Colgate-Palmolive Company (CL) Evercore ISI 3rd Annual Consumer and Retail Conference (Transcript)

Industry and Company Overview * Industry: Consumer goods, specifically oral care and personal care products. * Company: Colgate-Palmolive Company (NYSE:CL) * Focus: Asia-Pacific region, with a particular emphasis on China, India, Southeast Asia, and Australia/New Zealand. Key Points Asia-Pacific Consumer Health and Recovery * Mixed Recovery: The Asia-Pacific region is recovering from the impact of the COVID-19 pandemic, with varying degrees of recovery across different countries. * China: Recovery is slow, with muted consumption trends and challenges in brick-and-mortar and e-commerce channels. However, there is cautious optimism for the second half of 2023. * India: Recovery is stable, with urban markets recovering while rural markets lag. There is optimism for rural market improvement in the second half of the year. * Southeast Asia: Strong growth in the Southeast Asian market, with stable and positive trends. * Australia/New Zealand: Stable and positive trends, better than pre-COVID times. Colgate's Transformation in China * E-commerce Growth: E-commerce has become the primary growth driver for Colgate in China, accounting for 45% of the business. * Transformation Elements: * China Excellence Center: Created an innovation team, data team, and e-commerce team focused on China-specific strategies. * Premiumization: Increased average selling price through innovation and superior product experience. * Optimized Go-to-Market Model: Focused on large cities and large format stores. * Team Restructuring: Reorganized and re-engineered teams to drive transformation. * Market Share: Colgate has more than quadrupled its market share in e-commerce over the past three years, reaching 11% market share in toothpaste in Q1 2023. Dual-Brand Strategy in China * Darlie and Colgate: Colgate operates a dual-brand strategy in China with Darlie and Colgate, leveraging the strengths of each brand to capture a broader market. * Darlie: Strong in lower-tier cities and retail environments, focusing on freshness and whitening. * Colgate: Strong in upper-tier cities and large format stores, focusing on scientific credentials and oral health. Chinese Consumer Preferences * Similarities with Skin Care: Chinese consumers in both skin care and oral care seek expertise, excellence, and innovative solutions. * Functional Benefits: Chinese consumers value ingredients and sophisticated benefits, leading to premiumization and higher price points. * Enzyme-Based Technology: Colgate's enzyme-based toothpaste sells at a premium price due to its perceived value and benefits. Expansion to Southeast Asia * Transferable Success: Colgate is successfully transferring learnings from China to Southeast Asia, focusing on innovation, marketing activations, marketing technology, and go-to-market strategies. * Southeast Asia: Colgate is confident in the Southeast Asian market, with a focus on execution and leveraging the learnings from China. India Market * Market Recovery: The Indian market is recovering, with stable share trends and optimism for rural market improvement in the second half of the year. * Urban vs. Rural: Urban markets have recovered while rural markets lag, with significant opportunities for growth in rural India. * Per Capita Consumption: India has low per capita consumption compared to China, presenting a significant opportunity for growth. * Premiumization: Colgate is focusing on premiumization through innovation and driving per capita consumption. U.S. Market * Scanner Data: Scanner data has been soft recently, reflecting temporary reductions in promotions and the impact of cost inflation. * Improvement Expected: Improved volume performance and better market share are expected in the second half of the year as advertising spending increases and competitors take more pricing. Hill's Acquisition * Cost Inflation: Hill's raw material costs are peaking later than the rest of the business, driven by agricultural costs and avian flu. * Acquisition Impact: The acquisition of Red Collar will have a 90 basis point impact on total company gross margin in the fourth quarter, but this impact will gradually decrease over the next few quarters. * Margin Progression: As more private label volume is transitioned out and Hill's volume is brought in, gross margins should improve over the next couple of years. Plaque Pro Release * Technology: The Plaque Pro release has received positive feedback due to its technology, mouth feel, flavor, and benefits. * Rollout: The rollout is going well, with advertising and promotion beginning to kick in, leading to accelerating trends.