And you mentioned Latam, where the category is still a bit more nascent and a real opportunity. Do you get involved with that? Or is that -- no, no, you're on the consumer product side, that's the Hill's is a walled off business, like they're going to do that solo?
Juan Pablo Zamorano
Let me answer that question first. I don't -- but we provide support. We provide support with the talent. We provide support with infrastructure. We provide support with consumer insights. So they are our brothers and sisters, and we make sure that we give them all the possibility for them to succeed. And connected to what John is saying, obviously, with more capacity, bigger opportunities will open for us in Latin America for that business.
John Faucher
Yes. I mean a great example of this is I had a conversation two weeks ago with someone at the company who started off in consumer affairs in Brazil, and then went to marketing for Hill's in Brazil and then had other roles with Hill's, including roles in Topeka and then now is one of our general managers for one of our businesses in North America. And it's a phenomenal career path that you never could have mapped out, but because they had access to both the Colgate side of the business and the Hill's side of the business, it's a great talent developer. One of JP's direct reports did e-commerce at Hills. And so had a head start relative to e-commerce, what was happening on the rest of the business. And I think that has led to very strong e-commerce performance in Latin America over the past several years. So there definitely are a lot of synergies, particularly in terms of talent on top of the whole professional aspect.
In terms of the international opportunity for Hill's, again, our market shares are lower in Europe. Part of this is going to be growing out the category. Again, the high-end pet food category is still relatively underdeveloped in emerging markets. So it's there, but it's small. We have the ability, I think, to not only grow share but to effectively grow the category in a lot of those markets as well.
Europe, there's still growth there in the high end, no question, that's more of a market share opportunity. But I would say, nicely north of 50% of the business is in the U.S., but the rest of the business is sizable.
Jason English
Okay. We got time, and I've got plenty more questions, but I want to make sure the audience has any questions. Get an opportunity to ask them. Any questions out there? All right. Let's keep it going then. So we touched on a lot of Oral Care. We started the conversation there. We touched on your pet care business.
Let's go back to the Skin Care business, which is still sort of new for you guys. How big is it on the derma side? And what are you seeing? I think Filorga is still under pressure right now. It's a higher number of businesses tethered to Asia, SK-II still under pressure, YesStyle is still under a lot of compression. What are you seeing in that market in Asia, travel retail in China? Any green shoots coming up and...?
John Faucher
Yes. I mean, so I think overall, our skin business has done well. If you look at the three brands combined, and particularly in terms of PCA SKIN and EltaMD. So I think we feel like the channels that we've chosen, particularly in the U.S., the derm channel continues to do well. Elta and PCA have very good e-commerce businesses, Elta more on Amazon, PCA more on sort of brand dot com. And so that's been a very good, nice margins, great professional model. We do really good work with the profession in those businesses.
Asia has been an issue, particularly China, no question. We've talked about that a lot. I think we had a view for a moderate recovery in China, which I think is playing out. I think we feel like we have gotten through some of the worst aspects of that and that things should improve going forward relative to what we had been seeing in our expectations. So we think that's encouraging. We are expecting things to the extent that things get back to normal.
I think we're still a little unsure what the new normal will be post-COVID from that standpoint. So we're being, I think, appropriately prudent with our assumptions. It's going to be lumpy. You're going to see travel come back in certain ways, right? When is Chinese travel to France going to come back? That's going to impact the Filorga business. Obviously, you've got Korea, you've got Hainan, all these different factors that go into there. So I think relative to our expectations, things are proceeding pretty much as expected. But I think it is going to be a moderately paced recovery from that standpoint.
Jason English
Okay. Okay. And you didn't mention how big it is.
John Faucher
It's like low to mid-single digits as a percentage of the mix.
Jason English
Is still small. Is there something you want to scale over time inorganically as well as -- obviously, you want it to grow organically. That's silly questions, so I'm not going to ask that. But inorganically, would you expect to continue to add more things to this?
John Faucher
I mean I think we would like to. I think we're going to be, again, sort of prudent is the word I'd like to use here. The professional model is a model that we understand well across all of our businesses. And so -- and again, it's really been vital to the work that we've done on EltaMD, PCA and Filorga and some of the core pharmacy markets. And so I think as we look at this, if we can find brands that are reasonably priced, that we think we can really leverage that professional endorsement model, yes, we will look at them. But we're going to be prudent, and we're going to pay a fair amount and really make it so that we are the right owner of the brands.
