Colgate-Palmolive Company (CL) — Q4 2023 Earnings Call Transcript

Thanks, Betsy. Good morning, and welcome to our fourth quarter and full year 2023 earnings release conference call. This is John Faucher. Today's conference call will include forward-looking statements. Actual results could differ materially from these statements. Please refer to the Q4 and full year 2023 earnings press release and related prepared materials and our most recent filings with the SEC, including our 2022 annual report on Form 10-K and subsequent SEC filings, all available on Colgate's website for a discussion of the factors that could cause actual results to differ materially from these statements. This conference call will also include a discussion of non-GAAP financial measures, including those identified in tables 4, 6, 7, 8, and 9 of the earnings press release. A full reconciliation to the corresponding GAAP financial measures is included in the Q4 2023 earnings press release and is available on Colgate's website. Joining me on the call this morning are Noel Wallace, Chairman, President, and Chief Executive Officer, and Stan Sutula, Chief Financial Officer. Noel will provide you with some thoughts on our Q4 and full year results and our 2024 outlook. We will then open it up for Q&A. Noel?

Thanks, John, and good morning, everyone, and thanks for joining us to discuss our strong finish to a very good year in 2023 and our positive outlook for 2024. Over the past two years, we've been particularly focused on sustaining our strong organic sales growth while rebuilding our margins and improving our cash flow performance. We delivered on all three of those goals this year while still investing behind advertising to strengthen our brands and building and scaling capabilities to deliver future growth. 2023 marked our fifth consecutive year of organic sales growth either in line or ahead of our 3% to 5% long-term target range. We delivered balanced organic sales growth, growth in all six divisions, all four of our categories, and with improved balance between pricing and volume as we exited the year. Volume rounded to flat in the fourth quarter and was up for the quarter, excluding the impact of lower private label volumes at Hill’s. Our market share momentum is improving behind strong innovation, higher levels of brand investment with a focus on improving the effectiveness of each dollar spent. We're also seeing the benefits of our digital transformation as our efforts with data analytics continue to proceed. Our commitment to revenue growth management and the strength of our funding the growth efforts combined with our global productivity initiative drove gross margin expansion, double-digit-based business operating profit growth, and high single-digit based business EPS growth. We delivered these results while increasing the investment in marketing and strategic capabilities and absorbing the headwinds from higher interest expense, pension, and tax. We drove greater than 60% free cash flow growth, allowing us to invest behind our brands, increase capacity, and buy back stock. We also increased our dividend for the 61st consecutive year. I am deeply proud of the results Colgate people have delivered in a challenging operating environment. 2024 will offer many of the same challenges as 2023, geopolitical unrest, foreign exchange headwinds and a challenged consumer, continued softness in China, and a large number of political elections around the world. We enter 2024 with strong momentum and the plans in place to deliver in this environment, as well as greater flexibility in both our income statement and our balance sheet. As we have mentioned over the past few quarters, we're focused on returning to consistent, compounded EPS growth, and our 2024 guidance reflects this ambition. We will continue to invest to drive high-quality, balanced organic sales growth and with both volume and pricing growing. We plan to deliver our productivity to fund this incremental investment while growing earnings per share. This should enable us to deliver strong cash flow growth to invest back in the business and return cash to shareholders. I look forward to discussing our 2024 plans in further detail at CAGNY next month, so you can share the confidence the Colgate-Palmolive team has in our continued growth. And with that, I'll take your questions.

Hey guys. So just wanted to focus on market share results in Q4 and as you look ahead, oral care share was obviously strong again and you delivered healthy expansion for the full year. Can you just talk about your forward positioning on the share front in oral care? You've got a tougher comparison here. So how do you think about the sustainability of those share gains as you look out to 2024? And then a similar question on pet. Obviously some industry pressure points, can you sort of juxtapose your market share relative to those industry pressure points and if the unlocked capacity is a significant driver of market share opportunity in the longer term in that business? Thanks.

