We're going to get started. Next up this morning, we're very happy to have Colgate-Palmolive here, and the company's chairman, president, and CEO, Noel Wallace. This year, we're going to do things a little bit differently and go right into a fireside chat, which I'm excited about, so thank you for that opportunity. 2026 is the first year of the 2030 strategy period, but it's also a year with continued macro volatility. When you step back from the quarter-to-quarter noise, maybe what's the single biggest change, or is it a few things that you're trying to drive inside Colgate this year?
Yeah. I think the fortune is we're coming off a 2025 strategic plan where we developed, in my view, a lot of momentum behind the business. Going into the 2030 plan, it's much easier to execute a strategy when you have momentum behind you versus when you're chasing that momentum. It's really now about perfecting some of the capabilities and scaling some of those capabilities that we've been developing over the last five years. We've done a lot of work in AI, we've done a lot of work in analytics, we've done a lot of work in revenue growth management. We're now really pushing ourselves very differently in the area of innovation. We feel like we're in a stage where we're not necessarily trying to play catch up, we're now scaling these capabilities across the organization.
That momentum that we built through the 2025 strat plan, we feel we can continue through the 2030 plan. The other areas, we're being much more choiceful on our investment profiles around the world. We see real opportunities, particularly in emerging markets where we've seen category growth accelerate beyond where we see in developed markets, and that's an opportunity for us.
Okay. If we assume that category growth remains muted over the next 12 months, we've seen a sort of more challenged macro backdrop. What should we be focused on to determine if Colgate's specific execution is improving? Is it household penetration? Is it market shares? What are those key metrics to keep track of to gauge progress?
Well, you've heard me talk a lot about just consistent, durable growth, and that's certainly the mantra that we profess across the organization, and we really push our organizations to develop the long-term strategy necessary to do that. I think the steps we've taken within the 2030 plan have done that. Clearly, household penetration is a key barometer for us, market shares. We want to see the category start to inflect as we put more innovation in the categories as well. So our ability to drive the key operating metrics that we set for our teams, top-line sales growth, bottom-line sales growth, cash flow, penetration, those are all very important in terms of success for us over the next couple of years.
Okay. So you've just delivered a really solid first half to the year. But the external environment is still pretty choppy, so maybe we can get grounded doing, like, a little walk around the world, talking about the business and category growth and if anything's changed since earlier this summer.
Yeah. I think the strength of the first half really speaks to the fact that we have a really broad-based business that has great geographic diversity around the world, and our ability to really tap into some of the emerging market acceleration that we've seen in some of our daily use categories has allowed us to drive that consistent growth. But if I go around the world, let me start, I guess, in Latin America, strong quarter in second quarter, up mid-single digits, high single digits in Brazil, mid-single digits in Mexico. Good market share acceleration, lapping some of the toll manufacturing that we had last year, but we're seeing those market shares come back nicely in a great innovation stream across multiple categories. We had balanced price and volume growth in the quarter, growth across all three of our categories.
So we feel the business is in very solid footing as we move into the back half of the year. Categories are more or less stable where they were the year before, so not seeing any deceleration in any of the markets. Go to Asia, good quarter there. Obviously, you've seen the strength of our India business come back nicely in the second quarter. That's largely driven by some of the initiatives that we've taken and the strategy that we're deploying in that market, particularly around the modern trade, and getting much more premium innovation in the market, which we see as an ongoing opportunity. China performed well, mid-single digits. Our Colgate China business continues to execute exceptionally well, particularly in the online world. Palmolive and Hazeline had a good quarter with some premium innovation. If you go across the rest of Asia, obviously pretty solid growth for us.
A good region for us, despite the fact that we've seen some sluggishness in the categories across Asia, particularly in China. If I go to North America, tough quarter for North America. We talked about that quite extensively in the call. We've seen some inventory come out of the trade. We've seen some market share erosion due to some heightened competitive activity. We've seen our share in the premium side not get to where it needs to. That will be a key focus for the business moving forward. We have a new team in place.
