Good morning, everyone. I'm Andrea Teixeira. I lead the coverage for U.S. household and personal care, including beauty, including Colgate, as well as beverages for JP Morgan Equity Research. It's my pleasure and my honor to have, I would say, friends with me. Maria Paula Capuzzo, who is the head, she leads, she's the president of Africa, Eurasia, and the Middle East for Colgate, with extensive experience all over the world, as well as John Faucher, who I've known for 20 years, who leads, M&A and investor relations at Colgate. I'm just gonna start with you, Maria Paula, with the innovation. Your CEO, Noel Wallace, has spoken very deeply about how innovation has been at the core of Colgate's transformation process and making breakthrough and transformational innovation for impacting the business across the globe. Can you comment about your experience on that?
Yeah, absolutely. Good morning, everyone. It's a pleasure to be here with you, and thanks, Andrea, for the invite. I think back in twenty nineteen, at the first Noel's CAGNY, I had the pleasure to be with him, and at that time I was spearheading innovation for Latin America, and one of the focus areas that we discussed was innovation and the changes that we intended to do there. But more importantly, Noel reinforced at that time our focus on driving organic growth and accelerating the growth of the company, innovation being a core pillar to that. Over these years, we have seen Colgate step change the profile of our innovation to more breakthrough and transformational innovation, rather than just line extensions, and with that, growth came. Beyond that, aligned to our strategy, we have decided to reinforce our core innovation together with our premium innovation.
So a renewed focus on working across the portfolio architecture and making sure that we had, as it has always been for Colgate, science-backed, science-led innovation across our portfolio for the different types of consumers that we have. Beyond that. Oh, I think we're having some, is it my mic? Is it working now? I think it's better. Should we go back?
Yeah, go.
Okay, so let me just go back and recap on what we were saying, because I think we were getting cut. So back in twenty nineteen, first, Noel's CAGNY, he talked about the importance of us accelerating and focusing on organic growth for the company, and a key portion of that was revamping our innovation strategy. What we have done since then as a company is to was to really improve the profile of our innovation from line extensions to more transformational innovation. And also we have re-looked at our portfolio and the importance of innovate across price points and use the whole portfolio architecture. Why that? You know that Colgate is the most penetrated brand in the globe in households.
With that, we have quite a very unique footprint with the brand in different price points, and core is a key part of our business and so is premium. We renewed our commitment to provide science-backed innovation for both the core and the premium side of the business. Premium continues to be a big opportunity for us in terms of innovation. We know that within premium there are some segments where we're experiencing success, and we are committed to continue driving. Whitening is a key example of that. It has been a key growth driver for the company, also enhancing margin and mix. On the other hand, a couple of weeks back, Noel commented in one consumer conference about some unique opportunity spaces that we have.
If we continue to talk about oral care, the notion of active prevention, which is a growing space for the category, where we do have a brand that is uniquely positioned to capitalize on that, which is Colgate Total. So there are some innovations coming in that space, and you'll hear more about that soon. In the core innovation, we have seen that, by elevating core innovation and relaunching some of our key products, we have gained more momentum in terms of growth. I can give you an example of my current job. Last year alone, we probably relaunched around two-thirds of our business in the core, and with that, significantly step change some of our growth profiles. We'll talk about that later.
Beyond the specific spaces, and I will give it to John to talk about Hills, more specifically, but just beyond the specific spaces of innovation, I think we're excited as a company, how we have been progressing our innovation culture in general, and that would be talent, it would be processes. For sure, it would be also getting to superior insights and making sure we activate against those, and very important also, driving our activities and the revenue growth management, leveraging those innovations to support our endeavors in working the portfolio through revenue growth management. And my final point on innovation is also, I think we were early adopters of AI in innovation back then. In CAGNY, a few years back, we talked about how we were using it for knowledge management and innovation.
