Ladies and gentlemen, thank you for your patience in holding. We now have your presenters in conference. Please be aware that each of your lines is in a listen only mode. At the conclusion of this morning's short remarks, we will open the floor for questions. At that time, instructions will be given as to the procedure to follow if you would like to ask It is now my pleasure to introduce today's first presenter, Taryn Miller, VP of Finance and Interim Head of Investor Relations.
Thank you, and good morning, everyone. Welcome to Kimberly Clark's 2nd quarter earnings conference call. On the call with me today are Mike Hsu, our Chairman and CEO and Maria Henry, our CFO. Earlier this morning, we issued our earnings news release, And we also published prepared management remarks from Mike and Maria to summarize our Q2 results and full year 2021 outlook. Both documents are available in the Investors section of our website.
We hope you find it valuable to have prepared remarks ahead of this call. In just a moment, Mike will share a few opening comments, and then we'll take your questions. During this call, we will make forward looking statements. Please see the Risk Factors section of our latest annual report on Form 10 ks for further discussion of forward looking statements. We may also refer to adjusted results and outlook, both exclude certain items described in this morning's news release.
The release has further information about these adjustments and reconciliations to comparable GAAP financial measures. Now, I'll turn it over to Mike.
Okay. Thank you, Taryn. Good morning, everyone. Before we get into the Q and A, I'd like to offer some additional perspective on our performance. Clearly, our results did not turn out as we expected and we knew it was a tough comp given our strong growth and record profitability in the year ago quarter.
Now while we expected volatility this year, the external environment has proven to be even more volatile than our expectation at the beginning of the year and versus our April update. Since we spoke in April, commodity inflation has spiked higher and our supply chain has been challenged. These dynamics are impacting us and more broadly the industry. We're also navigating historic levels of demand volatility in consumer tissue. Last year, we worked really hard to support our consumers and our customers as demand increased at a record pace.
While we expected the category to retract this year, that decline has meaningfully outpaced our expectations. This has been driven by reduced at home consumption due to increased mobility and destocking of both consumer pantries and retailer inventory. Consumer tissue has historically been very stable and we expect demand to normalize over time. We remain confident our brand fundamentals, even as we acknowledge that the short term tissue outlook has been difficult to call. We've taken decisive action to offset impact of raw material inflation.
We've announced pricing in key markets around the world. Our pricing actions are on track and we expect to fully offset The effects of input cost inflation over time as we've done in previous cycles. We've also taken prudent steps to We expect this to be reflected in our results as we continue to implement these actions. We view this level of input cost inflation and the COVID driven demand volatility to be discrete issue. We will continue to take appropriate action to reduce the impact of volatility over time.
At the same time, we remain confident and committed to our approach to building brands. Despite near term challenges, we have plenty of bright spots in our business. Our strategy to invest in our brand is working. You can see this in our Q2 results broadly across Personal Care and especially in D and E Markets. Excluding North American Consumer Tissue, our organic sales were up 4%.
Personal Care organic sales were up 6% globally, driven by a 4 In D and E Markets, Personal Care organic sales were up 8% with very strong market share performance, including in China, Brazil, throughout Eastern Europe, India, Peru and South Africa. We've recently captured number 1 diaper share position in China and Brazil, which reflects the strength of our brand fundamentals with consumers. Importantly, we're starting to see Green Shoots and KC Professional. The business grew year over year and sequentially as we saw strength in international markets and positive trends in washroom products. As more companies transition back to in person environments, we expect KCP momentum to improve in the back half.
We're encouraged by our underlying brand performance and have made significant progress in addressing the supply challenges we faced earlier this in our North American Personal Care business. Looking forward to the second half, we are expecting better results across the business. We believe the major factors impacting this quarter do not reflect the fundamental health of our business. We remain committed to our strategy to deliver balanced and sustainable growth We'll continue to execute KC Strategy 2022 and we'll invest in our business for the future. This includes investments in innovation, commercial capabilities and technology.
Importantly, I also want We are acutely aware of the impact that this pandemic continues to have on our employees, our consumers and our partners and the world. We will continue to prioritize the health and safety of our people and all that interact with Kimberly Clark. Now with that, we'd like to address your questions.
Thank you. At this time, we will open the floor for questions. Thank you. Our first Question comes from Lauren Lieberman with Barclays.
Good morning, Lauren.
Good morning. Thanks for letting me jump in first. Wanted to first just start with I think the biggest question, which is relatively short term, but is the guidance reduction for this year. I think it'd be helpful for everyone to just hear a bit about your degree of confidence that like this is it, right? The environment's been incredibly volatile.
But as you look forward from here, to what degree have you built in flexibility for things to perhaps Worse in, so I think that's sort of an important starting point. And along with that, within the inflation basket, What has been the biggest delta versus when you last communicated an outlook to the guidance to The Street back in April? Thanks.
Got it. Thanks, Lauren. Yes, a couple of things. I'll start with the outlook and I'll ask Maria to provide a little more color. But first of all, I'll just say overall my view on the outlook is It reflects certainly, as I mentioned in my prepared remarks, significant changes in that external environment that we hear our view as being 3 issues and that are really that we're managing and fully managing, I would say that the 2 issues that we're talking about are 1, Raw material inflation and then the consumer tissue demand changes, particularly in North America.