Shane is directing a strategy that's really a reset in terms of how we're thinking about the next three to five years in North America that will encompass a significantly stepped-up innovation, particularly on the premium side, that encompass a double-down on some of our AI analytics and RGM work that we've been scaling around the world, and really using the North America market as a way to drive more innovation in those capability areas, particularly around AI and innovation. I think we're confident as we move forward, we'll start to see things improve, but it's going to be a long-term turnaround to get that business where we need to. Very competitive environment. We've taken, as you know, some surgical work on getting our couponing in the right place. We've seen some of our competitors increase their couponing, and we weren't as competitive as we needed to be.
That's more of the surgical work that we're going to do in some of our key retailers to get our business back where it needs to be.
Okay. And that couponing dynamic is just in selected retailers as well?
It is just in select retailers, yeah.
Okay.
There are programs that some of the retailers have been asking us for that we did not feel were right for the business long term, but we have seen the competition continue to accelerate there, so we need to make sure we are competing effectively. This is not a race to the bottom. This is not about taking our prices down. It is just being more selective with our couponing.
Okay, great. Let us stick with that and talk about the balance between price and volume. In the first half, pricing was still the biggest driver of organic sales growth for the company. You have also said the back half is more volume-driven. What are some reasons you are confident that volume can pick up in the second half without assuming a major category rebound?
Yeah, a couple of things. If I strip out private label in the second quarter, we generate pretty decent volume growth at 1.2%. Ex that, we are pretty pleased with that. If you move forward, private label will come out of the business almost completely by the end of the third quarter, and by the fourth quarter, we will be completely clear of that. So we are not going to have that as a tailwind. We have felt that, particularly with some of the acceleration that we have seen on the innovation side in emerging markets and the acceleration in advertising, that we will see categories start to come back, and we started to see a little bit of that in the second quarter, particularly in emerging markets. Likewise, you have got some easier comps in the back half on volume, so we feel good about that.
Overall, we're seeing things that we feel are going to give us continued sustainable volume growth that we saw in the first or second quarter back into the third and fourth quarter. We see it actually accelerating. We won't get as much price in the back half at this point. We'll watch where material prices go. We've seen, obviously, with oil going up a little higher, we might see a little bit of that impact in the back end of the fourth quarter in terms of material prices. But we have the ability to continue to try to offset some of those material price increases as well as logistics with some of the pricing and revenue growth management and an acceleration of our premiumization strategy, which is so important in this environment.
Okay. When you think about the top-line growth algorithm, 3%-5% in an ideal world, what is the optimal balance, though, between volume and price? Does that vary across developed and emerging markets?
Yeah, it really varies because it's a function of what's happening in the local region. If we're seeing cost inflation in Latin America or foreign exchange headwinds, we'll take more pricing in those, and we'll see that come a little bit out of the volume. If we're not seeing those material price increases and not having to take pricing, we have the ability to drive more volume in those regions, and it's a function of what's happening from a macro standpoint in some of those markets, collectively with our innovation strategy. What are we seeing from an innovation in those markets to drive accelerated volume and pricing? If you go around the world, the fact that we have such high market shares, particularly in emerging markets, it really depends on whether the per capita consumption is high in those markets or whether the per capita consumption is low.
If the per capita consumption is high, we're really driving premiumization. A market like Brazil, clear opportunity to continue to drive premiumization. A market like India, we're clearly driving more per capita consumption in those markets. That will inflect on volume and price depending on the strategies that we're deploying.
Okay. Let's talk a little bit more about North America. I know you already touched on it a bit, but you've mentioned how a strategic reset likely includes more premium innovation, these surgical pricing interventions that you'd already mentioned, and greater brand support. But if we take a step back, and maybe you don't know yet, is really changing or going to change in the operating model versus the sort of just intensifying existing playbook as you think about repairing with the state of play in the market?
Yeah, I think it is quite different when you start getting into the minutiae of the strategy, so to speak, because we're really trying to deploy a much more holistic strategy across our categories. It's not only the focus on premiumization in oral care, but via premiumization across all the categories in which we compete. So we're really ramping up innovation in order to deliver that. You've seen us launch into the spray cleaner category with Fabuloso. You've seen us launch into premium price pumps on Palmolive dish liquid. So we're really looking for opportunities to continue to premiumize, which is where the consumer is and where we're under indexed in terms of growth. The innovation needs to be value-oriented, obviously.