We have done it for science, and we have done it even for concepts moving forward. And what we see is that some of those, combined with the best people, we really can increase the performance of our innovation, the strength of it, the incrementality of it, which for us is so important, and also our speed to market. So with that, John, I don't know if you-
Yeah, yeah, the only thing I would add from that standpoint is, along with focusing on the incrementality and the size of the innovation, we changed our incentives surrounding innovation so that our operators are incentivized to deliver bigger innovation, but also more incremental innovation. And that's been a shift over the last five years. And then, the other thing, I'll focus on the Hill's piece of it, because it's a big opportunity for us at Hill's. And a group of us were recently out in Kansas City at Hill's new headquarters, going through the innovation grids. And Hill's is a very singular brand within pet nutrition. 100% focused on science, both in wellness with the Science Diet or Science Plan brands, as well as therapeutic with the Prescription Diet brand.
And we have a significant opportunity at Hill's to drive incremental volume from innovation. We recently have opened new wet food capacity, and wet is a segment where we under-index, and it tends to be higher margin, so there's a great opportunity for us on cat, which tends to skew towards wet, small paws or small dogs, which also skews towards wet, and where we can launch in new forms, like pouches and tins and mousses and things like that. And then we also have capacity that we purchased a few years ago on the dry side, which again, by bringing our capacity utilization at lower levels, we're gonna be able to bring more innovation to market. And it's really, as Maria Paula said, very science-based innovation, because that's really the DNA of the Hill's brand.
And then, on top of that, we're supporting that, not only on the oral care side, but also on the Hill's side, with significant increases in advertising spending over the last several years. So it's a change in how we build the innovation and then how we go to market with the innovation as well.
So the next point, you spoke about innovation, but also specifically on one of the pillars, increasing brand awareness, increase brand penetration and household penetration. And you came through as a CEO of Brazil with the highest per capita consumption of toothpaste in the world, and now the last four years have been the lead at as a president of EMEA, Middle East and Africa. Like thinking about how can you drive all this household penetration within those regions with two wars, and you being able to grow volumes over the last five quarters and organic sales growth in between 16%-20% in the region over the last eight quarters?
Yeah.
So that, how can you use that and continue to build into that, that growth in household penetration?
Thanks for the question. Let's start with an enterprise look at it. The way we look at growth, as an enterprise, we can drive it mainly in three ways, and again, Noel talked about this. The first one is more people, so driving penetration and getting more households to get our categories and our products, our brands. The second one is more product, so making sure that the people that consume our brands today, they consume more of and drive frequency with that. And the third one would be with more value or more price per ounce, which is a lot driven with our RGM initiatives. If we think about consumption per se, that continues to be a tremendous opportunity for us as a company.
You would be surprised to know that in many parts of the globe, the average brushing per day is below two times a day, and that includes developed markets, some like Europe, and in the developing world, like, for example, Africa, that would be significantly lower, many times less than once a day, and so there is indeed a lot of opportunity for us to continue driving both penetration and per capita consumption. And Hills, I think, John also talked about, that the penetration headroom for growth is enormous. Now, if we focus specifically on penetration, because indeed Brazil is skewed towards a lot more per capita consumption, but parts of the growth in Brazil has come from a consistent investment over many years in oral care education.
Colgate has a flagship program called Bright Smiles, Bright Futures, which we have been committed to over thirty years. I think we're surpassing 1.2 billion or 3 billion people in the accumulated time, kids that we have educated good hygiene and oral health habits, and that, over time, builds more, more consumption. But consumption is hard to measure on a year-to-year basis. It's a longer term measurement and KPI of the business. What is a bit easier to isolate in a short, shorter term is penetration, so the more people we reach, and we're sharply focused on that. Let me give you one example of Africa Eura sia. We have decided a couple of years back to revamp our strategy with BSBF and increase our investments. We know from marketing mix modeling that investments behind BSBF are among the highest returns that we have in the company.