And if you add it up, Lauren, year on year, If you add those 2, it's well over $3 of EPS on a year over year basis. So it's a pretty significant increase. Obviously, given that amount and given our outlook, we are covering a significant portion of that, but we can't We are covering a significant portion of that, but we can't practically cover all of that this year. All right. And so what I would say is Part 1, our pricing implementation is largely on track and we expect to fully offset inflation over time, not all this year, but over time.
And then the North American consumer tissue volatility is COVID driven and I view that as more episodic in nature and I think the team is doing a very good job navigating it. But certainly, Lauren, it's a little tougher managing the shortfalls in the category versus some of the gains that we went up against last year. And so those are 2 that I would say are discrete issues. The big delta on the commodities, perhaps that's less visible to all of you is the polymer resin side of the business, right? So you could see the You can track the eucalyptus prices, which have kind of remained in the space that we've called.
But what's really escalated is resin, which think for the full year, our estimate, it'll be up almost 100% at certainly at historic highs for us. And That should abate at some point, but I think it's initially we thought that was going to come down some in the back half, but it looks like the highs are staying high longer. And so that does reflect some of the pricing that we've taken. So overall, I think those are really the 2 big issues. I do really want to point out Lauren, our brands are fundamentally very healthy and we continue to see really robust growth around the world in both organic and in share.
And even we're really pleased with our North American Personal Care recovery. Although we are a little light on share, I would say almost all of that is related to supply issues. We still under shift orders significantly in the quarter despite being positive on organic growth in the quarter. And so we feel good about where the business is and where our brand fundamentals are and we're expecting a stronger Q3 in our Personal Care business. But maybe, Maria, do you want to add some color?
Yes, sure. I'll on your first question, Lauren, about the full year outlook, we've been wrong twice now. And so it's an incredibly Dynamic environment that we're operating in and the changes versus our expectations are clearly on the input cost side as well as How the consumer tissue category in North America has unfolded here. When I think about the guidance range that we've provided, we have 6 months left to go in the year and there's $0.25 still in the range. And I don't like to take guidance down ever.
And since we've done it twice, You can rest assured that the guidance that we provided is both Thoughtful and based on the trends that we see, allowing for some ranges given How dynamic this current environment is. And then on the outlook For operating margin compared to 3 months ago, a couple of the things that I'd call out, Higher commodity costs, lower volumes in consumer tissue. And along with those lower volumes, There's associated fixed cost absorption, tissue business generally runs at very high utilization rates and has high fixed costs and The actions that we've taken to offset that also go into our outlook, which include higher cost savings and reduced between the lines
Spending. Okay, great. And Maria, when I look forward, I mean, it feels maybe a bit early, but to look Forward into next year, as I think about the headwinds that you faced year to date from those higher manufacturing costs, be it a combination of The storm impact in Q1 and really more materially the negative operating leverage, like you said, the absorption on tissue. I mean, as we look into 2022, simply the absence of those factors, if you just go back to a more normalized demand environment For tissue, right, those should be they should just go away next year. I mean, is there anything I'm missing as I think about Kind of impact to profitability from operating leverage and higher manufacturing costs looking into next year and as we start to compare against these
Yes. I'll say 2 things. It's very tempting to talk about 2022, given where we are with this And the very unusual dynamic that we're facing, I'm going to resist That temptation is the environment and quite dynamic. And I think we're best off waiting To see another 6 months before we call 2022, given that the macro factors are moving so much. But That said, Lauren, the way you're thinking about it is correct.
Okay. Thanks a lot. I'll pass it along. I appreciate it.
Thanks, Lauren.
Thank you. Our next question comes from Dara Mohsenian with Morgan Stanley.
Good morning, Dara.
Hey, guys. Good morning. So, Mike, you mentioned you expect to be able to fully Offset the cost pressures with pricing over time. Is that with just pricing alone to be clear? Does that include other areas like cost savings?
And just given the inflations unprecedented this year, do you think you have pricing in place by year end to fully offset those cost pressures or Might it take a longer period of time to realize the pricing necessary and sort of a couple of rounds of price increases. How do you think about that? And I'm particularly focused on how you think about pricing just given the magnitude of that inflation is much worse than it typically is when you take pricing.
Yes. Dara, great question. I would say yes and yes. I'm not trying to be flip, but I would say, one, generally, we've taken really broad based Pricing action globally, almost I wouldn't say all markets, but in nearly all key markets and pretty extensive. The price and the pricing ranges from Mid single digit to high single digit, in some cases, double digits, right?
And so pretty extensive pricing. Obviously, we couldn't recover all of that given timing because We announced in March, generally implemented in June or in the beginning of Q3. So we'll get a half year run on the pricing and then a full year as we get into next year. That said, commodities have continued to move. But even as we announced our pricing, part 2 of pricing is We remain committed to leveraging our revenue growth management capability and there's a lot of other levers that we can pull beyond list We continue to manage pricing in our environment and we're committed to doing that.