Great. Good morning, Dara. Thank you. So let me start a little bit broader on the categories, particularly oral care. We're really encouraged to see the inflection of positive volume growth in the categories around the world. And in many of the regions where we had seen negative volume growth, we started to see an inflection of that towards the end of the fourth quarter in the category. So that gives us great confidence that the category and the pricing that we put in place is continuing to turn. And importantly, we're going to see that growth continue in 2024. As you bring that back to our business, a really strong quarter for oral care, as you mentioned, both from an organic and sales standpoint, but likewise, as that transferred into better market share growth. If I take oral care in general, we were up double digits in the quarter. That translated into strong market share growth, particularly in regions like Latin America, Europe, Africa, Eurasia, and you saw some improved scanner data in the US as well. I think this is a reflection of the core business strategy that we have in place, the increased advertising that we're putting behind the business, as well as a strong innovation pipeline that continued in the back half of 2023 and will continue in 2024 as well. So market share is around the world strong and we would anticipate that, that will see continued growth as we move through the balance of 2024. And I would caveat with some of that, obviously the markets will be challenged given some of the upfront issues I mentioned, but pleasing to see the strong volume growth in some of our bigger regions. If you take Latin America, particularly three strong quarters of strong volume growth, very much driven by oral care, but quite frankly, that was a cross-section of all of our categories, and you see that volume improving across all of our divisions. So again, I think we're well positioned on that. Let me talk a little bit about pet, because I think there's some important context to our strategy and why what we're doing is different for the market and what we're doing is working for the marketplace as well. We talked about Colgate being the most penetrated brand in the world. We also know that Hill’s is low penetration, so we will continue to execute a series of differentiated strategies on Hill’s in order to continue to accelerate our growth on that business. So, if I take the three aspects that we think about for Hill’s, reach, awareness, and conversion, reach obviously is a reflection of the strong advertising that we're putting in place to get the message out. With low single-digit penetration on Hill’s, we want to ensure the awareness of our superior science is well understood, hence the strategy to drive more TV spending, more digital spending consistently through the quarters. We're spending a lot of time on the effectiveness of that reach to ensure that we're getting the awareness of it. We're using obviously a strong professional endorsement that we have behind vets and continue to accelerate our science and our clinical communication with that key opinion leader, which is critical to the success of the brand. And importantly, as we think about conversion, a lot of non-users in the category, as I mentioned I think on the third-quarter call, 5% of consumers are using a therapeutic nutrition, but theoretically 80% should be using a therapeutic nutrition. So a lot of opportunity to continue to drive share. The dynamics in the category, hence you're seeing a little bit of trade down from wet into dry. I mentioned that on the third-quarter call, treats have suffered. Now we're not immune to the category softness, but if you take a step back and look at our principal retail environments, pet specialty, neighborhood pet, we're growing share nicely across all of those environments, which means we're helping our retail partners grow category dollars. Penetration was up roughly 10% in the US, our biggest and largest market, so we're very pleased with the progress we have there. Yes, the category is a little softer, but we have the right strategies and differentiated strategies in place to continue to accelerate growth.

Hi. Thanks, operator. Good morning everyone. Maybe this question both for Noel and Stan, just related to Argentina. I think there was maybe a write-down that ran through the other expense line. So if you could give us a little bit more color on that and how much of that may recur and maybe, Noel, just kind of stepping back, I think this week we've heard from several other companies who maybe even rethinking how they approach Argentina given the devaluation. It's been a while since we've had this kind of currency crisis in Latin America. So, I don't know, just your perspective, both short-term, how we should be thinking about it from an accounting perspective, Stan? And then, Noel, just how you're thinking about Argentina maybe longer term?