So we're spending a lot of time getting insights and making sure that we have three to four-year grids to be able to go and exclusively launch unique innovation to some of our key trade partners as they see the needs to differentiate with their consumer base. So we're thinking about it quite differently from an innovation standpoint. We're putting a lot more resources into innovation. So the Strategic Growth and Productivity Program has allowed us to fund moving resources from certain parts of the organization into areas where we really saw the opportunity. North America innovation is one of them. The other key enabler, as I mentioned earlier, will be a step up in our AI and our analytic capabilities in the U.S., and RGM will be critically important. We have advanced analytics and AI that we've deployed in our RGM models around the world.
We're now looking at further enhancements to the RGM models, and then the U.S. will be the key innovative region for that. So we're quite encouraged by what we're going to see there. Another big change will be the structure of the organization. We're going back to some key fundamentals that we feel we've lost and how we're integrating both the commercial or the front end of the sales line into the marketing side of the business, and we're really trying to build one cohesive commercial team that's integrated into the media strategies that we have. So rather than having retail media isolated in one account that is disconnected from the overall brand strategy, we're bringing all those strategies in together, and that makes us reallocate the resources that we have across the U.S. market in a much more effective way.
Okay. Just to break down the North America business, how much roughly is oral care versus everything else? I am putting Hill's separately because Hill's is managed separately. Because one thing as you were speaking I was thinking about is how much of fixing North America is about oral care accelerating, or is it the everything else being a more active participant in their various categories?
It is all the above. Clearly, we need to get oral care. That is our biggest business in North America. We need to get that growing. The toothbrush business is doing well, but the toothpaste business needs enhancements. I think we have a very clear line of sight of what we need to fix. The premium part of the category has been clearly the fastest-growing part of the category. We just have not participated in that growth, and we are extraordinarily focused on making sure that we have the portfolio and the support levels in order to do that. Likewise, we have got some great brands across the rest of the business that have not been funded nearly as attractively as they should be funded.
Now with the Strategic Growth and Productivity Program and the flexibility that we built into our P&L, we have opportunities to increase our funding in some of those other categories and go after unique growth opportunities that we see, particularly at the retail level.
Okay. A lot of this is really, it is a lot about more innovation, not necessarily about existing on what is already in the pipeline. There is in general, there is a-
Correct. Yeah.
We need to step up. Any thoughts about bringing elmex to the U.S.?
Listen, I think one of the benefits that we've seen, at least through the 2025 period, is we've got these incredible staple brands in our oral care portfolio. So whether it's elmex, whether it's Meridol, whether it's Colgate, whether it's Hello, whether it's Tom's, and part of the success through the 2025 plan was deploying those brands in certain markets. Historically, if you recall, it was very much a very Colgate-centric strategy. We wanted to fit Colgate into every market, across every indication. We have found that we have brands that can play better in those indications. That being said, every market is unique and different, and our ability to bring one brand from another market into a new market is really dictated by the consumer acceptance of that, the retail environments that we're competing in, and the competitive environment that we see in that specific market.
We will evaluate all opportunities to continue to drive our portfolio. We're not relegated to just Colgate. The strength of our portfolio allows us to kind of flux any of our brands that we see fit, but it starts with the consumer, and secondly, it has to have a retail environment that fits that brand.
Okay. I want to go back on innovation for a second. I feel like we've talked for years about premium innovation, because there's certainly been a recognition on your part and the company's part that premium is where the growth was and premium innovation was critical. What's been the blockade? Why has it been tough to execute on what it seems like you and the team have very much known was the right thing to do for the business?
Right. Actually, I wouldn't say we've focused as much on premiumization as perhaps you're articulating, because part of the strategy in 2025, through those five years, was getting the core reinforced. We had walked away from the core innovation prior to 2020. We needed to get our core business stable, and then we needed to ensure that we then premiumized off of that. So to your point, it's true. Yes, we've talked about premium, but the real focus on the turnaround through the 2025 strategic plan was the core business. Now we're really addressing pockets of opportunity we see around the world where premiumization has grown a lot faster. We now have the innovation and the science behind our products that we think we can command the premium price and the value orientation. Premium's hard.