Jason English
Yes. Yes. The model makes sense, but it looks like an incredibly expensive model. Running a medical detailing sales force without a lot of scale is going to be a quick path and upside down P&L. But I imagine the ability to scale and the synergies that come with that, without any new brands can be rather substantial.
John Faucher
Yes. I mean if you look at it, I mean that's why having a professional sales force, putting that in place going to derm's offices, going to spas and aestheticians. Once you put that in place, it does allow you to look at that scale model, right? And then you factor in, as you well know from covering Estée and other companies, very strong incremental gross margins on that business. Yes, right? So if you think about that, that really creates that flywheel that funds investment, right, because it's not just the investment in the staff, it's also the investment in the advertising, et cetera.
Jason English
For sure, for sure. Okay. And Home Care, you touched about the benefits of home care brains in terms of scale, your manufacturing base, your scale with your customers. It's the same hold globally. And then just from the outside looking in, it looks like it's probably the least attractive piece of your portfolio, at least from a growth perspective and degree of commoditization and competition. Like are these unfair and perhaps biased observations? Or are they legit?
John Faucher
I think what I would -- and I'll ask you to sort of follow up on this. Home Care -- so first off, all of our businesses are growing, and they're growing at least in line with our 3% to 5% long-term organic sales growth, right? Those all four categories. Obviously, Oral Care and Pet Nutrition are growing faster, but we've been pleased. And I think it's interesting if there is a market perception that home care doesn't grow. But if you look at our competitors, when they break out their segment data, some of our big global competitors, you'll see their home care business in a lot of cases is growing faster than their personal care businesses even. And so we think there is growth there.
And so we think there's growth, we think there's long-term margin opportunity, particularly in Home Care, we tend to have big, lumpy businesses in certain ones not as sort of the most attractive word to use in countries, right? So we've got a big home care business in France. We've got a big Home Care business in the U.S., Mexico, Brazil. So in those markets, we have big scale advantages behind those businesses. And JP has leading market shares in a number of markets as well. So from that, France is another market where we've got very big market shares. So we think there's a lot of value that we can drive there. I think we are ramping up our innovation in those categories. Again, JP has got a ton of that in his region. And so yes, I think there are ways to get back to growing those businesses even faster and growing them through premiumization and innovation, not just through distribution.
Anything you would add?
Juan Pablo Zamorano
No, I would echo the comments. Growth has been there. Margins tend to be lower in the Oral Care and Personal Care categories, but that's already factored into the P&L. There is always a margin growth opportunity in those categories and it gives you all the beauty for other things, the critical mass, the training ground for people, it give you operating margins for…
Jason English
Cash flow.
Juan Pablo Zamorano
Exactly.
John Faucher
Been very big drivers of cash flow, which helps us from a capital allocation standpoint.
Juan Pablo Zamorano
Well, these categories are really, really big. So important to participate.
Jason English
And deeply integrated in prime with the overall business.
Juan Pablo Zamorano
Absolutely.
Jason English
Yes. So very synergistic and very…
Juan Pablo Zamorano
I think Oral Care business is stronger because we have the other two businesses that always help us to support it.
Jason English
Yes. Yes. That makes sense. So as you think about where else you'd like to perhaps buy, we talked about derma cosmetics. Is that where the focus would be on M&A? Or are there other areas where you would entertain acquisitions?
John Faucher
I mean so first off, I would say it's important to understand that we like the portfolio we have. We think there's always ways you can optimize your portfolio. But we're not focused on changing the portfolio of our business dramatically from that standpoint. But we'll always look at opportunities. I think we would look at Oral Care and Pet Nutrition along with Skin Health is our priorities from that standpoint. Are there new categories? Are there new forms? Are there new channels that we could take a look at? And so that's going to be the case. It's -- again, we like the portfolio we have. So we're not necessarily looking for new brands, but are there ways that we can go in and within specific opportunities, accelerate that growth at a reasonable price. And so yes, I think that's really the best way to describe it.
Jason English
Okay. I would love to go deeper on that, but we're out of time. We've -- we're actually now going over. I have a couple of seconds. So on that, no, we'll wrap it. JP, pleasure to meet you in person. Thank you so much for joining us today. And John, great seeing you again.
John Faucher
Jason, great seeing you as always.
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Colgate-Palmolive Company (CL) Presents at Goldman Sachs Global Staples Forum (Transcript)