So we decided to increase our investments in two ways. First, more reach and more kids covered, and second, the way we execute the program. We used to execute the program again for many years as a separate to our commercial strategy. And we decided to bring BSBF, which is such a commitment to improving the communities where we live and serve, to center stage of our core equity communication of the Colgate brand. So first of all, we brought it as our equity advertising, driving brand love, and with tremendous results. We measured that through MMMs, and we measured that through the results that we have in terms of growth. But then second, we decided to integrate into our commercial planning.
And a big change there was when we covered the schools and we talked to the kids, we then geo-located the stores around that school on a three to five kilometers radius, and we were improving the execution of our brand in those stores. How? First, driving more distribution, making the product more accessible. Second, improving the portfolio that we have present in those stores, so that people would have different toothpaste or toothbrushes for that matter, for different needs that they have. Third, improving the visibility of our brands. And you can imagine when you are driving that you also have goodwill, and so the ability of us having a superior registration and visibility in the stores was higher.
And then we measured the results in terms of growth, and the results surpassed those of the stores that are not covered that way. So, more importantly, I said I would start with penetration in the markets where we are executing this strategy. Penetration is consistently up, and it continues to go up in the different quarters. So we think there is a lot more to come from that. By the way, the advertising that we are using was tested and now is deployed in our largest division in the globe, which is Latin America as well. So, good traction around there. Anything that you wanted to add, John?
No, I think that's all.
Great. And then the hyperinflationary scenario that you have in-
Yeah
... in the learnings that you had in Brazil, and then coming into your region, obviously, you have Nigeria, you have Turkey, and you have a lot of these countries, like, managing, and being able to grow both volumes and organic sales growth for these quarters. Can you talk about how you're deploying those capabilities as you get more AI and information?
Sure. Thanks for the question, Andrea. Look, I had the opportunity to work in the Latin American business for a number of years, and what I think we pride ourselves on is that we stay for the long term. Sometimes the economies go up and down, but we have learned through the years how to consolidate our business, to continue to invest behind brand growth, and at the same time look for opportunities to improve productivity so that we can pass through those crises. I think that has paid off. If you look at the unique footprint that Colgate has around the globe, the strength that we have in developing markets is a direct consequence of that.
We have a very big Latin America business, we have a strong Africa-Eurasia business, and we have a strong Asia business as well. What we are deploying in the shorter term is similar to that mentality, looking at the business holistically and working the entire portfolio architecture within the categories and in the different categories, but also, understanding that, we will if we stay and if we are committed to the operating principles that have worked, we will win in the long term. Let me give you the example of Nigeria. Three or four years ago, we were a small brand in Nigeria, very small, low single digits shares.
Now, three, four years after, we're getting to 15% market share, and we see some of our competitors pulling away or scaling down a bit in Nigeria or even Argentina, while we are continuing to strengthen the brand, so this is one example of when we have crises in the country, but I think beyond that, the underlying growth has been much beyond Nigeria. We have shared growth across the division. This year to date, we're up so far in the year, 180 basis points of market share, on top of 140 basis points of last year, so a combined 320 in a little over 18 months. And that's coming from the different markets that we have in the division. How?
I think Colgate has usually been faster for, pricing, and so in a way we have created some headspace, but then we got a lot more sophisticated in using data and analytics, and with that, we understood a lot better elasticities, a lot better how to combine the use of the portfolio for greater returns, and indeed, we have good momentum in the division. As you said, we've eight quarters consecutive up to the second quarter of double-digit growth, and now five quarters of volume growth, the last quarter at 8.9%. But I think as a company, we're using the same type of operational discipline and the same levers. We leverage a lot of the capabilities that we have reinforced and built as a company, whether that is data and analytics, we have it at the center.