Clearly, in markets where you have high shares, getting consumers to trade up to a more expensive product is not an easy proposition. We need to do that differently. A lot of the work that we're doing with social media, a lot of the work that we're doing with our personalization now allows us to get much more targeted to that premium consumer and do it in a more effective way where the ROI is better. Clearly, the focus for us through the 20 30 strategy, particularly in North America and in some of our emerging markets, would be premiumization.
Okay. Other ends of price spectrum, we've touched on the couponing dynamic. I just wanted to be clear if there's anything else to think about on pricing, surgical adjustments, and how we make sure it's not an over-correcting dynamic.
In North America specifically?
North America specifically. Right.
Yeah. As I said earlier, this is not about taking pricing down. This is about being more competitive with where we are seeing the competition move. There are certain retail environments and certain programs that retail environments run where you need to be effective with your couponing. It is pretty as simple as that. We have not been targeting that as aggressively as we should, and we are going to ensure that we get our fair share of that consumer, which is obviously a little bit more intense in the U.S. with the value orientation that we are seeing across the U.S. economy and our need to make sure that we are competing effectively in that regard. It will not be any price reductions. It will be making sure our portfolio works as effectively as possible.
Second will be price pack architecture, a lot of architecture work, making sure that we are offering the right price points across our portfolio, which has always been a competitive strength for us, the fact that we compete up and down, and making sure that we have the right price points associated with the pack sizes that we have will be critically important. There will be no price reductions in this. It will just be promotional, tactical work that we will do across certain retail environments.
Okay, great. Last question on North America. When we are back here next year, consider that an invitation, what would progress look like on North America business, and how quickly do you think you can really reorient and start to execute on this strategic reset?
Yeah, it is going to take some time, but clearly, it is sustainable top-line growth. We need to see the organic growth come back and inflect positive consistently from quarter- to- quarter. We need to see the market shares, particularly in oral care, inflect positively over the next year. And we need to see, obviously, the margins come back into the categories where we are driving premiumization. Premiumization is an extension of that will be critically important. Our share of the premium growth across all categories, whether it is home care, personal care, or oral care, needs to continue to accelerate.
Okay. All right, so let us turn to emerging markets. Clearly been the growth engine this year. Brazil, Mexico, India, China, all contributing nicely. How should we think about sustainability of that growth?
It has been there for decades for us, as we have been in these markets for over 100 years in some of them, so we understand them extraordinarily well, and the growth continues to be very exciting for us. As most of you know, we do 70% of our revenues outside the U.S., and we have been in these markets for a long time. We understand the consumer, we understand the retail environments, we understand how to drive per capita consumption over the long term, and we understand how to drive premiumization. When you have that combination, you feel pretty confident that you can drive durable growth over the long term. And there clearly is a lot of upside still in the markets where we compete. Brazil, yeah, we have a 73 share in Brazil. We have an 83 volume share in Mexico.
Those are big numbers, but the premiumization aspect in Brazil is great. The per capita consumption aspect in Mexico, as well as the premiumization aspect in Mexico, is great. The category diversity that we have across those regions, we are very strong in not only oral care, but typically in our home care and personal care products as well, so we have a lot of levers to pull. The strength of the brand and the acceleration of advertising that we have put behind those categories over the last five years has improved the brand resonance, improved the brand loyalty. We feel pretty good that we are creating a stronger moat and we are bringing in new capabilities to emerging markets just as fast as we are deploying them in developed markets. Things like AI, we are doing exceptionally well.
We have taken programs out of India and put them into other emerging markets across the world. We are taking programs from Mexico and Brazil into smaller emerging markets around the world. We are really trying to strengthen the capabilities and the enablers that we have in emerging markets to continue to protect and drive that durable growth for the long term. The innovation in emerging markets is exceptional.
Okay. For many years, the story in these markets has been about both increasing category penetration and trading up the pricing ladder, like you mentioned earlier. Do you think, is oral care household penetration opportunity, is it smaller than it was 10- 15 years ago? Is premiumization more the name of the game in some of these markets, like a Brazil? Yeah.