Thank you, Bryan, and good morning. I want to provide some context about our history in Argentina. I apologize for the lengthy response, but it's important for everyone to understand how we navigate these hyperinflationary environments. We have been operating in Argentina for nearly a century. Our management team is highly skilled in hyperinflationary accounting and is adept at managing both the income statement and the balance sheet, as well as preventing further devaluations. This expertise comes from many years of experience handling such volatility. Looking back to the major devaluations in 2001 and 2002, as well as in 2014, we have consistently worked to mitigate potential market fluctuations. We have continued to invest in Argentina for the long term, maintaining manufacturing facilities and solid relationships that allow us to access dollars. Given the historical limitations in accessing dollars, we now have the flexibility to import products into the country as well. On a positive note, price controls appear to have stabilized somewhat, which should reduce future fluctuations. We remain focused on delivering value to consumers and adjusting our prices to manage significant transactions. While we are not immune to devaluation, its effects will manifest more in our margins than our overall profits in the coming quarters. We are committed to achieving appropriate pricing in the market, although this will take time to reflect in our financials. I want to express my gratitude to our experienced team for their diligent management of the economic environment in Argentina, and I feel confident that we have a handle on the situation, despite the ongoing volatility.

Thanks, Noel. And, Bryan, let me start and pick up where Noel left off on the team. So as an example, we have a gentleman that I work with, Jose Fernando and he is my CFO for Latin America. But, he was also the CFO or the Finance Director in Argentina in 2002. So we have a depth of experience and I think that manifests itself with a very proactive approach to market conditions. So he and I talk on a very regular basis about changing market conditions, and then more importantly the proactive nature of what we do about that. So they've operated in a hyperinflationary environment for a very long time. They take the actions necessary where we look at the long term. So while we operate in a hyperinflationary environment, we account for it appropriately. You do see the impact of the devaluation and other income other expense. It was not the majority of that line item. So there are other items in there but we dealt with that, we delivered our overall numbers, we improved our productivity, we delivered margin expansion, profit expansion, and cash flow. So I think the team's done a very nice job looking at it proactively and dealing with it decisively. So you mentioned on a go forward basis, obviously when you devalue, your balance sheet gets smaller. We'll continue to take those actions going forward. We have a growing business there. So, going forward, I would not anticipate a major impact to our results from Argentina.

Thank you and good morning, everyone. I was wondering if you can talk, Noel, a little bit more about marketing investments. And you elaborated just recently that you mentioned increased advertising. And are you also seeing a normalizing promotional environment in the past? You had said that you dialed down and you're reinvesting in promotional capabilities in the US. Can you comment on how you stand right now and how the category promotional levels are? And separately, if you can talk a bit about the supply chain changes that you implemented with the new leadership and also how your position in light of the disruptions in the Middle East and the learnings from the pandemic? Thank you.

Thank you, Andrea, and good morning. I will address the advertising and promotional aspect and then elaborate on some of the impressive work Luciano has accomplished in his new role. Our strategy for the past few years has remained focused on building brands through effective communication and innovation, which is reflected in our financial performance. We've significantly increased our advertising without compromising our guidance or our operating profit targets, which is a positive indication of our financial health and our ability to keep investing in the future. This approach gives us the flexibility to manage our spending efficiently, ensuring we consistently discuss reach, frequency, and the return on investment for our advertising, both digital and linear TV. We're committed to increasing our advertising efforts in 2024. Currently, the promotional environment is quite positive, operating at about 75% to 80% of pre-COVID levels. While it has moderated, we will be careful about increasing the frequency of promotions in select regions where we might have raised prices too much. Overall, we aim to foster category growth and healthy volume through enhanced advertising. Regarding the supply chain, Luciano has made significant strides in transforming it by introducing innovative ideas related to automation and data analytics for better network optimization. Recently, our focus, particularly at Hill's, was on increasing capacity, as shown in our capital expenditures. Moving forward, there will be a shift toward enhancing efficiency and savings, optimizing our network, digitizing our supply chain, and leveraging data analytics for better operational efficiency at a granular level. Overall, I’m pleased with Luciano’s direction and the team's exceptional efforts in preparing for further optimizations ahead.

And, Andrea, I'll just pick up on your last comment around the issues out in the Red Sea and the shipping. So we've been also proactive on that, looking at alternate methods where available, planning for the lead time disruption. And the rest of the supply chain has remained stable, so we don't see issues there. But we have anticipated longer lead times than planned appropriately for 2024.