You may have seen it at CAGNY. We had a presentation about that, revenue growth management, and even creative excellence. And in the last quarter, all of our divisions and operating units posted volume growth. I don't know, John, if you-
I mean, look, I think, you know, the key is, as Maria Paula said, we're committed. We're committed to these markets, and we're gonna stay for the long term, right? We've been in these emerging markets for some of them for over 100 years, and so, you know, we really look at this as an opportunity when other people are pulling back, potentially moving to a different business model, you know, that's when we ramp up. We take the pricing that we need to take-
Yeah
... we execute against the pricing, we get the gross margin back up, we invest back in the business. Now, we also manage our cash very wisely, and so we're making sure, you know, we see these devaluations happening ahead of time, and we're more likely to take steps ahead of time so that the impact of the devaluations becomes less, by, you know, taking cash out, by taking cash out of the business. But also, I mean, going back, you know, Maria Paula has been through this. She's worked in Latin America for many years at Colgate. We have talent that goes all across the globe who have worked through these types of crises, and that gives us a real advantage. So, you know, we have a playbook that we put in place when these types of events happen.
We execute against it well, and then that's how we go about consolidating our market share over time and rebuilding that business, even if we have a significant devaluation.
And that takes us to the overall... stepping back for the overall company. Like, the organic sales growth has been remarkable over the past, and then you've delivered over the past, I would say, more than eight quarters, right? I mean, in a row. And you've been and I would say, like, the first half of the year was, like, 9%, 9-plus for the whole company, and then, of course, your guidance implies a deceleration, which is an interesting point. Like, and I wanna-
Well, I mean, it looks-
- explore.
I mean, I think if you, if you look back at how we've talked about pricing over the last couple of years, is we took this pricing to put into the P&L, again, to restore gross margins so we could continue to invest back in the business, generating that demand, generating that household penetration and volume growth that Maria Paula talked about. You know, that's the focus. Now, as we took the pricing, we said consistently that the elasticities were more favorable than what we had anticipated, which means that we saw less of an impact on volume as we took pricing than we had expected. Now, pricing growth is decelerating. We've heard that consistently from companies around the globe. There's less cost inflation. You know, we're still getting pricing, but it's a little bit less. As that pricing growth decelerates, volume is coming back.
Again, very robust volume growth, as Maria Paula talked about, but it's not coming back at a one-to-one ratio because the elasticities are relatively similar as the pricing decelerates. So yes, great organic sales growth in the first half of the year. Our guidance for 6%-8% for the full year implies a deceleration, but it's really the fact that the volume, we're not expecting it to come back at a one-to-one ratio as the pricing growth decelerates. But again, we delivered, you know, 4.7% volume growth in the second quarter. You know, that was better than organic sales growth for most of our competitors from that standpoint. So off of a strong base, given the innovation we've talked about, given the investment in advertising, given the nimble execution in emerging markets, we feel good about the underlying trends.
Yes, we do expect organic sales growth to slow a little bit as we get into the back half of the year.
You spoke about volume, and Maria Paula, your region, you delivered the 8.9% on top of, like, five successive quarters. You had lacked volume growth in eight quarters of... basically, that's 16%-20% organic sales growth. Can we extrapolate a little bit of understand, like, the comp, the dilemma, but the 4.7% for the whole company is, like, a very balanced, and Noel has talked about the better balanced growth in organic. How we should be thinking, like, in terms of the volume share, as it seems like your competitors are probably not focusing as much on that improvement in some of the areas, in some of the countries?
I mean, I'm not sure I'd necessarily say that. I mean, again, we're focused on what we're doing. I think Maria Paula said it perfectly in that if you focus on driving... You know, share should be an outcome of how you run the business, right? So if we get more people buying our product, meaning more household penetration, if we get more product, meaning greater per capita consumption, and also, if we can drive revenue growth management, right, then share should be an outcome from that standpoint.
Mm-hmm.
But I think, you know, for us, the key has been the innovation, the increase in advertising spending. Again, and we've had, you know, specific focus on getting this household penetration back into the business. So Noel's, Maria Paula mentioned Noel's recent presentation, you know, there's some great work that we've done in India that's really about driving brand health, about driving penetration to get growth back into the business, and then, you know, that's how we're gonna drive this volume growth. So I think it's competitive out there. I think, you know, our plan all along has been to get back to consistent compounded earnings per share growth, which we know starts with balanced organic sales growth, right? So it's all four of our categories, all six of our divisions, balance between volume and pricing.