Yeah, good question. If we are doing our job right, the opportunity for household penetration is coming down, right? Because over the years, we are investing to drive that household penetration. I think overall, there are still opportunities for penetration across some of the emerging markets. I will talk perhaps about some of the newer markets that we are going into, and per capita consumption still is a clear opportunity. But if you take the biggest opportunity holistically, if you take Mexico, Brazil, India, China, that is 56% of the middle-class growth over the next five years. Those four markets. You add Nigeria and you add Bangladesh to that, which are new markets that we have been going into, you get to 65% of the middle-class expansion. Those six countries alone represent 25% of the population growth.
Emerging markets, and I am just throwing some of the bigger markets out, emerging markets clearly is the growth opportunity for our company in the long term, given the fact that we have been there for so long and we see the growth opportunities both in middle class and population. That is exactly the type of organic and tailwind we want behind our business. We will continue to focus on the breadth of our footprint around the world and the opportunities that we see in those emerging markets.
Okay, great. Let us talk a little bit more about China. Even though it is kind of a smaller market for you guys, it has gone through its own transformation. Colgate China, like you mentioned, has performed well. Hawley & Hazel is starting to improve, maybe not exactly where you want it yet, but making progress. What have you seen in China about how the consumer and the go-to-market model are changing, and how have you adapted? Then specifically, a couple times you have mentioned, this morning even already, about the Colgate China playbook and how that is transferable to Hawley & Hazel. But maybe explaining what that means would be helpful.
Yeah. If you remember, I guess probably four or five years ago when we were sitting here, China was our turnaround story. I give the management team in Asia, and particularly in CP China, wonderful kudos for the incredible role that they did in changing the trajectory of that business from a drag on the business now to a growth accelerator for the business and a profitable growth accelerator at that, which has been terrific. One of the big changes that we have seen in China that most CPG have experienced over the last five years is the complete transformation of the brick-and-mortar business to an online business. Now, roughly 50% of the business in China is online, and across that online business is a multitude of different platforms that require very distinctive go-to-market approaches in order to be successful. Our team has done two things exceptionally well.
They have innovated for those platforms really well, and they have created, with all of our AI abilities, analytics ability, a media structure that is pretty unique. We are able to develop thousands of pieces of content per day now in China to deliver personalization to the market. That is all done through AI and done through a system that we have built over the last three years in order to compete more effectively in that retail environment. Hawley & Hazel is now playing catch up to that. They are really starting to deploy the CP playbook on innovation. They have got good premium innovation that we talked about, which is the Double Action tooth technology that is done very well online, but they need to continue to step that up to be successful in that market long term.
The market's become more expensive to compete in, and so as a result of that, we've invested all these capabilities over the last three or four years to truly determine, is the effect of our spending doing what we need to do to drive the brand long term? You can deploy a lot of spending in a platform like Douyin, which is the equivalent to TikTok, and get a real jump in your sales. But long term, is it profitable for the business and is it doing what you want for the brand in the entirety of the market? We've spent a lot of time strategically thinking through that aspect of how to win in China, and so far, that seems to be playing out quite well with our formula. Continue to see opportunities.
Hawley & Hazel still have some work to do, as we know, but they're starting to really take some of these best practices that we've had in CP China and deploying those across their own business.
Okay. I said it was the last question on North America, but I do want to know if there's learnings from the turnaround in China that you can take back to the U.S.
Yeah. Absolutely. I think what we've seen is the pace of innovation in China is at a multiple higher than what we've seen in the rest of the world. As a result of that, we're starting to build systems in our innovation process that we think can transfer from China into other markets. Clearly, the priority is North America. I've had the North America team visit China in order to understand what might be relevant for them. Clearly, the online business in the U.S. is nowhere close to what it is in China, but there's still a lot of transferability in how they think about the insights they're gleaning from the market and how they deploy innovation, particularly, and personalize that innovation based on unique retail environments at a much faster clip.
