Colgate Palmolive Company CL CEO Noel Wallace Presents at Barclays Global Consumer Staples Conferenc

Great, thanks Lauren. Hello everyone. It's obviously great to be here with you, at least by video. I'm actually in Connecticut, and I hope — I wanted to wish all of you and your families a healthy and safe environment given the circumstances, and particularly for those with kids returning to school, best of luck with the new school year. I'll keep my remarks brief and very focused for today in order to leave time for questions at the end. But I'll be talking about three different topics — topics pretty consistent with what we've been highlighting through the last 18 months. I'll start with our performance in 2020 and how we're seeing our markets generally, our operating priorities for this year as we've talked about them over the last two quarters, and how we have an eye on the future and as we transition particularly into a more uncertain environment in 2021.

I'll start off by going back to what we said on the Q2 conference call. We said we were pleased with our performance, both in terms of our results through the second quarter and how we were dealing with the crisis, how Colgate people were reacting to it all around the world. We still feel very good about how we're operating during this difficult environment. We also highlighted that our main concerns were the direct impact of the virus and the government actions to send the virus and the potential disruption that could create, and the uncertainty behind that. We also discussed the potential for economic weakness to impact our categories moving forward and how we project those moving forward in the future.

Despite the uncertainty, we delivered strong growth through the first half of the year. One of the things we kept emphasizing in our discussion of our turnaround in organic sales growth over the past two years is the fact that we are delivering broad-based growth. We're not relying on one category or one geography in order to deliver sustainable, profitable growth; we need to deliver both volume and pricing growth across all our geographies and across all of our categories.

You can see on the next slide the track record of this turnaround. While we've seen some benefit from COVID in certain categories, we believe the biggest pieces of this growth are coming from the strategies that we put in place in 2018 and 2019, and they're still bearing fruit for the business. This leaves us positioned for growth not just in 2020 but also going forward. As I mentioned, we have experienced teams around the world, they're used to working through difficult times and delivering results. We have strong healthy brands that are trusted by consumers. Our brands offer great value to consumers who are looking to trade down, but we also have the ability to trade consumers up as we bring more premium innovation to the market, and that has certainly been a focus of ours. Our supply chain has performed extremely well during the crisis, with increased capacity utilization and very limited downtime. And as we discussed on the Q2 call, we'll support our brands with increased marketing spending in the back half of the year. Our markets remain very competitive, as you can imagine, and we need to ensure that we're reaching consumers with impactful messaging to drive purchase intent across the board. And lastly, we're adapting our strategy to ensure that we will win in the recovery, and as we look towards 2021 and beyond.

So our priorities remain the same as we laid out in Q1 and Q2 calls: first, navigating through the crisis by focusing on our values, Colgate values; adapting our strategies and executing them with agility; and third, managing through the crisis with the course for the future. So first, let's talk about navigating through the crisis, or being true to our core values. We know that hand washing is one of the key steps that people can take to limit the spread of COVID-19, and we make a number of products for hand washing, and we take that responsibility very seriously. This is our #SafeHands bar soap program that we've committed to donating 25 million bars of soap, and we're distributing those across 28 different countries around the world. But it's not just helping our consumers; we need to help our customers, and we see that as a big opportunity to create stronger relations, particularly as they need to learn to navigate through this new world. In many markets around the world, we're helping our customers work safely by providing them Plexiglas screens, as you see here, so that they can keep their employees safe. Here you can see one of us in a mom-and-pop store in Latin America, and here you can see another example from our Latin America team on large-format stores — very creative ingenuity from our teams on the ground to help our customers stay safe, as well as their shoppers. We're also providing educational materials to our customers and our consumers that remind them of the behaviors they need to adopt to create safe shopping environments. We also repurposed our well-known Bright Smiles by Future Brands program to distribute health and hygiene products all over the world, to ensure that we're using that program not only for our oral care checkup checklists, which have been difficult during the pandemic, but to improve education broadly in the categories in which we compete.