If you focus on building the model that way, then, you know, and you invest behind it, I think that's what leaves you in a better position competitively. Anything you would add from that standpoint?
just would say that we are always focused on high-quality volume. It's not volume added, and so sometimes, shares, as Jon said, it will come, a little after, but it will come if we're focused on high-quality volume, and we are sharply focused on that. The other thing is that we have a unique footprint globally, in terms of, the composition of our business in, developed and emerging markets and as well as the types of categories in which we operate. That's what we continue to, build upon.
... And on that, just on North America, which gets a disproportionate emphasis.
Thank you for acknowledging that.
Yes, exactly. You have like a, like, volume, which is what you should be measured upon, right? The volume had been very strong. In the last quarter, you did 5.9%, if I'm not mistaken, in North America.
Mm-hmm.
Double-digit increase in share, and improving household penetration, which is something that is important for the U.S. as well. How do you think, given and pricing was, you know, it was the opposite, it was down 3.3%.
Mm-hmm.
But, you know, again, it's a good trade-off because of operating leverage. Can you talk about, like, how investors should be thinking going forward?
Sure. So it, as Noel talked about on the Q2 conference call, and we want to get back to balanced growth. And again, we want balanced growth in, not just at the total company level, but across divisions. And, you know, within a CPG framework, you really need a balance of both volume and price to make the algorithm work longer term. You know, a key focus across our markets, but particularly in North America this year, was getting back to volume growth and doing that through getting household penetration up. And one of the key factors that we looked at in terms of driving that increase in household penetration was getting back to focusing across all price tiers.
Okay, and I think what had happened was, over the last several years, as we looked to offset the increase in raw materials, and as we had great innovation, we were focused, you know, I don't want to say exclusively, but predominantly on premiumization within the portfolio. And we saw an opportunity this year to get a little more balance between our different price tiers. And so we dialed up a little bit our focus on what we call the mid-tier. So not the entry-level price points, not the ultra-premium price points, but again, where we felt we had lost some more households. And what we saw in the second quarter, in particular, was really strong growth in the mid-tier. So let's say Optic White Stain Fighter within our whitening portfolio, as opposed to Optic White Pro Series, which is our ultra-premium offering.
So probably was a little more successful than what we had anticipated, and so that drove some negative mix. We did additionally see some negative channel mix in the quarter, which I think is more about the growth of specific retailers within the U.S. than anything else. A little bit more volume shift into multipacks, and so that drove, you know, a little bit of negative pricing, which we said would continue into the back half of the year. You know, again, I think that's more related to some choices we've made in terms of growth, but the plan is to get back to balanced growth, both volume and pricing in North America. I think you'll see us get back to that over the next couple of quarters. And I would say the North America environment generally remains constructive.
You know, there's no question, you can see this in the scanner data, the pricing growth is decelerating, but at least in our categories, volume has come back, which is not true necessarily for all CPG categories in North America, and you know, our market shares generally look solid. We're growing across home care and personal care, so the trajectory is good. We've got to do some more fine-tuning on the pricing, but I think, you know, we're generally seeing decent category growth there, and I think we'll get back to that balance.
Can you talk on that a little bit about the promos and couponing, and how you're seeing that?
Sure. So, we are seeing. I would say promo is sort of, again, a little bit of a normalization, getting back to those pre-COVID levels. I don't think we're seeing dramatic increases in promo spending. We are seeing some increases in couponing. Noel, again, talked about this a couple of weeks ago. You know, look, there is pressure from the investment community for CPG companies to get back to volume growth, and so I think you are seeing a little bit of couponing to drive that, because it doesn't show up in the scanner data. The coupons scan separately. Nothing we can't manage, but a little bit of pressure there, but that's mostly, again, because I think, you know, companies that don't have the emerging markets exposure are going to rely a little bit more on the U.S. for growth.
You know, we're able to, I think, have a little more flexibility in the business model because of the great growth that we're delivering in Latin America. You know, our China business is growing, and then, as you mentioned, Maria Paula is delivering great growth with her Africa Eurasia team.