So that's part 1. I do think kind of given where we are and It's normal and reasonable to expect that we're also going to leverage our cost savings program. I mean we have a very strong program as you're well aware on force And we've kind of beefed that up over the course of the past year or so and we feel good about that. And so we'll continue to leverage that. So overall, again, I think the answer is yes on both.
The bigger thing, Dara, we do recognize the impact of While raw material inflation over time, in our categories, they tend to be a little more volatile and we're a fundamental underpinning Of our strategy is margin improvement. So because of that, we believe we really have to on an ongoing basis offset the effect of inflation over time.
Okay. And just one follow-up on the pricing front, where you have implemented pricing so far, What's the retailer reaction and receptivity been like? And it'd be early to judge consumer receptivity, but Some pretty large price increases in your portfolio. So just any thoughts on the ability of consumers to handle that higher pricing An impact on market share and any thoughts there on what we might see going forward would be helpful.
Yes. Look, we never take Pricing actions lately and we know they can be stressful for both the retailer and our consumers and their shoppers. So we think hard about that. I will say, we believe our pricing actions globally are generally on track. And I think broadly the retailer conversations, Though never easy, I would say have been largely constructive.
And certainly they understand what's happening In the cost environment, and so we're working through that. And then I think from an An execution perspective, our teams have done a phenomenal job executing rapidly around the world. I would say In terms of other brands, I would say generally we've seen a lot of the other brands move in a similar direction. I wouldn't say Identical, but directionally in that same place. But the execution of other brands and private label tends to vary Market by market and so some will lag a bit more, but I would say generally we feel like our pricing actions are on track.
Great. Thanks.
Great. Thank you, Dara.
Thank you. Our next question comes from Kevin Grundy with Jefferies.
Hello, Kevin.
Hey, good morning, Mike. Question for you, Mike, on advertising and marketing. So it looks like you did decide to defer some investments, which is unsurprising in the current environment. I think the intention was clearly not to do that. Maybe Mike just spend a moment on where you decided to pull back and why and then just I know this is difficult.
We can appreciate that in Current environment, but balancing appropriate levels of investment behind your best and highest return ideas with the current commodity cost environment. And then I have a follow-up.
Yes. So overall, the thing about it and when I say our challenges are kind of discrete. The challenges Remind us, I'm sure you remember Kevin, it's like inflation in North American tissue. In the balance of our markets, our businesses are performing very well and generally above And so I would say maybe the thing I'll land with you is despite our near term challenges, we're really focused on improving Our long term growth profile. We're really confident that our balanced sustainable approach to building brands is working and that the brand fundamentals Globally are very healthy and that we're improving our market positions.
We were up in share in about by our tracking about 2 thirds of our market category combinations in the quarter and so we feel good about that. And the brands continue to respond well to strong investment. I mean we had multi share point gains in infant childcare across China, South Korea, Australia, New Zealand, India, Indonesia, Eastern Europe, Argentina, Peru, pretty much double digit growth in Brazil. So we feel good about the overall performance of the business. So because of that, We're really maintaining investment where that's working and where the businesses are on plan.
We have dialed back in some markets. You can assume, For example, in North American Fat Tissue, given that the fluctuation in the category, we have chosen to pull back a little bit on the spending. And we're going to continue to do that. We're going to operate with discipline. I think we talked about in prior quarters, but there is as much a math component to our advertising program as there is a creative component and we're pretty disciplined.
It's kind of how we manage All of our consumer investments, whether that's trade or marketing, and so we're pretty disciplined on the ROI. And so our teams are reacting as you would Probably hope that they would. Maury, you got anything to add?
Yes. The only thing I'd add is, if you look at our full year outlook, what The thought on advertising is that it's down somewhat to 2020 for the reasons Mike just discussed, but it's well ahead of 2019 on a dollar basis.
Got it. Thanks, Maria. One quick follow-up for both of you. Just on capital allocation and M and A, we saw that the buyback outlook came down with a lower earnings outlook. But when you're going through the type of environment you're going Now you can't say pricing fast enough and even sort of leaning in and getting the organization behind productivity.
Is it still not enough to offset The sort of commodity cost pressure, does it sort of give you pause with respect to the M and A strategy over time and the school of thought That the company should look to diversify the portfolio away from some of these commodity sensitive categories and do That in a disciplined and accretive way. So your thoughts there would be helpful and then I'll pass it on. Thanks.
Yes. Kevin, we're always looking at acquisition or M and A Opportunities, right? And whether that means additions to the portfolio or subtractions to the portfolio, certainly you saw that last year with Softeq, which Continues to be a really exciting opportunity for us and that business is performing very, very well. By the way, up in the teens, up multiple share points in the quarter. So we're Super excited about that.
Given where you are, I think we'll continue to look for opportunity to enhance the portfolio and certainly on both the plus, Whether it's attractive markets or attractive categories, but also we're going to continue to look hard at our performance of our existing categories And businesses that don't add to our overall growth profile or aren't going to be ongoingly accretive to our business, We're going to take a hard look at. And so again, we manage capital with incredible rigor and discipline. And hopefully that's what our investors will appreciate about our approach.