Hey, good morning, everyone. So, Noel, going back to Hill's, clearly, high single-digit top line growth, excluding the private label, discontinuation, very strong results in the quarter. As you think about '24, like, can you give us a sense of how you see the volume for that business evolving and also the pricing environment in pet food? And then at the margin line, you saw a pretty significant cost headwinds in 2023. Are you seeing any moderation on the cultural and protein side for the Hill's business? Thank you.

Yeah. Good morning, Filippo. Thank you. We see more balanced volume and price as we move into 2024. Obviously, we've had roughly six quarters of aggressive pricing, seven quarters where we've had to take pricing to offset a lot of the inflation that we've seen in agricultural products. To get to your second part of your question, we do see ag prices beginning to moderate, which is good, which over time, as we see the pricing settle out in the markets, we anticipate that volume will come back. But remember, this is the one category we compete in where we've seen prolonged inflation as we move through the back half of 2023. But we anticipate that will definitely moderate as we move into 2024, and pricing likewise will moderate, and we'll see a return to really continuing to drive that successful household penetration number that I shared with you earlier, which is obviously our ability to continue to support strong advertising. So overall, we'll see that more balanced growth as we move through 2024. And on the margin line, as I mentioned again, a more moderating cost. We're still lapping some of the strong inflationary environments that we had in the first half of last year. So that pricing that we've taken in the back half of this year and early in the quarter will stay, but we'll see the volumes start to come back as we move through the back half of the year more meaningfully.

Hi, good morning. Thanks for the question. Really good to see the big uptick in brand spending this year and the success it’s having on competitive performance and growth. My question is, can you talk about some of the other investment buckets outside of advertising and brand spend? I'm thinking R&D, CapEx, some of the more infrastructure capability investments that sit in the P&L. Where are you guys today now versus where you think you need to be? And what's the relative importance of these non-brand spend buckets in your view? Thank you.

Yeah, Callum, thank you and good morning. A good question because we've talked a lot about positioning ourselves to win in the short term, but more importantly, succeed consistently in the long term. And that has been a lot around obviously the advertising investment. But as you well point out, investing in other areas, specifically capabilities, our digital transformation would be at the forefront of that, training and developing talent, bringing in talent, ensuring that we're optimizing our agency and the talent that they have on that side. So that's an important part of ultimately building the capabilities to continue to drive the effectiveness of our spend and ultimately setting ourselves up for better data architecture and the infrastructure required to do that and do it consistently over the long term. So a lot of investment going in that space as well. On the capital side, we've had, obviously, a lot of spending on the capital side in terms of increased capacity. As I mentioned earlier, we're going to see that start to shift to a lot more optimization and savings projects moving through our manufacturing facilities. As I mentioned earlier, setting up infrastructure for our data architecture and our data transformation. So overall, these are all investments for the long term that we think will continue to play out and allow us to drive that consistent earnings growth that we talked about earlier. Stan, anything to add to that?

Callum, the only thing I'd say is when you look at the face of the income statement or balance sheet, the absolute numbers, it doesn't reflect the one of our key jobs here is to allocate resources and we reallocate to those high-growth areas or the areas with the most potential. While that may not show on the absolute line, underneath the covers, that reallocation of resources, whether it's dollars or human capacity is what supports us in analytics and digital and data and S/4 HANA and to enhance all those capabilities. So lots of work under the covers to drive resource to those key areas.

And I'd mentioned very indirectly tied to your question, is the strong cash flow, right? The cash flow is giving us the ability to have a lot more flexibility in how we invest across the business, and that is pleasingly up significantly as you saw in the quarter and the year.

Hey, thanks and good morning. I wanted to ask about gross margin. It was obviously very strong in the quarter and you expect progress in '24. Maybe just some perspective on the work you've done to get here, the drivers this quarter. But then also, as we look at '24, I'm assuming from a year-over-year perspective, that expansion is heavily weighted to the first part of the year. But sequentially, how should we think about gross margin? Is the fourth quarter a high watermark? Or is there a sequential progress that can be made? Thank you.