Another key value is sustainability, and we've been on this journey for quite some time, and we continue to build on our strong track record in this vital area. Importantly, we have been able to embed sustainability throughout the entire organization — something that's so relevant across all of our demographics today, so it becomes a top priority in how we operate in every business, not just a function of using less water or less plastic. It becomes a real purpose-driven initiative for our 2025 goals. We've also announced, in that regard, our new sustainability mission, which includes aggressive 2025 targets. So now you can see our new sustainability mission on this slide: Colgate invites a billion homes to create a healthy and sustainable future. Why a billion homes? As a reminder, the Colgate brand is in more homes around the world than any other brand. Almost 60% of homes will purchase a Colgate branded product during the year. And if you combine that with products like Hills, Palmolive, Protex, Softsoap, Tom's of Maine, and Elta, and all of our other brands, we're in well over a billion homes worldwide, and that's an important responsibility for us in order to promote our sustainability for the world. Our mission is not only to do our part to create a sustainable future but importantly to help our customers and our consumers around the world do their part. As part of our new sustainability strategy, we have aggressive forward-looking targets in terms of net zero carbon emissions, 100% renewable energy, elimination of one-third of new plastic, and many others that you see on the chart here. One area that we have become an undisputed leader in is our focus on true zero waste facilities. We lead in number and geographic breadth of zero waste facilities and have a plan to be zero waste by 2025 across all of our facilities.

And our commitment to our communities is not just about humans; it's also about pets. We're very proud of our continued support for Clear the Shelters. While pet adoption at the beginning of the COVID epidemic has lowered shelter populations, the Clear the Shelters program saw over 100,000 adoptions so far this year at over 1,100 participating shelters — a great turnout. So not only is this great for all the pets and pet parents, but it's strong brand building for Hills. These pets all go home with samples of Hills pet food, and it's also a great way for us to drive merchandising with some of our key retail partners. And we also help with the shelters all year long, supporting over 800 shelters on an ongoing basis here in the US and Canada, and we feed over 90,000 shelter pets a day through that program.

Our second priority is about taking our successful strategies for accelerating growth and adapting them to this new and challenging environment. As we've talked about, we've got big core brands that account for a majority of our business, and we know that we have to grow those core brands to drive category and market share growth long term. So we continue to innovate and invest behind those core brands while adapting our marketing messages for the COVID environment. Let's take a look at some of the examples we've done this year. We've talked a lot about oral care core innovation in the past, but core innovation is not just for toothpaste. One of our most exciting core innovations this year is happening in personal care, and that's on our Protex brand. The anti-bacterial body cleansing segment is rapidly growing, as you can imagine; it's a great time to have news on the Protex brand, which is a big and growing brand for us in emerging markets. We have reformulated Protex to use flaxseed oil. Protex with flaxseed oil actually boosts your skin's natural defense and continues to eliminate 99.9% of bacteria — the first of its kind formula that allows us to combine important antibacterial benefits with the natural ingredient story, two highly relevant segments in the market in which we compete today.

We also have core innovation in our home care businesses. We've launched Ajax in Europe with new biodegradable and vegan formulas, and we're packaging that made with 100% recycled plastic. And here's advertising that probably is pretty compelling for all of those new pet parents who recently adopted dogs on the Ajax brand. And of course, there's core innovation in oral care. We spent a lot of time talking to you about our efforts to turn our China business around; we'll talk about the e-commerce efforts in a bit. But I also wanted to focus on core innovation on our 360° brand, which is our biggest franchise there next to the Darlie brand. We're also launching the brand with a new positioning around gum health — a key consumer focus in China — new packaging, as well as new advertising. So let's roll the spot.

But growing the core isn't just about innovation. As you've heard us talk about, we have to drive consumer purchasing on these brands by keeping them fresh in the consumer's minds, and doing that through our best-in-class marketing with purpose-driven brands, particularly in the COVID era where big trusted brands can obviously have an advantage in consumers' minds. So what I wanted to do now is to share a spot from Latin America that's made up of real footage of employees of our advertising agency communicating over video calls what they want to do when the quarantine is over. And I think you'll agree it's really genuine and universally relatable. We produce similar spots like this all around the world. So let's show that.

A great spot, obviously in the world we live in today, driving real purpose behind our brand. You can see that, I think, very evidenced in that spot — no text, very little text, no copy, and obviously testing very, very well to build our brand. But probably our most successful recent core innovation has been on the Hill's Science Diet launch. Are you familiar with the success of the rollout here in the US? But much of the world, we had to relaunch Science Diet during the COVID pandemic when many veterinarian offices were closed and our reps obviously couldn't do in-person visits. The Brazil team created a complete virtual launch using videos and digital tools to connect and interact with their customers. Highlights include the 3D technology that made it possible for customers to interact with the new and engaging package we introduced. And after each event, the team held hangout sessions to get first impressions and feedback from our customers. Great creativity shown by our teams on the ground. Not surprisingly, overwhelmingly positive feedback from our customers on the ingenuity and creativity shown by the teams on the ground.