Yes. And on the buyback specifically, Our at the midpoint of our guidance, our operating profit is now expected to be down $450,000,000 year over year. You'll recall that in January when we were coming into the year and set our target for buybacks, we were expecting operating profit to be up Slightly. So with the reduced cash flow coming into the business, that's really what's behind the reduction of $250,000,000 to $300,000,000 on the share buybacks. And then in terms of capital allocation, we also trimmed our CapEx plans for the year by $100,000,000 and we remain committed to the single A Credit rating and to make all of that work after having leaned into it with the restructuring as well as the acquisition of Crosstax, That's how we make all of that math work.
Very good. Thank you both. Good luck.
Thank you, Kevin.
Thank you. Our next question comes from Chris Carey with Wells Fargo Securities.
Good morning, Chris.
Hi, good morning. So I just want to actually touch on the consumer tissue outlook for the back half of the year. Seems to me that the kind of the important part to making the outlook Work, but at the same time, you had noted that that's an area that's been a little tougher to call. And I guess I'm trying to understand maybe just a little bit of confidence around The normalization, which you had noted in your prepared remarks, it seems to me that market share has really peaked during COVID, maybe some Capacity benefits and that you've just you've seen some reversion in market share, in fact it's got those levels. And so if you kind of run it flat to 2, 3 years ago, it's sort of unchanged.
And I guess what I'm getting at is just What exactly you think is occurring in that business and just maybe specifically the types of things that you're seeing that give you confidence in this Reacceleration in that business in the back half, which again to me seems to be kind of the important factor in making the full year outlook work.
Okay. Yes, great question, Chris. And I'll try to unpack it and we can go back and forth on this a little bit. First, let me just say, I remain very confident on North American tissue business. We've got great brands, performed very well last year.
I do think we have given back some share this year. What happened last year When the category spiked and at this point last year, I think the category is up about 30% or so, consumers were looking for tissue and our customers were looking for tissue. And so our organization really moved aggressively to try to serve our customers and consumers At a point where we felt like they needed us the most. And so we really pulled out all the stops. We probably did gain a little bit of share, Particularly on a brand like Cottonelle, where we had a little more availability than maybe some of the other brands in the marketplace.
And so it looks like To us, while our share is down a bit this year, I do think it's kind of reverted maybe to the prior year levels to some degree. And we'll continue to go forward and earn our share growth over time on that business. But we feel like our brands are healthy, But we are navigating what I would say is like the most volatile part of the demand curve that we experienced last year. The front half is where All the spikes in demand. And so there were really two effects there is the spike in consumer demand and then there was a corollary effect on retailer supply.
And so Maybe the one disconnect that you might not have visibility to the data are, the category in the quarter in North America and I'm talking bat tissue specifically was down 12% in consumption, okay. And then our shipments were down about 27%. And so the difference between the 12% and the 27% is really for us, We estimate as retailer inventory changes. And what happened last year on the inventory side was, I think exiting Q1 where there was the big spike, Retailer inventories as a percent, if I index it to historical levels or 2019 levels had dropped down to below 40% of what I would say they're traditional turn inventory. And so retailers work really hard to get back into supply.
And so by the end of the year or toward the back half of the year, they were well north of 100% of overall levels. And so as we entered into this year, Our estimate would be retail inventories were probably in the 130%, 140% range. And so that's Dial back in the 1st and second quarter this year and so explains kind of a big chunk of the delta here on demand. Looking forward, again, I'll stand by it. I mean, I looked at this category for a long time and it's one of the biggest categories.
Obviously, if you think about back tissue in particular, it's a very stable category. And so the logic for me is, In a post COVID world, I think there will be more people at home on an ongoing basis than there were pre COVID. I don't think the office environment or the work environment is ever going back to 100% every day. And So logic would say consumption should be a little higher than the base level of 2019. Now year to date, we're below 2019 levels for the category, but we think I would say LOGIX would say that that should kind of normalize over time.
And I won't estimate whether that's at what point, but Over the long term, this category has proven to be very stable and our brands have proven to be very, very stable and very healthy.
The other comment that I add if I can.
No, please go ahead.
Yes, is Just you were asking specifically on consumer tissue, which certainly has a big first half, 2nd half effect, if I look overall first half, second half, in the first half, our organic sales are down 5 percent and our operating profit is down 26%. If you take the midpoint of our ranges, you get to a second half that looks something like Plus 3 on organic and, plus 5 on operating profit growth. And so if you think about Our second half outlook and the key drivers there, will have easier comps. We will have Step up and benefit from volume growth and price realization in the second half, the majority of the consumer tissue destock, We are assuming occurred in the first half. We won't have the winter storm effects that we had in the first half.
KCP Washroom is expected to continue to see sequential improvements. The pricing actions are now fully in the market. We'll see some build on our cost savings as we typically do. It's usually second half weighted and our other manufacturing cost headwinds should be lower. And then offsetting that What will be the higher commodity costs headwinds?
If you take the $4.85 year to date and our guidance, it implies Year to go is 765 at the midpoint. So that's those are the drivers for the Second half and certainly the dynamics in consumer tissue are a key part of that.
All right, Chris, we threw
a lot at you and I threw a lot at you on tissue. Don't know if that answered all your questions or I'm happy to take a follow-up.