Okay. Let's switch and talk about Hill's. Hill's continues to outperform in what's been a pretty soft pet category. I know the expectation is for Hill's to keep gaining share, but I'm just curious how you're thinking about category growth and also pricing power for Hill's in a soft market environment.
Yeah, I think second quarter's a great quarter for Hill's, 4% ex private label on a flat category. Clearly, we're growing share in all the key segments. I've talked a lot about being much more selective on where we want to grow, and we clearly have swim lanes or channels that are extremely important to Hill's. It starts and ends, quite frankly, with the professional advocacy that we have and the strength of the brand in the profession, largely driven by our Prescription Diet business and our ability to transfer that equity into pet specialty, where we have a strong business as well. While the category's been somewhat slow, we're still benefiting from the significant acceleration that we saw during COVID.
As I mentioned, I think two or three years ago, that will pay out in perpetuity for us because we've had a lot more pet adoptions during COVID. The base has gotten bigger, and what's really interesting when you start breaking down the dynamics of the category, we're seeing, one, that dogs are aging quickly, and there's a lot more older dogs in the U.S. right now. As a result, that's excellent for us because older dogs invariably have more health concerns. Health concerns bring them to the vet, and the vet recommends Prescription Diet in many cases for some of those issues. That continues to play favorably for us. Likewise, during COVID, we saw a lot of Gen Z adoptions of pets.
We're really trying to make sure that we get our fair share of that younger demographic that will then build in the future for us as we move forward. Demographics of the category, yeah, while the category's relatively flat, there's still growth opportunities, whether it's Gen Z and the aging consumer. Second is the segments that we've talked about consistently over the last three to four years. A significant change in pet ownership from large dogs to small dogs, to cat, and to the use of wet to add to the bowl. We played quite aggressively to bring our science into those segments, and we're growing very nicely in those segments in order to generate that 4% growth I talked about in the second quarter.
Okay, great. I know there's been a lot of interest in the fresh launch for Hill's. I know it's early days, but just any learnings or things you'd want to share on that front?
Yeah. Maybe I'll start with Prime100, which is the acquisition that we made a few years back in Australia. Clearly, with the aim to understand the fresh category, it's a very interesting category, but it's unique in many ways, particularly from a manufacturing and distribution standpoint. Obviously, it's cold chain, which is something new to Colgate and new to the Hill's business. But we bought the Prime business because, one, it had a strong therapeutic underpinning, had strong advocacy from the profession, and had exceptional quality and a unique manufacturing process that we thought was quite interesting. Fast-forward two years after sitting and learning from that business, we have started a rollout of Hill's Fresh in the U.S. It is driven first and foremost by going to the profession and gaining their advocacy. The profession was looking for a professional science-based brand to recommend.
Clearly, the awareness of fresh in the U.S. has expanded quite considerably over the last five years, and pet owners are asking, "Well, what do you think about fresh?" Now they have an alternative to recommend to those pet owners in Hill's Fresh. We're being very selective and very choiceful in how we do this rollout. We've launched a single protein, a brand that has therapeutic benefits to it that we like, and we love the fact that the profession seems to be very supportive of what we're doing and how we're going about introducing the Hill's name into the category. This will be a very thoughtful launch. This is not about generating immediate incremental sales and dollars through the P&L. This is about building a brand for the long term with the profession in the segment of fresh.
We're going to be very choiceful in how we deploy it and how we rolled it out, ensuring that we are very considerate of what we need to do to compete in this category for the long term and not simply generating short-term benefits. We have an exceptional quality brand. We have great acceptance from the profession and from the consumers thus far. It's going to be a long road to get to where we need to get to, but we're committed to it long term, and we've got some good indications out of the gate.
Okay, great. Let's talk a little bit about the SGPP. Strategic Growth and Productivity Program for those that don't know. You framed it as more of a strategic enabler than just a typical cost savings program. I'd like to understand how the program actually changes the way Colgate-Palmolive operates and to talk through any related changes to org structure that are coming out of it.