Yeah. Let me top line, and I'll let Stan answer a couple of questions. Obviously, I think that pricing, I think cost, I think foreign exchange is obviously the big drivers in the cost line for us. So we've done a terrific job in delivering strong funding to growth. I think a lot of opportunities as we had the supply chain settling down, our ability to start ramping up a lot of the projects that were in many respects on the back burner during COVID. That has allowed us to drive strong funding to growth. We anticipate that that will continue as we move forward into 2024. The pricing has been a big part of the gross margin expansion that we've been very aggressive with over the last six quarters. Yes, pricing will be more balanced as we move forward. So you would anticipate that will be a lesser impact as we move through the gross profit and raw materials will continue to, I think, be inflationary, but far more benign than we've seen in the past and there's clearly a moderation there. So ultimately, hopefully, an opportunity for us. With that, let me turn it over to Stan to give you a little bit more construct to that.

So first, we're very pleased with the progress on gross profit through 2023. We had sequential improvement across the categories driven by a broad base of innovation, productivity, that helped offset that commodity situation that we all had to deal with. Now as you think about going forward, coming off of Q4, there are a number of items that always impact the timing, Q4 to Q1. And this year, there's a couple of new ones with a little bit of Argentina, timing of some events worldwide, like Chinese New Year, the timing of when that occurs and where some of this price rolls through, roll through from 2023 and incremental new price. So as we go through the year, we expect that, that will expand, but not at the same kind of levels, obviously, as 2023. So working through that, the teams are focused on productivity. The balance of the top line will change from pricing being the predominant driver to pricing and volume and that productivity will help us drive the margin improvement as we go through the year.

Yeah. I would just simply underscore that there will be a sequential impact at the margin line on Argentina as we will take pricing in the quarter, but that will take a while to flow through to recover the transaction impact of the devaluation.

Thanks, operator and good morning, everyone. So I wanted to ask specifically about Latin America volume performance, up 8% this quarter, three straight quarters of growth. And I recognize that the comps are somewhat easy, but the growth is still really impressive. Can you maybe just unpack how much of that is a function of category growth versus share performance? And really, how does that inform your view on volume growth looking out to '24 in Latin America specifically? Thanks.

Thank you. We previously discussed the strength of our Latin America business during the second and third quarter calls, highlighting our ability to lead in pricing and our consistent history of volume returning to the categories. At the category level, it's encouraging to see positive inflection across all three categories we compete in. Our volume has grown significantly over the past three quarters, resulting in strong volume share growth for our business. We are very satisfied with our overall performance. Given the current trends in the categories, we are confident that balanced growth will continue as we move forward. While we will need to implement some currency pricing throughout the year, we anticipate volume will return in these markets, which is precisely what we are observing. In our largest markets, particularly Brazil and Mexico, we experienced a strong quarter with double-digit volume growth in Brazil and similarly robust growth in Mexico. This clearly indicates that our strategy of implementing strong innovations across all price points, coupled with increased advertising, particularly in the fourth quarter, is effectively recovering the categories and driving good market share growth in the region.

Yeah. Thank you, good morning, everyone. Just wanted to follow up maybe on the raw material packaging inflation. Just some more perspective. You cited specialty products, I just wanted to get some context around that and what exactly some of those elements are.

Sure. Let me throw that one to Stan and he can give you a little bit more context there.

Sure. Unlike the prior two years, we don't expect a material impact here. So we see modest inflation in 2024 and there are some areas like every year that go up and down. But there are some new ones this year, things like fish oil has increased significantly. But overall, we expect modest inflation. And so while commodities overall are off of their highs, they're still elevated versus pre-COVID levels. And we expect that as we go through this, there might be a little bit of benefit moving in our favor, but not dramatically. And the only thing I'd say after that is raw materials are one component. So we deal with conversion costs, we deal with transport and logistics costs, and we drive productivity across all these areas through our Funding the Growth program, and that's why we're confident on margin expansion for 2024.