Yes, that was extremely helpful. The only Quick follow-up would just be just on the level of inventory, retail inventory in tissue as you enter Q3, given some percentages, Where do you see it today? And then if I might, I would just sneak in a question on how you're thinking about birth rates and medium term impact on volumes Then I'll get back in the
queue. Yes. All right. And just I'm going to a disclaimer on my inventory. Those are our estimates.
And so I'll That's kind of how we look at and think about it. I would say close to historical levels. The caveat I'll say on Khryso is We're not exactly sure and I'm not sure the retailer is actually sure how they want to handle it at this point, right. And so I think kind of given the category volatility And on a retailer by retailer basis included, I think it's going to continue to bounce around a little bit, right? And Because in the example I'll give you is, we were building up inventories, but there was another spike kind of In the fall period and then the winter period as well.
And so I do think consumers largely And that there is plenty of tissue availability, but that said, I've seen a lot of new things over the last 18 months and so, we won't be surprised if behaviors continue to shift around a little bit. So that's on the tissue side. And the other part of it is certainly there was a consumer we think consumer pantry destocking as well. I will tell you The team in North America has done a phenomenal job conducting research to try to estimate that. I will say it's probably as accurate as trying to estimate share Panel data, right?
And so you're asking consumers how much they're carrying. And so but we do believe consumers taking a lot of their stock out as they have more confidence that tissue is available, but that remains to be proven out. So that's on the tissue. And then on the birth rate, yes, our estimate for this year, first of all, It's probably down about mid single low to mid single digit. And that's probably a little worse than the last The prior 2 years, I think the prior couple of years were down about 1% to 2%, depending on the year.
And then given COVID, I think it Feels like some families have decided to defer family formation, and so kind of in that range. I will say, We feel really good about the recovery of our infant childcare business and the fact that we're really recovering from a supply perspective. Our brand propositions, we feel very strongly about. And so we feel like in the Q3, We should be back to being on track in our infant and childcare business.
Thanks for all that.
Okay. Thanks, Chris.
Thank you. Our next question comes from Steve Powers with Deutsche Bank.
Good morning, Steve.
Good morning.
You did throw a lot at us on that consumer tissue conversation, but I guess I have Just a clarification coming out of the back and forth you just had with Chris and the commentary this morning. I guess I'm still trying to ascertain whether you see a change in consumer takeaway expectations on the balance of the year because What I read in the prepared remarks is that the consumer pantry and retailer inventory rebalancing occurred faster than you previously assumed as it relates to 2Q.
And you just kind of reaffirm that, but
I didn't really hear anything about a net reduction in consumer takeaway. So I guess, were you not assuming Any rebalancing in the course of 2021 before and it just happened in 2021 where you thought it would happen later downstream? Or Is there because I guess I can understand the pull forward and the rebalancing for the first half versus more spread out and that hurt 2Q, but There's still a net negative impact on the full year that I can't pinpoint. So can you just help me there?
Yes. There's a couple of different ways for me to answer that question. I'll say, Let me anchor it versus our original plan or our plan expectations for tissue at the beginning of the year. We walked in the year and just think back to December, Steve, The vaccines were really not rolled out. And so our going in was that the category would be lower than 2020 overall.
But in some ways probably a mid single digit decline, right? Because we thought at that point in time, Consumers, people would still be at home generally, right? Now coming out of that and as we entered our April update, it was clear that the vaccines rolled out much faster than anybody anticipated. And mobility, the data that we track show that we're returning to maybe 80% or 85% Of historical levels. And so that was faster than we anticipated.
And so our expectations for the category, Actually, we're down a little bit further. I think coming out of the Q2, I would say our category expectations, Which were up about 22% in Bath last year, probably we would say are going to be down at least in the mid teens or so mid to high teens. And So overall, I think our expectations for the category are going to be worse than they were at the beginning of the year. That said, at that level, I would say That's still I still believe it should be above a base year of 2019, right, if you take the 2 years together. That remains to be seen.
It feels like a Kind of sticking my neck out there call on that just because of what we experienced in the front half. But again, I'm working from logic that says There are likely to be more people at home than there were in 2019. And if people are home more often, then the consumption of at home bath tissue should be higher, But that remains to be proven out.
Yes. Okay. Okay, that helps. And I guess that segues into my next question, which you sound Pretty satisfied and happy and kind of upbeat with the trajectory of the professional business, probably in part Because of that vaccination reopening, trend. I guess, so that resonates with me.
I guess, I was expecting a bit More just as it relates to 2Q given the dynamics you said as an offset to Consumer Tissue. And so just maybe a little bit more color as to how you see that business Trending and kind of what your expectations are in the back half?
Yes. On KCPC, I wouldn't convey happy. I would say it's Certainly proud of our team and how they've responded to all these challenges. I'm cautiously optimistic about where that And I do see some green shoots. I mean a couple of things kind of going on.
Organic was up too, right, which is a sequential improvement Versus where we went we've been for this past several quarters. That was predicated on really strong growth internationally, which had a really soft comp from a year ago. But importantly, improvement in sequential improvement in the North American washroom business, which is a big business for us And really, really important. I wouldn't say it's taken off yet, but we are seeing the impact of more people returning to work, whether it's in the office environment or a factory environment. And so I think Those were all positives there.