Yeah. Let me back up for a second because we initiated the program roughly a year and a half, two years ago, coming off of the growth that we saw through the 2025 strategic plan. It wasn't like we were behind the eight ball, we needed to reduce costs in order to do this. We really felt we had an opportunity to strategically enhance the organization's capabilities and use some of the savings that we would generate, not only to funnel back into those capabilities, but to funnel the growth opportunities that we saw around the world. Clearly, a manufacturing footprint more optimized around the world as we look forward and more strategically looking to drive more personalization through automation.
We need to make sure that we're able to deliver against the specific retail environment needs, and be much more personalized with our offerings and be much more online-ready with our offerings. The automation that we're putting into our plants and the savings that have come from that are generating the opportunity to do that specifically. We'll think about deploying our portfolios a little bit differently in terms of the SKUs we offer to the market. Second was taking the savings and investing back in the capabilities that have been so important to us over the last five years. We've really increased our spending on AI, moving now into things like agentic. We're increasing our focus on data analytics and insights, and that's through collaboration with some of our big retail partners.
Third, we put a significant amount of that savings into specific headcount allocation to innovation. North America would probably get the majority of that. We've had a lot of ways where we've been able to take that savings and continue to deploy it in areas that we think we can scale now and continue to drive consistent top-line momentum while also dropping some of the savings to the bottom line.
Okay. If we assume for the moment that category growth is permanently impaired, does the work being done under this program give you enough operating leverage to deliver algorithm-level growth going forward in a more subdued category growth environment?
Yeah. You've heard me use the word flexibility in our P&L a lot, and that's a discussion we have at all of our operating meetings is making sure that we have flexibility up and down the P&L. We've done a really good job of building that flexibility. SGPP is just one of those levers. Funding the growth is another. Our revenue growth management is another. Our premium innovation is another. Yes, we think we continue to build leverage through the P&L as we move forward, but clearly, it starts and finishes with durable top-line growth. Our ability to continue to fund advertising, which we funded strongly in the back half of this year, will continue to hopefully accelerate the category and drive the leverage through the P&Ls.
But optimizing our plans for lower category growth, if that happens, the automation I talked about earlier, the robotics that we're putting into our plants, that allows us to drive more leverage through our facilities as we see volume subdue. But rest assured, we are very confident that categories will inflect positive ultimately as the economy starts to come back, and we get a lot of the noise out of the system that we're experiencing now, because the inherent base fundamentals of those categories, whether it's per cap penetration or pricing that we have, will allow us to drive the category growth to better levels.
Okay, great. I did just want to ask a question on M&A. There's been some pretty big portfolio moves across Staples in the last year. Colgate's been on the sidelines and has really remained focused on four core categories. But if we took a step back, what are the kinds of assets you might be interested in acquiring? How does M&A fit in with the 2030 strategy? Also just thoughts on acquiring sort of the smaller, faster-growing emerging brands that are out there.
Yeah, I think we have been excellent stewards of our capital structure. We are very careful about how we deploy our capital, and M&A is an easy temptation to get into, particularly if you are chasing growth and you need to make M&A to growth. We find that to be a very dangerous position to be in. We feel we are in a position where we have enough tailwinds in our categories, and the focus that we have and the strategy we are deploying will generate the strategic plan that we have. As I have said before, we do not include M&A in our strategic plan at all. The organic growth has to justify what we are trying to deliver to our shareholders. Big M&A is really hard. We do not really see transformational M&A in the cards at all. It is extraordinarily difficult to execute.
There is a lot of executional risk that comes with that, and we do not necessarily see it as necessary for the current growth trajectory that we see on our business. Close-in M&A might be an interesting opportunity for us if we see assets that we believe add to the brand strength that we have, add credibility and capabilities to the categories in which we compete, and that we can add benefits back to them. Prime100 was a perfect example of that. It was a nice fit into the business. It allowed us to really understand how to do cold chain distribution, allowed us how to manufacture a fresh product in a much more effective way than we initially were thinking. So it has brought real benefits to the business.
We like those types of acquisitions that we feel accretive to the business long term and have a real additive benefit to our capabilities. But big transformational will not be something that we are necessarily looking at.
Okay, great. We are going to have to leave it there. We are going to go to breakout, but please join me in thanking Noel for being with us this year.
Thanks, everyone.