Our second growth focus area that we've discussed with you is innovation in high growth segments and adjacencies. Our Optic White portfolio has been a consistent growth driver for us. We've long felt that there was greater potential for the brand given our superior peroxide technology. And with the launch of Optic White Renewal, which is our latest innovation on this brand, it comes at the highest price point ever for an Optic White product in the US, so again pushing the importance of moving into the premium segments. The consumer results, as you see on the chart, have been really strong, and here you can see the share performance of both Renewal and the overall Optic White franchise. And all that business came at obviously an incremental selling price. Consumer interest, as you can imagine, in whiter teeth has always been very high, and consumers are looking, as we learn, for more do-it-yourself solutions in this category. We think these areas are beyond toothpaste where the Optic White brand can compete successfully. Here you see our Optic White Overnight Whitening Pen, which has been a great performer for us here in the US in e-commerce, and is beginning now to roll out into brick-and-mortar retail as well. It sells for about $25 on Amazon, and the product reviews are really good.

Similarly, and then obviously related to some of the antibacterial, sanitization trends we see around the world, we've launched some sanitizers under the Palmolive and the Protex name. This is agile action by our teams on the ground, and we've done that in markets where we believe we have strong brand performance and we can sustain those businesses in the long term. And the mouthwash category has seen some increased consumption during COVID, as consumers are looking for antibacterial solutions for their mouths. So we're launching a Colgate Total Antibacterial Mouthwash Spray in Latin America. Importantly, this also captures the growing trend of portability and on-the-go, but a great demonstration of our agility and reaction to consumer behavior trends.

Our third strategy for driving organic sales growth is expanding in new channels and markets, and you've heard me talk a lot about those this year. Obviously, e-commerce has been a big beneficiary over the last six months, and we saw almost 50% growth in our e-commerce business in the second quarter. I mentioned Optic White innovation earlier, and the performance on e-commerce has been even more impressive given the premium nature of that product. So here you can see some activity on Optic White on e-commerce, which has helped us drive over 200% e-commerce growth for our North American division in the second quarter. And we're excited about our newest direct-to-consumer launch, which is Colgate Hum, our latest smart electric toothbrush offering, available here in the US right now. It's available at humbycolgate.com for about $70 for the rechargeable version and about $50 for the battery version. Hum is an app-enabled toothbrush, allowing users to track their performance and really assess how they're brushing their teeth, and ultimately earn points for brushing to buy replacement brush heads. Here's our introductory ad for this new innovation, so let's roll that spot.

So we can feel it, and it's very early days, but the response has been great. Here you can see two reviews from Wired and GQ, both of which are glowing about the performance of the brush and the app and how it works. We'll be rolling out further in e-commerce shortly, as well as to select brick-and-mortar retail through the balance of the year.

We talked a lot about China; it's another very big e-commerce market for us, and one where we have talked about the need to premiumize our product portfolio to successfully compete in that market. We launched Colgate Miracle Repair toothpaste, which is an amino acid formula toothpaste made for delivering healthier gums. And through the launch of Miracle Repair and our focus on other premium products that we've introduced this year, we've been able to increase our average price per kilo by 46% in the first half of 2020 versus 2019. So clearly delivering against the strategy that we put in place, and we're continuing to innovate in this space. What many people don't realize is that gums are very similar in physical makeup to skin. We see the opportunity, particularly in markets like China, to bring skincare trends into oral care. Serums are a very big trend in that market, particularly in skincare. As you know, we are now launching the Miracle Repair mouth serum here in the third quarter, which will help us defend against early age gum disease amongst our consumer population. So good stuff there. We've also launched our skin health brand PCA Skin in China across cross-border e-commerce late last year — I think it was in the late fourth quarter — and we think PCA's legacy as a professional brand, particularly here in the US, can set us up for long-term growth in the China market, and early indications are pretty good. Here's some pictures of a livestream event that we did in June with one of the top livestreamers in the market, which is obviously a significant trend in China now moving around the world. And interestingly, we sold out of all of our product based on that livestreaming in 10 seconds. So again, great results exploring new avenues to drive distribution and transaction and build our brands.

Our third priority is focused on how we exit the crisis better prepared for future growth. One of the keys would be our ability to remain focused on breakthrough innovation. You know, while the global economy may remain weak for some time, we know that our retail partners are looking for strong innovation to drive their categories at all price points to help drive their business as well as ours. We've talked about old ways of working and our overreliance on line extensions — a strategy that wasn't delivering incremental growth for either Colgate or our customers. Going forward, however, we're shifting our resources in terms of people and time from mostly line extensions to a greater balance between line extensions and transformative and disruptive innovation — what we're calling Horizon 2 and Horizon 3 innovation. And I think you've hopefully seen some evidence of that innovation in my slides today, and there's more to come in the balance of the year and into 2021.