Great. And Stan, if I could just follow up on Filippo's question. I think he was asking on proteins as it relates to Hill’s. So you cited ag costs, but maybe just comment on protein? What you are seeing...

Yeah. Pleasingly, at least at the current point in time, we're not seeing an impact to Hill's in total on an increased basis year-on-year. So we look in total around Hill’s as ag has kind of stabilized here a bit as well as proteins, we don't see a big headwind heading into 2024 based on total for commodities for Hill's. And that's important, because as we drive productivity with modest levels of flow-through on price and the innovation, that will allow us to continue to expand margin on the Hill's portfolio.

Hey, good morning. So I wanted to ask about productivity and maybe go down to the regional level. I think this was the best productivity in our model anyways, going back roughly 20 years. And so is there anything abnormal about this quarter, any pull forward of productivity? Or are we talking about maybe just productivity muscle continues to build here? And then just connected to that, this was the best North America margin we've seen in some time. Was there any outsized productivity benefit in the quarter? Or are you just starting to see some easing costs and better efficiency relative to the stabilization we're seeing in the business? Thanks.

Yeah. Thanks, Chris, and good morning. Yeah, a little bit of all of that, quite frankly. Obviously, with the incredible inflation that we've seen over the last 1.5 years across the bulk of our commodity basket, we've had to obviously accelerate the funding the growth and the higher cost obviously have allowed us to generate higher funding the growth. As I mentioned earlier, a lot more efficiency in the plants and our ability to utilize our manufacturing facilities to drive more of the funding the growth projects has likewise allowed us to step up a little bit of that funding the growth in 2023 that we historically had not had the time to do. So a bit of it will be symptomatic of the year and the opportunity. But I think the discipline that we've ingrained and the culture that we have ingrained at Colgate around funding the growth in parallel, likewise with the global productivity initiative that we put in place, has allowed us to generate obviously strong contraction in our costs overall. I wouldn't say use it as a benchmark for going forward. There will be a lot of moving parts to that, but we feel like structurally, we're in a better place on funding the growth. Structurally, we've managed to execute the GPI in line and slightly towards the high end of the guidance range that we provided earlier on that initiative. So we feel like we're in a good place. Pricing will moderate, so it's important that we continue to generate the strong funding the growth and through the P&L in order to generate the margin growth that Stan talked about.

Thank you, good morning. I wanted to ask about the top line, especially after the impressive 7% growth in Q4. The guidance for the fiscal year is around 3% to 5%. Can you provide some insights on the first half versus the second half, and the volume growth as pricing starts to stabilize? Additionally, regarding EPS, there was strong performance in '23 and Q4, with expectations of mid- to high single-digit growth. This range suggests a possibility of growth slowing in 2024. Could you discuss what needs to happen to reach the higher end of this range, and what factors contribute to the lower end, including any conservatism in your guidance? Thank you.

Thanks, Olivia, and good morning. So as I said in my front comments, we believe we are well positioned to deliver consistent compounded earnings growth moving forward. And that's certainly reflected in our guidance in the range that we provided. We have a good strong momentum coming out of '23 and heading into '24. And I think most importantly, the flexibility in the P&L and the balance sheet has allowed us to set ourselves up for continued success. As we look at the cadence of that, we will see the balance overall change as we lap the higher pricing that we've had through the bulk of 2023, that will rebalance itself down to be sure and we'll see the volume come back in the categories. As I talked about earlier and ultimately, our focus on driving household penetration with the increased advertising and the market share position that we have. So we think we're in a good position. Comps will get tougher as you say, but we feel that we'll see the volume growth come back and will offer balanced growth throughout the balance of the year. Now recognize that we still have some inflationary markets, Argentina, we talked about, obviously, Nigeria and Turkey that will drive some pricing. We've got some flow through. Most of the pricing we'll see in 2024 will be pricing flow through. We are going to take a little bit of new pricing in certain select markets. But overall, we're going to see a much better balance, as I mentioned upfront. How that ultimately unfolds we shall see but we're definitely planning for more balanced growth as we move through the back half of this year.