There are some offsets because we did grow significantly in our wipers and PPE or safety business last year Due to additional COVID demand, that's probably cycling down a little bit this year and that's a bit of an offset. So we feel good about the The KCV business, I think the team even throughout last year was working hard. I think somebody mentioned on the call last year around jet air dryer conversions And we've got better offerings in our washroom business, great towel products, great dispenser products. And so we are winning Conversions, but I think I said on prior calls, we haven't seen the share we won't see the share until the products flow through the dispensers. So we feel good about what the team is doing and looking forward to I'm cautiously optimistic.
Okay. Thank you for that Mike. If I could just Maria, you had mentioned that 7.70 Or so at the midpoint of inflation to come over the back half. Do you is there any, I guess color you can offer in terms of How you see that flowing 3Q versus 4Q if it's weighted significantly one versus the other or if it's more evenly spread? Some help with the cadence there would be helpful.
Thank you.
Yes. I think the expectations are that The commodities will reach peak in the Q3 and then start to ease a bit As we get into the Q4, so I'd use that as the kind of faith in guidance.
Perfect. Thank you both.
Okay. Thank you, Steve.
Our next question comes from Peter Grom with UBS.
Good morning, Peter.
Hey, good morning, everyone. So you mentioned in your prepared remarks, and I was also pretty encouraged by the performance and commentary around D and A. And so obviously, you have pockets of strength, Pockets of weakness and you mentioned strong share performance there. But I was just curious, has the consumer been more resilient in those markets than you would have anticipated Kind of given the COVID environment or is this strength really just Kimberly specific?
Well, That's really hard for me to generalize because I think it varies. I think certainly there's a lot of We're less impacted by COVID and I would say a lot of that is in Asia. Although I caution when I say that because it's starting to pop up again now More significant, particularly in market big markets for us like Indonesia. So I think there is some aspect of resiliency, But the other aspect is and maybe underlying is the strategy they're on, which is to elevate the category and expand our markets. And I think the teams are really Concentrated particularly in infant and childcare with the Huggies brand, really great product offerings.
I mean, I think the big thing That's happened over the last, I would say, 2 years is globally our teams on diapers have really aligned around kind of a set of consumer benefits That we're going to win on and really aligned on kind of the product technology platforms that are global platforms That we're launching. For reference, we're up 4 share points in Australia and New Zealand in diapers. We're already obviously the market leaders there. But that diaper has specific lineage that's linked to our China diaper. I wouldn't say they're identical, But they're highly related, right.
And so that's kind of the work that we've been on. We've taken share leadership positions in Argentina and Brazil. And again, the diaper there is related to the diaper that we're making in North America. They're not wins, but they're related, right? And so I think, again, the teams are really focused on, I would say, I made a shift from product features to consumer benefits that we're focused on delivering.
And I think that's really shown in the shares. And again, I'd say, In China, we were up about 3 share points in the quarter as we were last quarter. I mentioned 4 share points in Australia and New Zealand, 4 In Korea, 4 share points in Peru. So we're seeing pretty broad based share gains, but we feel like they're We're certainly not promoting our way to those share gains because we don't really believe in renting share. I think it's basically great products, great digital execution And then really hard sales execution and great partnership with customers.
No, thanks. That's super helpful. And then I just wanted to ask a couple of Follow-up questions in regards to the commentary on second half organic sales growth. So first, I just want to make sure I heard the comment on volume growth correctly. Is that a total company Comment or was that something specific to Consumer Tissue?
I thought total company, but I just wanted to be sure because I think Chris' question was on Consumer Tissue. And then just like anything you can share on phasing of that 3% growth between Q3 versus Q4 given the cycling of the
Sure. I was making the comments. I was bridging from the question on consumer tissue to the total company, Because consumer tissue is certainly part of the story in the second half when we look at the Total company outlook. So to clarify, we're talking about total company in my remarks about first half, second half. And the phasing of the quarters, I'm going to stay away from quarterly guidance Here, I think the things to consider are the year over year comps.
I did make some commentary around phasing on the commodity headwinds. And Beyond that, I think I'm going to stay away from the quarters.
Okay, great. Well, thank you
so much and best of luck. Okay.
Thank you, Peter.
Thank you.
Thank you. Our next question comes from Jason English with Goldman Sachs.
Hey, good morning, Jason.
Hey, good
morning folks. Thanks for slotting me in. Appreciate it. So a couple of questions. I guess I just I really want to focus in on tissue and pricing.
You guys had Phenomenal price growth in the Q4 'twenty in North American tissue, and I believe it was because you had under accrued or over accrued, excuse me, over accrued for trade spend And I thought, of course, the year had to true up. So we're lapping a period where you would over accrued for trade spend, suggesting that while I know list prices take I think I was expecting many of us were expecting you to at least get some pricing benefit from lower trade. Yes. On a 2 year stack basis in North America prices eroded in developed markets outside of North America prices are deflationary and developing and emerging markets your prices are deflationary And you just achieved the worst price cost deficit that I can find on record. So it begs the question of What's really impeding your pricing power right now, particularly in an environment where as you're saying, you expect demand to be above base case 2019.
Why aren't we seeing more responsiveness of sort of net price benefits flowing through the P and L?