Great. Let me go back to Maria Paula on how margins, and then I think it speaks to the whole strategy for the company, as opposed to dollar margins, as opposed to percentage margins, and with all the complexity in your region, with these ninety-nine countries moving around in terms of, like, profitability, you still you grew top line, and you grew dollar margins and also percentage margins, so thinking about what Noel and the board had established as the main, kind of like North Star in terms of gross margin, can you talk about that operating leverage and how you're being able to build gross margin?
Sure, let me just step back for one second. I think you asked what is the mantra, and I think a lot of the mantra is to continue to drive brand health over a longer period of time, and the other piece is that as leaders of the oral care category, we see as a responsibility, and it's exciting to drive category growth, so the way for us to drive category growth and be the leaders driving that in the markets where we compete, we understood we had to play across the different levels of our portfolio once again.
So that, through a lot of understanding of RGM, how to work people across the price ladders, also unique spaces of the position of our brands, the different brands in the portfolio, with the science-led model that we have, with the penetration drive and also increasing advertising. So if we go back to where we were in the beginning of the presentation, we talked about a renewed focus on innovating across price points... not always in that sense, every single innovation you're gonna give is gonna be margin incremental. But we are quite disciplined in making sure that the margins, margins that we're driving are contributing to the total margin of the P&L.
What we do is that we are, while accelerating growth at the top, we're making sure that we build flexibility in the middle of the P&L, so that we can fund the model with more advertising. Specifically to your question, in Africa, Eurasia, over the last three years, we have been able to expand margin despite of the some of the hyperinflationary environments that we're operating and many FX headwinds, and I think it's because of that. We are so focused on driving the growth, and at the same time, we have the operational discipline that we can combine, and we leverage on tremendous capabilities that we have globally for supply chain and many other things. So, it's working to your point, and I would like to-
Yeah, I mean, look, I think, you know, incredibly well said. I think our focus has shifted. If you go back sort of 10, 15 years ago with the company, we were very focused on specific gross margin delivery by year, so 50 to 75 basis points of gross margin expansion, and, you know, what we're more focused on now, to your point, is growth, right? It starts with organic sales growth, and, you know, if you invest across . . . You know, again, if you grow across all of your divisions, we have six divisions. You know, North America is in dollars, most of Hills is in dollars. If we deliver organic sales growth across our businesses, the organic sales growth will drive net sales growth, meaning growth in dollars.
You know, if we can grow faster, we can deliver maybe a little less gross margin expansion, but still drive significant gross dollar, gross profit dollars, right? Which, as Maria Paula said, will allow us to invest back in the business and still deliver the type of consistent compounded earnings per share growth that is necessary to drive what we believe is top-tier TSR. What it really does is it gives the operators much more flexibility, right? Because when you're focused on your innovation driving gross margin, you're only gonna innovate in half of your portfolio, right? You're only gonna innovate on everything that's above average gross margin. We've gotten much smarter about saying we can grow the entire portfolio, again, increase that gross profit dollars.
That's allowed us to increase the advertising to sales ratio, you know, by over 400 basis points relative to where we were in 2016 on top of the sales growth, which means a big increase in advertising dollars, which will allow us to sustain this growth. So I think it has been a shift in terms of how we view growth, and gross margin's gonna need to go up over time. It's not that we're not focused on growing gross margin, it's just that we're trying to look at it in a more holistic view of the P&L.
Just one additional thing, I think culture of the company has also been ever-progressing, and it's something that Noel always talks about. Recently, we changed, or we revamped some of our leadership principles and even the values of the company, and you see that transpiring in the quality of our people and the results that they deliver. A big shout-out to the people that really deliver this growth all across the Colgate world. I usually say if there is any situation we go to address, I would rather address with the Colgate people, and I think that they are living that every day in and day out, and are the responsibles for the evolution of the company.