Hey, everybody. Good morning. Could you maybe just give us a kind of state of play in China, starting maybe with the market and then getting into new business specifically?

Sure. Thank you, Kaumil, and good morning. In China, you've heard it, I think, consistently throughout the earnings season so far that there's a real slowdown in China, and we're not immune to that slowdown. I will say with respect to some of the numbers out there, we feel we've performed very, very well across Greater China. Our business roughly down low to mid-single digits and that was very much commensurate with the category declines that we saw in those markets. Clearly, on the skin health side, we've seen a more acute decline in the categories and therefore, a bigger decline in our business as well. Long term, the market fundamentals remain intact. And I think it will take some time as we move through 2024 for those markets to come back. Obviously, a lot of stimulus money, as you've read, going back into the market, but we shall see the impact that has on consumers and consumption. But we think we're well positioned. The business continues to build share on the Colgate side. We talked about the Holly & Hazel. We think we're now shipping more closely to consumption as we move through the price increase and some of the inventory allocations that we've seen across the trade and we've got a strong innovation pipeline for next year, but we will be thoughtful and prudent on our investment structure in China until we see the categories come back to levels that invite us to invest more. But we feel long term, a good market and the dynamics are there, but we want to be thoughtful in the short term.

Great. Thanks, good morning. On North America, it was great to see volumes inflect a positive this quarter, and you called out growth not just in oral care, but also in bar soap, liquid hand soap and cleaners. So I know there's a lot of things that kind of contribute to that better performance. You mentioned more balanced promotions. But I was wondering if could you spend a little bit of time talking about innovation across the business and any plans for '24? And maybe also if you could talk a little bit about any plans you may have around hand dish and plans to kind of stabilize and regain share in that business? Thanks.

Yeah. Hi, Lauren. Good morning. Thanks. I can't really talk specifically to the innovation that we have in 2024. But I can say, obviously, that we've got a strong pipeline and a much more balanced pipeline across all of our businesses. The acceleration in advertising is thoughtful and strategic as well that we will support more of our businesses in North America. I think that's a reflection of the really strong operating profit growth that we've reinjected back into the business. So we feel like we're in a much better place to support some of the categories that had been declining in advertising over the years. So we feel we're in a good place to reflect continued growth on the volume side. Obviously, the pricing will moderate quite considerably in the US as we move through 2024. And we've got a strong innovation pipeline across the categories in order to ensure that we continue to drive market share. The other aspect of it is, as I've talked about, a more balanced cadence of promotions, and we will make sure we execute those very, very thoughtfully. We have no intentions on going back to the historical numbers there, but we feel we've got some opportunities in select accounts in select parts of the country in order to accelerate where we've seen competition be quite aggressive. So good position. Really happy with the health of the P&L. Really happy with the advertising that we put back in the P&L, which will bode well for the long-term health of that business.

Yeah, thanks and good morning, everybody. Two questions for me. One, on North America. So global market share better, in North America markets for toothpaste a little bit weaker, advertising spend obviously increased in 4Q and for the year. How much is the right level? And is there a correlation in the US between advertising and volume performance? Is there more to it than that R&D, whatever, curious there? And then on the Hill's business, given the weakness in the pet specialty channel, has it made you think at all about whether your distribution mix in terms of where the product is sold, is right at this point? Or do you potentially think about expanding that to other retailer areas? Thank you.