Yes. I will start, Jason. So part 1 is, we have announced pricing in consumer tissue in many markets Most of our tissue markets around the world, including in North America. I wouldn't say we've taken it across every product line. And So, Scott 1000 is kind of a key product that we have.
And so that's one area. Certainly, we did benefit, As you mentioned from accrual differences, at the end of last year And the other thing that we benefit throughout last year was given the amount of demand in the marketplace, we reduced our promotional spending overall, Right. And so we kind of earn maybe the same or higher volume levels without having to spend the trade. So that was a benefit last year That we are cycling this year. And so we are putting some investment back in trade.
And for reference, I would say the category Promotional intensity in a market like North America is still below historical levels, but moving its way back to what I would say are more normalized levels. So we recognize the need to do that. The thing that I will tell you is, I think your point is on, which is we've got to get better price realization. I will say, We don't necessarily view the additional spending of trade to be a negative profit driver in the sense of We've invested in a lot of tools and revenue management and we expect our teams to be able to use those tools to drive volume and growth profitably. And so we're going to hold Ourselves accountable to that.
But with that, again, we recognize the need to get additional price realization and there's many ways for us to do that in addition The list pricing that we've taken and there's also ways for us to do that through revenue management, through trade efficiency, price pack and other things that We'll continue to look at Maria, if
you have any.
No, that's right.
Okay. So there's other mechanisms. We're just not going to see them yet. They're going to take time to see. Last time we had inflation in tissue, you guys ran a price cost deficit for 8 Is there any reason to think you could close the gap Faster or given the environment that you're mentioning with promotional activity actually picking up in the face of rising costs, could it actually even be more prolonged this time?
Well, again, I think we've actioned generally our pricing in the marketplace. And So I would think that hopefully, the duration of that gap would be shorter. Certainly, we didn't like the gap through the first half of this year. And so that's one part. 2nd, again, we're going to continue to review kind of all the levers that we have On revenue management, and make sure that we make the appropriate adjustments to our plans on a market by market basis.
Got it. All right. Thanks guys. I'll pass it on.
Okay. Thanks, Jason.
Thank you. Our next Question comes from Andrea Teixeira with JPMorgan.
Good morning, Andrea.
Thanks for
taking my questions. Good morning. So I wanted to go back Surprising, I'm sorry to beat a dead horse here, but what is your read on the consumer elasticity, not only in the U. S. But also internationally, Sorry.
As you're obviously competing with players that oftentimes are private. But specific to the U. S, the dollar share that we're looking Not only in tissue, in tracked channels, as you explained well through Chris' question before, but also in diapers. Are you seeing that the same decline across all channels? And is that an indication that consumers are probably down trading now that they Private label, for example, Scott's 100 is the one that competes more neck to neck with private label.
So are you seeing any Issue there or perhaps you're going to tweak a little bit of your price increase now that you know what you know about tissue And then perhaps do more IGM where you barbell a little bit of this price increases. So any update on embedded in your Guidance, if you are changing some of your pricing or any second rounds in North America that we may not be aware or You've embedded it there. So any color there would be great. Thank you.
Yes. Great question, Andrea. Maybe the short answer for me is, I don't know yet. I think, for reference, we took about a high single digit price increase across Our personal care businesses and then some selective price increases, for example, on Scott Tissue in North America. And I would say those went into effect at the end of June.
And so it's a little early for us To gauge that, if I go off the history though, I will say the last list price increase we took on these businesses, actually In personal care was not listed, it was more count, okay. But that said, I would say that the consumer elasticity at that point back in 2018 Was probably in my mind a little lower than what we modeled in terms of elasticity. So what that implies, I think there's a couple of different factors. If I would say More price sensitive factors would be that I think consumers are facing broader inflation in this environment across all
categories, right, beyond consumer packaged goods.
So that may be one factor, right, that's Right, beyond consumer packaged goods. So that may be one factor, right, that makes it a little more challenging. The other factor that I know talking to people in other industries There have been reductions in other spending, consumer spending, which create a little more wallet for some of the more consumables. And so that's an offset. So for me, the answer is at this point, a little theoretical ambiguous and so it remains to be seen, but we'll know As we work through this quarter.
And now that's super helpful for tissue. And then diapers, like I felt that You don't have as much of these channel stuffing that we saw or even I'm assuming retail inventory. I think you spoke mostly from A customer tissue perspective and not so much on the diaper. So what is happening there? Do you see that Changing also the logistics moving around as a moving target for you?
Again, I don't see Nothing changed, but again, it's still early for us to tell. Yes, I think you're right, Andrea. The dynamics in personal care were very different than tissue last Sure. And so there was a bit of a, I would say, consumer buy in in the Q1 last year, but it was a, I would say, a mid single digit Kind of number maybe mid to high single digit whereas the Q1 last year consumer tissue was like up 30%. And So very, very different behavior.
And then we unwound that almost all of that in Q2 of last year. And so I think The consumer, the Personal Care North America behavior has perhaps been a little bit normalized. And again, I think the same thing holds for what I was talking about with tissue, which is Our pricing has been kind of in the market for about 3 weeks now. It's a little bit earlier for us to get a read. But again, I think we feel We are optimistic about it.