That's wonderful. And one of the things that is part of that pillar, kind of the flexibility, the holistic view about the P&L, is being able to, get the advertisement levels at the levels that would fund that growth over time. And we were discussing before, a couple of, like, investors, like, you get a lot of those questions about, like, when you're gonna flow through. And that's, you know, something that, I think for the benefit of this audience and the webcast-
To-
how to think about it.
So I'll start off sort of like-
Yeah
... a bigger picture view, and then-
Mm
You wanna talk about sort of how we look at ROIs, and
Yeah.
So, you know, look, again, the way we'd like to think about it is we have levers in the P&L to drive that consistent compounded earnings per share growth, to drive the top-tier TSR, right? And again, the best way to deliver that, the leverage through the P&L, is to drive dollar sales growth. But we deliver productivity at the gross margin line. We're gonna deliver productivity on the overhead line. We drive cash, which will allow us to lower interest expense and buy back shares, try to get our tax rate down over time. So that's six different levers we have in the P&L before we get to advertising.
And so, you know, we think that can fund increased advertising, which not only helps brand health and drives the business, right, but then also gives all of you confidence that we can continue to increase the advertising and future organic sales growth. So, you know, that's kind of how we're looking at that we'd like advertising to be the last, you know, lever in the P&L that we use. Now, that may happen at some point, but again, that's not our preference. But I think the key thing, and Noel talked about this, and I'll ask Maria Paula to talk about this, is we're driving really good ROIs, and we're driving volume growth, which I think is a sign that the advertising's working. So you wanna talk about that?
Yeah, sure. Look, we see ROIs growing both in traditional media as well as digital and new media over time, and we are incredibly disciplined in looking at marketing mix modeling and other indicators to understand where to deploy the next dollar that we have into advertising. As I said, the BSBF is a clear example. Equity communication, we continue to enhance and strengthen our brands. The professional demand generation model, which is quite unique to some of our businesses, whether it's Hills, Skin, or even Oral Care. In Europe, we have the GABA brands that continue to do very well, especially Elmex, where we have deployed more advertising to support the brand, and we have seen consistent growth.
We feel confident that where we're putting the money, we're getting the return, and we're getting more return over time, which is even. It's even more exciting for us. I think the model is that, and we will continue to. We are never complacent at Colgate, and I think that's a big characteristic of us as a company. We continue to look at opportunities, and we continue to learn and iterate to get better. So that's what we'll continue to do, even on the advertising investment.
Yeah.
If I can just add one piece to that. So I think Hill's is another great example of that, where, you know, the increase in advertising to sales at Hill's has been greater than the increase of the overall company over the last several years. And, you know, we have mid-single-digit household penetration and mid-single-digit market share in the U.S., which is the largest market for Hill's, so there's a tremendous opportunity there. And I think you're seeing that in a category, pet nutrition, where, you know, volumes are relatively weak. Some of our competitors are struggling to put up organic sales growth. Hill's has returned to volume growth, returned to organic sales growth. We're seeing success of our innovation, success with the profession. Maria Paula talked about working with the profession with Elmex.
You know, Hill's has tremendous resonance with vets around the world, and that increased investment is really coming back to drive volume growth there, in what is a somewhat choppy category right now. So I think it highlights just how good we've gotten at understanding where the best impact from that spending is coming from.
And to the benefit, since you touched on Hills, like, that pivot, right? You only have about 6% market share in U.S., which is your biggest market share. There's a two-year runway, especially with the new capacity for wet. Like, maybe talk about a bit about how Hills can-
Sure. So yeah, so Hill's has two businesses. We have Science Diet or Science Plan in Europe, which is our wellness business, then we have Prescription Diet, which is our therapeutic business. And Science Diet, it, you know, basically has, again, mid-single-digit market share in the U.S., which is its best market. Lower market share around the world, and we were limited by capacity constraints because of the growth during COVID and coming out of COVID. So we added capacity, as I mentioned, both dry and wet. And so, you know, the market share opportunity in the U.S. is significant. We're seeing strong penetration and market share gains. And now, as we have more capacity, we're able to expand our offerings around the world.