Good morning, Mark. Thank you. First, regarding North America, we are focused on achieving a more balanced investment across the region. It was important to align our profit and loss, especially the middle segment, and that was a strategic decision we made. This strategy was supported by the overall strength of our business globally, allowing us to increase our investment in North America as we adjusted our pricing strategy. We have a solid pipeline for innovation and expect to continue raising our investment levels. This commitment is intended for the long term, as we see North America as a critical market for our future success. While we have noticed some softness in the Nielsen tracked channels, our non-tracked channels are significantly outperforming them, growing at three to four times their rate. Thus, we believe that our overall investment is effectively increasing consumption and sales in that market. In summary, we feel we are well positioned. On your comment regarding Hill's, our focus remains on the channels where we compete, as we consider our products to be uniquely differentiated in the premium nutrition segment. The science category continues to expand, especially in pet specialty. We do not plan to broaden our distribution to food, drug, and mass channels, as that could harm our brand. We have strict distribution policies that ensure we remain in our current channels, and we see considerable potential for growth there. Therefore, we have no intentions of broadening our distribution. Given that most of our business is in the US, we will carefully consider any market expansion for the Hill's brand to ensure we establish the right business model, emphasizing veterinary involvement in our expansion strategy to promote long-term profitability. We will continue seeking opportunities to enhance the health of that business and facilitate expansion in markets globally.

Thank you very much. Noel, could you discuss India for a moment? Many companies we speak with are quite enthusiastic about the market and view it as increasingly dynamic. Could you share your insights on your position there, market share trends, any new opportunities you're identifying, and your plans moving forward? Additionally, Stan, there seems to be a $0.07 impact on the other income item related to some offsets, asset sales, and a value-added tax refund. Could you clarify what is happening in that area? Thank you.

Thank you, Rob, and good morning. In India, we saw impressive results this week, with a 9% organic growth, strong pricing, and improved volume in that market. We are very optimistic about the Indian market and expect the rural segment to rebound, which will positively impact volume as we look ahead. Additionally, we have a solid innovation plan for India focused on our core businesses, and we are eager to see it implemented successfully. The team is doing a fantastic job expanding distribution points to ensure we maximize our investment strategy. We are positive about India, pleased with the results, and confident that we are positioned well for another strong year in 2024.

Hey, Rob, let me pick up on your second questionnaire and other income, other expense. As we talked earlier, that is made up of a number of items, both from this year and last year. And Argentina devaluation is certainly an impact, but not the majority of it. We also have some start-up costs in there, some one-time items from this year and last year. What I would say is that's not a new run rate. That's not going to continue into next year at that level. And you should think about these as kind of one-time events in nature. So these change as you go through the year.

Yes, thanks very much. Just wanted to talk on Europe. Another quarter of strong pricing this quarter. And looking back, I think it's 9.5% for 2023 or 4.5% in 2022. So just be really interested to hear how you're thinking about pricing over here because consistently, I guess, in the past, pricing hasn't been a big part of the story in Europe. Is this kind of a new kind of attitude we should expect to continue doing sort of more pricing in general coming out of Europe?

Yes. Thanks, Ed. Good question. We think we've learned a tremendous amount on pricing in Europe and really work closely with our retail partners to find ways to drive value and ultimately their categories. Clearly, a significant inflation over the last six or seven quarters, which certainly helped to take more pricing in the marketplace. But I think our teams have exited '23 with more confidence. Now there's no question as inflation declines in 2024, we'll get a much more balanced view of pricing and volume moving back into the P&L. But I think some good stories that have allowed us to really accelerate our innovation and drive real value in the categories by relaunching our brands. You heard Jean-Luc talked about that at the Deutsche Bank Conference, and I think that continues to be a consistent theme. So a lot of learning there, not saying it's going to be a challenge as we move forward to get more pricing in Europe, but we believe we've got the tools and the vehicle to continue to find ways to accelerate category growth and therefore, our margin growth in the business.

Well, thanks, everyone, for joining the call this morning. We hope you agree that the strategies and plans we have in place to deliver consistent compounded profitable growth to drive value for all of our stakeholders is there. And let me particularly thank all the Colgate employees around the world for their incredible hard work and dedication to deliver these strong results in 2023 and thank them in advance for the results they're going to continue to deliver in 2024. Thanks, everyone. We'll see you down in Florida.