We also need to take advantage of the uncertainty now to change how we want to work in order to drive productivity across the full enterprise of the company. As we continue to work remotely, we need to adapt all of our systems to take advantage of the greater amounts of data that we are generating, and use that to improve our efficiencies in areas like trade spending, areas like programmatic advertising, and product formulation. But really getting more efficient in how we operate. We also have to keep pushing in more traditional methods like portfolio optimization, which is required by our trade partners. Our best-in-class funding the growth continues to be sharpened and innovated against, particularly in further increasing the agility and efficiency of our supply chain. Our global supply chain group has done an amazing job working to deliver during the crisis, but we have plans in place to drive further supply chain flexibility and efficiencies as we move forward.

So I guess to sum it all up, we believe we have the right portfolio, the right strategy, and the right people to manage through the crisis, and we continue to be pleased with the results that we are delivering in this difficult time. But as you hear, we are focused on putting the plans in place to deliver strong growth in the future as well. So now, Lauren, I'll turn it back over to you for any questions.

No, I don't really think it does. I think we'll have an interesting balance moving forward that I'll talk to in just a moment. But the premium innovation is obviously driven by the shared growth that we're seeing in the categories, and the dollar growth we've seen across almost all our categories has been driven by premium innovation, and we're way under-indexed in that space. So as a result, we've obviously positioned ourselves moving forward to ensure that we capture our fair share of the premium growth in the market. And if you go back to 2008-2009, which I've spoken to in the past, the most significant innovation that we had during that recession was Optic White, and that's what drove all the incremental value in the toothpaste category during that period for us, and we were able to successfully roll that across the world. I think what's different here is that obviously more pressure on disposable income of consumers given the unemployment rates that we're experiencing today. And that's where Colgate's really well positioned. You know, we have the balance of our portfolio in that core area, that mid-price, and the strategy that we have in place today to innovate behind the core across all of our categories, we think plays really well for the recession that we're potentially going into. So it's having that right balance. We always know that driving real value to consumers and supporting that value with great marketing campaigns ultimately gets consumers to trade up and try new products. Affordable luxury is a key trend that we've seen in all recessions; consumers want to pamper themselves despite the difficulties they're having. Getting price points right, getting price pack architecture right even on the premium side of the business, and some of the initiatives we have in revenue growth management, we believe there's still a significant upside for us to drive premium while we balance the portfolio across the other price tiers that we have so successfully innovated against.

Yeah, yeah, we take a very holistic approach at this. It's balancing healthy growth with the economics of the P&L. And you know, if I start with the economics and the P&L, we're not looking to chase a lot of the deep discounting that's going on in the category, and we've seen aggressive couponing that we have deliberately decided not to go after. And obviously we've lost a little share as a result of that, but the share that we've gained, which is the growing part of the segment for us right now in the mid to premium price, is a much healthier portfolio to have moving forward. And that gives us the margin we need to continue to support our innovation. So overall, you know, we see the promotion environment, depending on where you are in the world, ebb and flow, but we have deliberately chosen that we're not going to chase some of these low pricing that we've seen particularly here in the US with couponing, and make sure that we divert our resources and our money into areas that we believe would drive sustainable profitable growth for us moving forward. Interestingly, some of the scanner share that we have lost has been on the base business because we haven't chased some of those coupons, and the growth that we've seen has been on, as I mentioned, the premium side of the business. So we think obviously that holds up well, particularly as we bring more innovation against the core and we continue to support our businesses as we talked about in the back half of this year.

Yeah, it's not different than what we talked about before. We continue to see significant volatility in the categories from week to week and from month to month. Obviously, the COVID-driven categories like skin cleansing — whether it's liquid hand soap or bar soap — hygiene floor cleaning products that deliver hygiene benefits, our Fabuloso of the world with antibacterial, as well as the dish category with more and more consumers staying at home and cooking at home and the dish cleaning involved with that. So we continue to see those at pretty elevated levels. The trade continues to want to catch up to the demand of those products. In other categories, we've just seen a lot more swings and volatility going up and down. You know, overall they're still slightly below where they were pre-COVID on some of those more stable categories like toothpaste, but we think that as the inventory comes out — which we believe it will based on the panic buying — we'll see those categories normalize moving forward. And so what are we doing about that? We obviously, as leaders in most of those categories, we've got this really aggressive innovation strategy coming in and strong support plans in the back half to support that innovation, as well as to drive some of our purpose-driven brands and brand equity. So we have the money in the P&L to continue to drive that, we have the innovation that we believe will continue to bring excitement to those categories, and working with our trade partners to bring that to fruition.

Okay, all right, thank you.