Because of our capacity constraints, we've been a little bit limited in terms of our ability to take advantage of our entire portfolio outside the U.S., and now we have greater product availability as we brought capacity utilization down to more manageable levels, and I think you'll see nice market share gains around the world. It's a very big opportunity, you know, short, medium, and long term there.
For the five minutes we have left, maybe touch a little bit on Simon's world, because we are in Europe after all, right? So the Western European side have been tremendously market share, despite a very challenging and private label-focused market for across the region. And then if you can, like, just touch about China, how much you're progressing in market share gains that you have had there, and,
Sure. So I'll start with China, and then we can sort of share a little bit on Europe from that standpoint. So in China, the Colgate brand continues to do very well. Several years ago, we pivoted to more of an e-commerce focus, particularly a premium innovation focus. Maria Paula talked about our change in focus towards premium innovation. China's been probably the best example of that, where we have a portfolio in brick-and-mortar that is more at moderate price points, and then an innovation strategy built on e-commerce. That's worked very well. We have a second brand, our biggest brand in China, which is a local brand called Darlie, where we had taken pricing last year, and so that drove a decline in volumes. We have lapped that...
As we have lapped that, we are now seeing volume growth in China, and so, you know, it's a very difficult market. Category growth rates remain relatively low, and so we're doing okay in China. I think we're doing better than our peers. We are less reliant on China growth than some of our peers. Again, going back to the growth that we're seeing from some of these other emerging markets. So, you know, I think we'll see China continue to move along positively for us, but certainly not robust growth from that standpoint. Going back to Europe, I think, you know, what we've seen, and I'll ask Maria Paula to talk about sort of as you broaden out the portfolio behind spending, what it can have on the entire business, like personal care and home care.
You know, but that's really what we've seen. Maria Paula talked about Elmex. So Elmex is growing share very nicely in the markets where we have it in Europe, big increase in investment. We've also invested more behind our personal care and home care brands in Europe, and so brands like Sanex and Palmolive, which have great resonance with consumers, but we hadn't spent as much money behind. This increase in advertising across a broader swath of the portfolio has allowed us to drive more broad-based growth and is really helping market shares. So do you want to talk about sort of the increase in advertising across the portfolio?
Yeah, we have increased in Europe, like we have increased in other regions of the world, supporting some of the great brands that we have. I think Sanex is an example, or even some brands in home care as well. We have some breakthrough innovation, even in home care, and that's working for us in Europe and elsewhere.
Any thoughts about, like, how investors should be looking at the company now, as we pivot, in the two minutes we have left?
I mean, you know, look, again, it's. Our focus is delivering consistent compounded earnings per share growth to deliver top-tier TSR, but it really starts with organic sales growth and driving net sales growth from that standpoint. Maria Paula, when she started talking at the beginning, talked about sort of that pivot to growth back in 2019 when she and Noel presented at CAGNY, and it really marked a little bit of a shift. And she also talked about the culture. The culture has shifted back towards winning, because for a number of years we weren't gaining market share, and we weren't really winning, and we weren't sort of driving the businesses the best way we could. And I think what you've seen now is a shift towards a more aggressive, sort of focused model from that standpoint.
Anything you would add from that standpoint?
I think it has been exciting for us to see the return on the adjustments that we have made on the strategy, and I think that we keep sharply focused on our strategic goals and on our purpose. We always go back to that to decide on anything we're gonna do. With the enhanced capabilities that we have created at the center, which I didn't want to go unnoticed, in digital data and analytics, as I said, RGM, huge capabilities that really are happening on the ground. They are created at the center, but then as we deploy them on the ground, we're enhancing and bringing them to the next level and making decisions based out of data, and I think that's paying off.
So it's exciting to see and to be a part of that.
Well, exciting times for Colgate. I hope you keep smiling next years in a row, coming back here. Thank you again, and best of luck with everything.
Thank you so much.
Thanks, Andrea.
My best.
Thank you all.