Okay. Thank you.
Thank you, Andrea.
Thank you. Next, we have a follow-up from Lauren Lieberman with Barclays.
Great. Thank you. Sorry, I was speaking off guard. Wanted to ask about let me just find my final question. Just the category growth in personal care in D and E markets, I know you talked a bit about very much so about market share gains.
But one of the things that's definitely been out there is like the resilience of some of the categories in D and E markets. So just anything you can offer in terms of perspective on why the categories have kind of held in as well as they have because even again with your share growth still implies the categories are in a pretty good spot too.
Yes. And maybe I'll go around the horn because it varies so much because of a couple of things. One, probably the biggest one being COVID. I would say we were really positively encouraged by our performance across Latin America. I thought it was terrific performance in a really, really challenging COVID environment.
I'm sure you're kind of reading all about it. But I mean, in a market like Brazil, our Personal Care organic was up over 20% behind volume and price and we did take pretty significant pricing actions there. Overall, we maintain our share there. We're already in the leadership position. And I think what's happening in Latin America broadly and why we're winning is The team is doing an excellent job adding value or premiumizing the category, but also pivoting in some ways back and forth, even within the same year between value and premium.
So the big thing is we have very strong leadership positions throughout Latin America. For example, in Argentina, we're the leaders In value tier and we're the leaders in premium tier and we're the number one brand overall. And so the team depending on kind of what's happening in the local environment Kind of makes the pivot as to what products they're going to maybe drive and emphasize a little harder. And certainly, I think In Latin America, maybe this year more than maybe even 2 years ago, value is very important. Consumers are stretching out their consumption.
But we flow through a lot of our great product innovation to our value tier as well. And I think that's working. So that's kind of one set of things. I would say China is different. Lauren, we were up 3 share points in the quarter.
We're proud at least for now we're in the number one share And we feel really great about our products. And so I think the consumer continues to really respond The product superiority and innovation, I will say the category conditions are pressurized because I don't know how much you're seeing, but the birth rates are coming down Fairly significantly. And so we recognize that's going to be an issue for us to work through. But in the near term, our team feels great About their ability to grow the business, grow share and work with the big e commerce partners. And then in some of the other markets, Eastern Europe, I mean, I think we are multiple share points up in almost every market across Eastern Europe, somewhere in the range 1 to 7 points of share in the quarter.
And again, I think great offering, kind of they're all related. The China diaper, the U. S. Diaper, the result, They're kind of all related to each other and very good. And I think the teams are recognizing how to drive those.
So I think it varies. The one that watch out area that we're very kind of paying close attention to because of COVID is ASEAN, Indonesia, Vietnam, India as well. Again, those environments right now are really pressured with the pandemic. And so we're really Keeping a close eye on that. So I don't know if I answered what you were looking for or if there's something else.
Yes. No, absolutely. Thank you, Mike. I really appreciate it.
Okay. Thanks, Lauren.
Thank you. Next, we have a follow-up from Jason English with Goldman Sachs.
Hey, Jason.
Hey, super quick follow-up question, real tactical on what your response was on there. I think you said China growth for you, my personal care, was up maybe mid single digits, but you just said you captured 300 basis points a share in the quarter. It implies a pretty sharp market decline in the market.
So can you drill down a little
bit deeper there? Like what is the rate of decline you're seeing? And I think you mentioned birth rates down,
Not we know, birth rates down, that has a prolonged drag on infant population. So is what we're seeing today likely persist for a protracted period of time?
Yes. Sorry, my bad. I was a little unclear. China overall Personal Care was up mid single digit. Our diaper business was up double digits.
But that said, I think your question still holds. Yes, there are expected to be some birth rate challenges in China. So it will slow down as a market. I still believe And I think our team believes there's still significant opportunity to premiumize our categories and we're still a low Double digit share, and so there's still plenty of share opportunity. That said, I do think there will be a slowdown on the diaper side of the business.
Our fem care business has been growing strong double digits. In the quarter, it was down a bit, because we were cycling a promotion, A big promotion that we've decided to get out of this year. And so but we feel great about our fem care business. That's grown Strong double digits for I think 3 or 4 years in a row now. And so we expect continued growth in China, although I think On the diaper side, the category will be challenged somewhat.
It also kind of points out, our Our emphasis on diversifying our growth across developing and emerging markets. So one of the things I'm excited about, Jason, is I think we grew significantly in India. I don't know if I can tell you, I think 50 percent well, strong double digits in the quarter. And I would say Indonesia, I'm really glad we made the acquisition of Softex. It's a great business.
I think the business is up in the teens. Even though they are cycling or working through some pretty good COVID challenges, pretty significant COVID challenges, but it's a great business And a great team. And again, with Indonesia and India, I think the growth in those markets is going to be very significant for us over the next several years.
Thanks for the clarification. Really appreciate it. Thanks.
Thank you. There are no more questions at this time.
Okay. All right. Thank you all very much. We're certainly navigating some high volatility in external environment, but we're taking decisive action And we're continuing to improve our brand fundamentals to sustain long term sustainable growth. All right.
So for that, thank you.
Thank you, ladies and gentlemen. This concludes today's teleconference. You may now disconnect.